1. THE UNIVERSAL LANGUAGE OF ROI:
CONVERTING YOUR EAP BENEFIT INTO AN INVESTMENT
EAPAA CONFERENCE
SYDNEY, AUSTRALIA
AUGUST 4-5, 2016
LOUIS A. SERVIZIO
PRESIDENT, DMSG

2. OVERVIEW WHY IS ROI ANALYSES IMPORTANT?
WHAT IS THE LOGIC FLOW BEHIND AN ROI CALCULATION?
WHAT ARE THE TYPES OF SAVINGS GENERATED FROM AN EAP?
WHICH VARIABLES WERE CONSIDERED IN THE ROI SIMULATIONS?
BRIEF REVIEW: CONCEPT OF INTERNAL RATE OF RETURN (IRR) AND NET PRESENT VALUE (NPV).
HOW DO WE MEASURE PRESENTEEISM AND ABSENTEEISM GAINS (WOS)?
WHICH ANALYTICAL TOOL/CALCULATOR DID WE USE FOR THE ROI SIMULATIONS?
WHAT ARE THE INPUT ASSUMPTIONS?
WHAT WERE THE RESULTS FROM THE ROI SIMULATIONS?
BETWEEN COUNTRIES
WITHIN AUSTRALIA
BREIF REVIEW: THE CONCEPT OF BREAKEVEN PEPM AND UTILIZATION RATES:
WHAT ARE THEY AND WHY ARE THEY IMPORTANT?
HOW ARE THEY CALCULATED?
WHAT´S IN IT FOR THE EMPLOYEES (FINANCIALY) AND HOW DO YOU CALCULATE THEIR SAVINGS?
WHAT ARE THE TAKEAWAYS?

3. WHY IS ROI ANALYSES IMPORTANT?
ROI is the great equalizer. It allows decision makers to compare the investment in your EAP against:
Those of your
EAP competitors
Alternative investments in healthcare programs (e.g., exercise and smoking cessation)
Alternative corporate investments (e.g., expansion of factory and investments in infrastructure and machinery).
Worldwide, there has been a belt-tightening in expenses. During good times “benefits” are safe. During bad times, only “investments” are safe.

4. OF AN EAP ROI CALCULATION?
WHAT IS THE LOGIC FLOW
OF AN EAP ROI CALCULATION?
Assuming only a subset of employees utilize the EAP, are the cost savings sufficient to offset the cost of the program, considering the program effectiveness in reducing costs, the value of money, and program turnover?

5. WHAT TYPES OF COSTS/EXPENSES
ARE IMPACTED BY AN EAP?
Accidents
Medical costs, insurance premiums and/or disability claims (importance depends on the country)
Employee out of pocket expenses paid to providers
Productivity losses from absenteeism and presenteeism
Turnover costs
Recruitment
Relocation
Retraining
Vary by country, region, industry, and occupation
Need productivity loss data base by country (next slide)

6. NOTICE THE DIFFERENCE BETWEEN STATES
WHAT DOES A PRODUCTIVITY LOSS
DATA BASE LOOK LIKE?
(AUS$ )
Manufacturing
Services
Output per employee per
Wage Rate Per
Hour
Day
Year
New South Wales
57.61
460.88
119,828
50.87
406.97
105,813
29.46
235.64
61,266
Victoria
47.20
377.60
98,176
44.19
353.52
91,916
26.79
214.34
55,728
Queensland
58.26
466.08
121,181
41.07
328.60
85,435
27.79
222.34
57,808
South Australia
48.42
387.34
100,708
42.85
342.77
89,120
25.74
205.94
53,544
Western Australia
67.55
540.39
140,503
45.67
365.38
94,999
33.19
265.48
69,025
Northern Territory
101.11
808.88
210,308
45.90
367.19
95,470
32.41
259.24
67,402
Capital Territory
68.18
545.42
141,810
95.23
761.85
198,081
34.26
274.04
71,250
Tasmania
48.65
389.17
101,185
89.96
719.66
187,113
24.02
192.18
49,967
Assumes Number of Work Days Australia
260
Number of Hours in Day 8
SALARY IS NOT A GOOD INDICATOR OF PRODUCTIVITY LOSS!
NOTICE THE DIFFERENCE BETWEEN STATES

7. WHAT VARIABLES ARE CONSIDERED
IN THE ROI SIMULATIONS?
Number of employees covered and PEPM rate (cost of the investment)
Expected prevalence rate of issues in the population
Utilization rate
Pre EAP expenses and effectiveness rates in reducing them:
Productivity losses from absenteeism and presenteeism
Employee turnover
Accidents
Medical costs or premiums
Out of pocket Provider costs for employees
Program turnover rate
Opportunity cost of money (discount rate)

8. WHAT IS AN INTERNAL RATE OF RETURN AND NET PRESENT VALUE?
Although there are several ways of measuring ROI, the two principal methods are Internal Rate of Return (IRR) and Net Present Value (NPV).
The internal rate of return (IRR) is a rate of return used in capital budgeting to measure and compare the profitability of investments.
Compares the attractiveness of various preventive care programs against each other, or preventive care programs against non healthcare programs (expansion of a factory);
The IRR is expressed as a percent.
The net present value (NPV) is the sum of the present values (value in today´s dollar) of the cost savings minus the investment in the EAP investment over a period of time.
Time value of money means that time has an impact on the value of cash flows (a dollar today buys more today than tomorrow because of inflation);
The NPV is expressed in dollars;
Think of this number as what the CFO can expect as an inflow to the checking account if everything goes according to plan.

