How McDonnell Douglas Cost-justified Its EAP
It was do or die. If the EAP couldn't pay for itself, it would be scrapped.
The first part of the challenge was to expand the EAP program to provide services to all of the 130,000 employees nationwide, and to accomplish this feat in six months. "At the time, we had only two EAP offices, one in Long Beach, California, and one in St. Louis," says Beckman. "Each of these offices had a full-time manager and a secretary. We also had three part-time people—one each in Tulsa, Toronto and Titusville, Florida." Under those conditions, it wasn't possible to provide services in other locations.
The new program required training the supervisors, getting the data system up and running, and hiring and training all of the personnel needed for the program. "The only way we could do that in six months was by bringing in a vendor," Beckman says.
McDonnell Douglas wanted the EAP representatives on-site, however. An arrangement was worked out with the vendor to provide the staff and all of the backup services, but the vendor staff counselors came to work at Mc-Donnell Douglas and became a part of the regular work force at each site. The organization also chose to provide a broadbrush program that included services to deal with all types of family, legal, financial and work problems, rather than focusing on only mental health and substance abuse.
The second part of the challenge was to prove the cost-effectiveness of the program. To accomplish this, the organization brought in Westport, Connecticut-based Alexander & Alexander Consulting Group to conduct a study of its EAP.
This study was completed in 1989. (Because of changes in the program at the McDonnell Douglas Helicopter Company in Mesa, Arizona, it was evaluated in a separate study, and the results of that study were comparable to the data obtained for the rest of the organization.)
During the time of the primary study, absenteeism and medical-claims data for employees who sought assistance from the EAP and were referred for substance-abuse or mental-health problems were compared with data from two other groups:
- Employees who were treated for alcoholism, chemical dependency or mental illness but who had chosen not to use the EAP services
- A control group of employees who weren't treated at any time for substance abuse or mental illness.
The study established the excessive rate of absenteeism and terminations for employees treated for chemical dependency or mental illness who chose not to use the EAP, when compared with the control group. In five years' time, the employees who were treated for chemical dependency averaged:
- 29% fewer days absent
- 42% fewer terminations
- $7,150 less in medical costs
- $14,728 less in dependent medical costs.
Employees treated for psychiatric conditions averaged:
- 25% fewer days absent
- 28% fewer terminations
- $3,975 less in employee medical costs
- $8,762 less in dependent medical costs.
(All amounts are in 1989 dollars.)
These savings weren't achieved in the first year, however. In some cases, the EAP clients actually had higher absenteeism and medical claims in the initial year of treatment. The payoff came during subsequent years and resulted primarily from reduced rates of relapse and other related consequences of improper initial treatment.
The total EAP caseload during 1988 was 5,800 cases. Of these cases, 602 individuals presented conditions that could be impacted in a positive way by the EAP and accepted EAP assistance for these conditions.
Based on the study results, the offset value during the next four years of EAP services for clients entering the program during 1989 is expected to reach $6 million in 1989 dollars. The savings may be broken down as:
- $2.1 million in employee medical claims
- $3.0 million in dependent medical claims
- $0.9 million in a reduction in absenteeism of 7,761 days.
Additional soft savings will result from decreased turnover and replacement-labor costs.
Toward the end of the study, the organization decided to convert the EAP to a totally in-house program, having the same number of EAP representatives. "Some of the vendor's people applied for these positions and were hired," Beckman says. There were no changes in costs of the program under the new, totally in-house program.
The success of the McDonnell Douglas EAP proves the value of such programs in reducing health care costs and absenteeism. This success can be duplicated, however, only by designing the right EAP for your company—one that takes your culture, and your reasons for having an EAP, into account.
Personnel Journal, February 1993, Vol. 72, No. 2, p. 48.