Employers typically rein in health care costs, now galloping at 6% a year, by slapping their workers with higher premiums, deductibles and co-payments. Is there a better way? Walgreen, the $54 billion (sales) pharmacy chain, is pushing a different approach: supplying the company doctor. It operates 364 work-site clinics for 183 large (1,000-plus employees) employers, including Goldman Sachs, Continental Airlines and Toyota. Walgreen says employers can lower costs by as much as 20%, thanks to the preventive care it provides. Its service will link employees' health records and those of spouses, dependents and retirees, to Walgreen's 6,356 drugstores. "We can't wait for health care reform," says Hal F. Rosenbluth, who manages the in-company clinics and sold his retail chain, Take Care Health Systems, to Walgreen last year for a reported $100 million.

The Scotts Miracle-Gro Co. of Marysville, Ohio, illustrates how it works. In addition to having spent $5 million to build a 24,000-square-foot clinic, pharmacy and gym for 3,500 employees and dependents, the company pays Walgreen $4 million a year for a staff of 22, including two doctors, two pharmacists and a dietician. (That includes a management fee that averages 30% of staffing costs.) The 900 patients who visit the on-site clinic each month use their premiums to pay for services like an annual check-up, flu shot, X-ray and simple blood work; generic prescriptions cost nothing. Complicated tests and visits to specialists and surgeons aren't covered by Walgreen. Scotts asks employees to fill out questionnaires that assess their risk of serious illness (or pay $40 a month in extra health care costs). If you're found at risk, you meet with a Walgreen health coach or get hit with a $67 monthly penalty. Scotts hasn't recouped its investment yet and won't hazard a guess about savings.

Necessity is the mother of innovation. The Department of Health & Human Services projects that private spending on health care will reach $1 trillion this year, 42% of the total. The average worker costs an employer $8,000 annually in medical expenses.

The first really big move to work-site clinics came from Henry J. Kaiser, the steel magnate who opened one in 1942 for his 20,000 Richmond, Calif. workers, who were building cargo ships. He also struck deals with nearby doctors to give his employees access to outpatient care. (His ideas eventually morphed into the first hmos.) Since then Dow Chemical (nyse: DOW - news - people ), General Electric (nyse: GE - news - people ), Johnson & Johnson (nyse: JNJ - news - people ) and dozens of other large companies have tried on-site health care. "Early forms were nowhere near as valuable," says Arnold Milstein of Mercer, a human resources consultancy. "With cost-cutting and mergers in the 1980s, it was an easy line item to eliminate." J&J, for one, has built its participation rate up to 94% by offering $500 cash incentives. That's key, says Ron Z. Goetzel, research professor at Emory University's Institute for Health & Productivity Studies, adding: "Greater numbers of people today don't have insurance, so we're seeing a resurgence of the model." But those incentives do little to achieve immediate cost savings.

There are disbelievers, too. Uwe Reinhardt, economics professor at Princeton University, points out that Walgreen's solution can't make a big dent in the country's $1.8 trillion of spending on catastrophically expensive health care, such as for prolonged hospital stays and the treatment of diabetes, AIDS and cancer. "You can save all the money in the world on primary care," he says. "You really have no method yet to control the cost of tertiary care; that is still the domain of hospitals."

Walgreen will probably end up modifying its approach before it throws in the surgical wipe. The American Medical Association has already called for an investigation into the alliance between on-site and retail clinics and pharmacy chains. Still, the next president will have to wrestle with the spiraling health care crisis--as well as the 46 million Americans who have no insurance. Whether coming from a McCain or an Obama administration, the freshest ideas will probably be a hybrid of free-market innovation and federal tax credits.

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