9. ? WORKPLACE OUTCOMES SUITE (WOS) HOW DO WE MEASURE REDUCTION IN
PRESENTEEISM AND ABSENTEEISM GAINS?
WORKPLACE OUTCOMES SUITE (WOS)
We used the reduction in presenteeism and absenteeism reported in a study of the Workplace Outcomes Suite (WOS) conducted in various regions of the world within DuPont.
The WOS was developed by Dr. David Sharar and Dr. Richard Lennox of Chestnut Global Partners in 2010.
Utilized by over 400 EAP providers to measure changes from before to after use of EAP services: ?
Employee presenteeism and absenteeism
Work distress
Work engagement
Life satisfaction

10. EXAMPLE WOS
FIVE ITEM VERSION

11. WORKPLACE OUTCOMES SUITE POOLED RESULTS: DUPONT TOTAL SAMPLE
SEPTEMBER, ABSENTEEISM
ITEM: For the period of the past 30 days, please total the number of hours your personal concern caused you to miss work. Include complete eight-hour days and partial days when you came in late or left early.
Percent improvement = (post-test minus pre-test)/pre-test

12. WORKPLACE OUTCOMES SUITE POOLED RESULTS: DUPONT TOTAL SAMPLE
SEPTEMBER, PRESENTEEISM
ITEM: My personal problems kept me from concentrating on my work.
Percent improvement = (post-test minus pre-test)/pre-test

13. SO HOW DO WE CONVERT EFFECTIVENESS RATES INTO FINANCIAL RESULTS?

14. THE EAP ROI CALCULATOR
The Calculator is a decision support tool that calculates the ROI for EAP´s. It quantifies all costs pre EAP and post EAP. The difference are the savings. The savings are brought to the present value and compared to the investment, resulting in an IRR and NPV.
Reductions in absenteeism and presenteeism, as well as the effectiveness rates in reducing all other costs and expenses impacted by an EAP, are entered into the Calculator.
Includes significant researched default data from the EAP literature, specific to each country:
Prevalence rates of emotional, legal and financial Issues;
Accidents rate caused by distraction and substance abuse;
Turnover rates caused by issues;
Claims costs;
Reduction of presenteeism and absenteeism.

15. A COMPARISON OF CROSS BORDER ROI´S Variables Not Considered
STUDY I
A COMPARISON OF CROSS BORDER ROI´S
What are the differences in ROI´s between three countries (US, Australia and Brazil) if all input variables are identical (after adjusting for exchange rates), with the exception of the prevalence rate of issues, productivity contributions, and reductions in absenteeism and presenteeism, which are unique to each country?
Variables Not Considered
Medical cost savings
Insurance claims
Disability claims
Variables Kept Consistent
Industry and occupation
Number of employees
PEPM
Utilization rate
Accident cost and rate
Turnover cost and rate
Financial discount rate
Presenteeism rate
Absenteeism rate
Number of days per episode
Program turnover rate
Variables Modified
Prevalence rates of issues
Salary
Productivity contributions (for the same industry)
Gains in absenteeism and presenteeism (from the WOS study):
Asia for Australia
Latin America for Brazil
US for US

16. INPUT VARIABLES Variables Austrailia US Brazil COMPANY XEON
REGION/STATE
New south Wales
East Noth Central
Minas Gerais
INDUSTRY
Manufacturing
OCCUPATION
General
Misc Fabricators
MONTHLY SALARY
AUS$5000
US$5000
R$1,659
PRODUCTIVITY CONTRIBUTION (economic models)
AUS$451.35
$588.31
R$118.59
NUMBER OF EMPLOYEES
7,896
TEMPORARY EMPLOYEE SALARY
COST PER ACCIDENT (exchange rate adjusted)
$758
$1,000
$313
COST PER RELOCATION (exchange rate adjusted)
$227
$300
$94
COST PER RETRAINING (exchange rate adjusted)
$379
$500
$156
TEMPORARY EMPLOYEE REPLACEMENT RATE
10%
ACCIDENT RATE
RELOCATION RATE
RETRAINING RATE
50%
FINANCIAL DISCOUNT RATE
2.03%
NUMBER OF DAYS ABSENT
1.5
PREVALENCE RATE OF ISSUES
26.00%
25.00%
42.26%
PRESENTEEISM RATE
12.30%
NUMBER DAYS PER EPISODE 90
PEPM (exchange rate adjusted)
$1.59
$2.10
$0.66
UTILIZATION RATE
6.20%
PROGRAM TURNOVER RATE
REDUCTION RATE ABSENTEEISM (WOS)
89%
83%
88%
REDUCTION RATE PRESENTEEISM (WOS)
26%
28%
36%
REDUCTION RATE ACCIDENTS
REDUCTION RATE TEMPORARY REPLACEMENTS
REDUCTION RATE RELOCATIONS
REDUCTION RATE RETRAINING
Note 1: Values in Red are the only ones modified
Note 2: Exchange Rates
1.32
1.00
3.20

