Is the city of Scottsdale dipping its toe into being a healthcare provider?

The background, and nothing new or unique here: Skyrocketing health insurance costs.

Two years ago, the city spent $41.2 million on its Healthcare Self-Insurance Fund. That rose to $44.1 million in the fiscal year ending June 30.

On April 16, City Manager Greg Caton told the Budget Review Commission the 2026-27 cost for city healthcare will be $49.9 million – a 21% increase in two years.

Caton’s presentation noted an “estimated 9.8% increase in medical claims costs.”

And …

“Implementation of a new employee clinic $1.75M.”

Carla and other BRC members raised their eyebrows at that.

Carla, who goes by just the one name, keeps a close eye on all things Scottsdale. Best known as a “preserve pioneer” who helped lead Prop. 490 to the finish line, she is also a member of the Scottsdale Budget Review Committee. 

Indeed, she routinely questions/grills city presenters on the Granite Reef Senior Center expansion, water infrastructure and, of course, the preserve.

The idea of an “employee clinic”?

“It was out of the blue,” Carla later told the Progress. 

Answering Carla’s request for more information, Caton told the BRC he had employee health clinics at the two places (Oro Valley and Grand Junction, Colo.)  he managed before coming here, and they were effective money savers.

And, he noted, Mesa, Phoenix and other Valley cities have employee clinics.

As the presentation did not provide details the Progress asked Caton’s office for more information on the proposed clinic.

“The clinic is still in the planning phase and would require City Council approval as part of the FY 2026/27 budget,” Holly Peralta, a city spokeswoman, responded.

“If approved, implementation is anticipated in the next fiscal year. The clinic would be located at or near a city facility, but a final site has not yet been selected.”

Even so, the city’s recent purchase of a Scottsdale Unified School District building within limping distance of City Hall and a nearby lease of a second nearby building would have to be high on the list of sites.

Peralta said the city hired a healthcare consulting firm to complete a feasibility study using actual claims data. “The study found Scottsdale is a strong candidate for a clinic, with projected net savings exceeding costs within two to three years,” Peralta said.

The $1.75 million, she added, “is a first-year estimate that includes clinic build-out, implementation and startup costs, along with initial operating expenses such as staffing, supplies and administration.”

The presentation showed claim costs are still anticipated to increase by upwards of 10%.

“The clinic is designed to slow the rate of growth by shifting care to a lower-cost setting,” Peralta said.

“The feasibility study identified about $2.7 million in annual medical claims that could be redirected into the clinic, along with additional savings from reduced emergency room use, better chronic condition management and lower workers’ compensation costs.”

After the first year, ongoing costs are estimated at $1.1 million annually, Peralta said, “with modest increases in future years.”

Clinic pro/con

The Progress asked City Council candidates – including the two representatives running for reelection – if they support the idea of a clinic.

Councilman Barry Graham: 

“A well-designed, on-site employee health clinic fits with the city’s self-insurance strategy. Many large organizations—including publicly traded companies—are already doing this. 

“Since the City of Scottsdale self-insures, this pilot program can help improve the quality of healthcare for employees while getting ahead of rising healthcare costs borne by taxpayers. It’s the kind of program I intend to monitor closely for its return on investment and employee utilization rates.”

Ethan Knowlden:

“Don’t have enough information on the clinic to offer a comment.”

Raoul Zubia:

“I support investing $1.7 million in a new employee clinic because it’s a practical way to control long-term healthcare costs and improve access to care. It reduces insurance claims, boosts productivity, and emphasizes prevention. It is a smart step toward strengthening the self-insurance fund and supporting a healthier workforce.”

Bob Littlefield:

“Right now I am a ‘no’ on the ‘new employee clinic.’ I am not convinced it would be cost-effective or produce better health outcomes. 

“But Caton is still tweaking this proposal so we will see what he comes up with.”

Councilwoman Solange Whitehead: 

“No resident (or employee) has asked me to spend tax dollars on a city employee health clinic. Our residents want secure water, safe neighborhoods, fiscal discipline and city leaders that put residents first.”

Crystal Carroll, Michelle Ugenti-Rita and Eric Sloan did not comment on the proposed employee clinic.