In 2008, health spending in the country topped $2.3 trillion, up 4.4 percent from the previous year. Those same cost increases hit state and local governments, and are expected to keep growing--an average of 2 percent per year until 2035, according to the U.S. Government Accountability Office. Take, for instance, Lakeland, Fla., a city of more than 94,000 located in the midsection of the state, which saw its worker health claims rise 6 percent in 2005 and a whopping 37 percent in 2006, according to Director of Risk Management Karen Lukhaub.

Not surprisingly, the city is looking for ways to cut health-care expenses for its workers. What is surprising is that the city found a way to save $1.1 million in health claims in just one year. How did Lakeland do it? By opening an in-house "preventive medicine" wellness clinic for city workers in August 2007. Since its launch, city work force participation has grown from 67 percent to about 87 percent. "We really haven't even seen the full potential of the clinic," Lukhaub says, "because we're just getting started."

Nearly three years ago, Lakeland city officials transformed its civil service conference room by dividing it into four individual rooms with a separate small hallway and waiting area. At the Healthstat Clinic on North Lake Parker Avenue, employees can receive basic medical services at no cost, an idea born after Lukhaub and then-benefits broker Jim Powell watched the city's health insurance costs continue to escalate.

Since then, Charlotte County Public Schools (CCPS) in Port Charlotte, Fla., also created a clinic, which opened Jan. 27, and many more local government agencies are considering the same. The reason is simple: Clinics may cost money in the beginning, but they save more as time goes on by having healthier employees, Lukhaub explains.

To create its clinic, the CCPS in January converted unused classrooms and labs in its technical school. It pays approximately $600,000 annually to Healthstat, which provides a nurse practitioner, a receptionist, an office assistant who does lab work and an overseeing doctor who is not based on site.

The CCPS pays for this program through part of the monthly premium charged to each employee, says Carrie Klum, the CCPS' manager of HR and employee benefits. "I would say last spring is when we came to the idea that we could do this," Klum says of contracting with Healthstat. "So it went pretty fast."

Lakeland also contracts with Healthstat, which has approximately 300 clinics nationwide, serving about 100 clients, 15 of which are public-sector entities. Healthstat Chief Financial Officer and Executive Vice President Susan Kinzler says these clinics are catching on quickly in the public sector--the majority of Healthstat's 15 public-sector clients came on board within the past 24 months for a few reasons. First and foremost is the cost savings.

"After the first 18 months, they save $1 for every $1 they spend on the program, and from that point on, the savings begin to mount," she says. "So by the end of the second and third year, their health-care costs are going down by about $2 for every $1 they're spending for the clinic. And by the end of the third year, their costs are going down by $3 for every $1 they spend in the clinic."

Sarasota County, the city of Sarasota and the Manatee County School District in Florida are considering opening clinics, and state officials plan to open more clinics in Englewood and Punta Gorda.

"The public sector was slow, but it's now starting to pick up," Kinzler says. "It's growing faster than the private sector, I think because this is positively impacting escalating health-care costs, saving them money. So they are saying, 'This is something we really need to think about,' because unfortunately, many of the other cost-saving components that they've tried just haven't been sustainable long term."