17. CROSS BORDER ROI RESULTS
Austrailia US
Brazil
IRR
448.00%
459.00%
341.50%
NPV
$498,817
$891,036
$64,991
COST/BENEFIT
5.48
5.59
4.41
COST SAVINGS
$625,392
$1,112,143
$86,250
Note 1: For consistency in comparison, results have been converted to US$
Note 2: Exchange Rates
1.32
1.00
3.20

18. CROSS BORDER ROI CONCLUSIONS
ROI´s and Cost/Benefit Ratios are very high across the world;
EAP´s generate large cost savings;
Although not explicit in the slide, the greatest contributor to ROI are the gains in presenteeism from EAP´s.
The difference in cost savings between the US, Australian and Brazil has mostly to due with differences in employee productivity, not due to the effectiveness in reducing presenteeism (28% in US vs. 26% in Asia). + $

19. STUDY II (WITHIN AUSTRALIA)
THE EFFECT ON ROI´s OF
VARYING PEPM´S AND UTILIZATION RATES
What are the differences in ROI results within one country (Australia) if all input variables are identical, with the exception of the PEPM and Utilization Rates?
Variables Not Considered
Medical cost savings
Insurance claims
Disability claims
Variables Not Modified
Industry and occupation
Number of employees
Prevalence rates of issues
Salary
Accident cost and rate
Turnover cost and rate
Productivity contributions (for the same industry)
Gains in absenteeism and presenteeism Financial discount rate
Presenteeism rate
Absenteeism rate
Number of days per episode
Program turnover rate
Variables Modified
PEPM
Utilization rate

20. AUSTRALIAN EAP SIMULATION
ROI RESULTS
VARYING PEPY BUT KEEPING UTILIZATION RATE CONSTANT
PEPY Aus$
UTILIZATION RATE
ROI
COST/BENEFIT
121
6.20%
6.00%
1.06/1 50
156.50%
2.56/1 25
412.50%
5.12/1
VARYING UTILIZATION RATES BUT KEEPING PEPY CONSTANT
1.28%
3.10%
Note 1: Values in Green are the breakeven utilization and PEPY rates.
Note 2: 6% is the opportunity cost of capital (Australian Treasury Notes).

21. WHAT IS A BREAKEVEN PEPY AND/OR
UTILIZATION RATE?
Breakeven PEPY or Utilization Rates are those that result in:
Cost/benefit of 1/1
NPV = 0
IRR = opportunity cost of capital
Why calculate breakeven rates? If your client feels that the utilization rate seems too low, or your PEPY is too high, you can show that that could greatly increase the PEPY or greatly reduce the utilization rate and they would still be fine.

22. WHAT’S IN IT FOR THE EMPLOYEES (FINANCIALY)
AND HOW DO YOU CALCULATE THEIR SAVINGS?
Without an EAP, employees have to pay for visits to providers out of their own pockets.
With an EAP, the Program pays for a (limited) number of visits. These payments result in savings in out of pocket expenses;
The key variables utilized to calculate these savings include: the prevalence rate of issues, the average weighted cost of visiting providers, the utilization rate, and the EAP success rate in resolving their issues;
The value of the these savings are not really part of the ROI to the employer but is of value to the employees.
The value of this benefit in one of the Australian model simulations was AUS$ 462, The value of these savings should be announced to employees periodically to gain support of the Program.

23. TAKEAWAYS
EAP´s generate expense reductions in a variety of areas. These expense reductions are both real and quantifiable;
Based on hundreds of simulations in various countries, by far, the reduction in presenteeism generates the greatest savings, and is the largest contributor to ROI;
EAP´s generate attractive ROI´s in almost any country;
By explaining, educating, and quantifying expense reductions generated by EAP´s one can counter the commoditization of EAP´s. PEPY rates are far too low for the benefits EAP´s deliver;
It is possible to calculate breakeven PEPY´s and utilization rates. It is important to show our clients that EAP´s provide great value, even with higher PEPY rates.
Even modest utilization rates generate attractive ROI´s.
It is possible to calculate the savings in out of pocket expenses for employees from your EAP. This value should be announced periodically to gain support for the Program.

24. Thanks!
Any Questions?
LOU SERVIZIO