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Marketing onsite EAP services: by touting the benefits of having a workplace-based EA professional and "unbundling" the cost of onsite services from the back-up network, vendors of onsite EAPs can positively distinguish their product from network models.

It's not easy convincing customers that onsite EAPs are a better investment than network model programs. First and foremost, the human resources (HR) community lacks an understanding of EAPs as they exist today. While HR professionals are involved in 90 percent of EAP purchasing decisions (according to Hewitt Associates), their understanding of how EAPs can deliver value to employers typically is limited by their direct experience. If they have never worked with an onsite program, it may be difficult for them to relinquish their preconceptions of what an EAP is supposed to look like and realize there is more than one model of EAP.

Another barrier to marketing onsite EAPs is demonstrating to a customer why an onsite program is a better fit for his/her particular company. The final barrier to be surmounted is the higher cost of an onsite program, which actually is a less formidable obstacle than the two mentioned previously. The purpose of this article is to show you how to overcome these barriers using a strategic approach to marketing that segments the marketplace, differentiates your product offering, and unbundles the cost of your EAP so your customer can make an "apples to apples" comparison.

WHAT IS STRATEGY?

Michael Porter, in a 1996 article in the Harvard Business Review, defined strategy by first asserting that it is not the same thing as operational effectiveness. Operational effectiveness is being able to provide the same services as your competitors, but at a lower cost. This is one of the reasons EAPs today are struggling with the stigma of commoditization.

This struggle has its origins in a seismic shift that occurred in the EAP field just over a decade ago, when several of the largest and oldest national EAP vendors were acquired by organizations whose roots lay in the insurance and managed behavioral healthcare industries. These companies recognized that they could lower the cost of EAP services by using their mental health provider network or a subset of that network, positioning the EAP counselor in the community (rather than within the worksite), and centralizing intake, training, and case management functions.

The migration from internal, onsite EAPs to vendor-provided network model programs was hugely successful. It would be a mistake, however, to attribute the triumph of the network model over the onsite model to cost alone. In the early 1990s, the newly configured EAP/managed behavioral healthcare providers had two enormous advantages: superior marketing resources and a highly receptive marketplace. The latter resulted from the fact that most of corporate America had, at that precise moment, become singularly focused on increasing shareholder return, which resulted in companies outsourcing any function that was not defined as a "core business" process or service.

Michael Porter also pointed out in his article that companies competing on the basis of operational effectiveness alone begin to look more and more alike, which he terms "competitive convergence," and ultimately see their profit margins erode. The behavioral healthcare industry apparently reached the maturation point of this cycle during the past year, as the largest behavioral healthcare vendor in the United States filed for bankruptcy and other companies began posting "For Sale" signs on the front lawns of their behavioral healthcare businesses.

SEGMENTING THE MARKET

If you are interested in marketing an onsite EAP or retaining customers for your onsite program, your primary task is convincing your customers, on a client-by-client basis, that your product is the best "fit" for their particular company. Most regional EAP providers segment the market based on customer proximity and size. Pursuing contracts with smaller employers is a perfectly good business strategy and allows local vendors to provide highly customized services for which local businesses often are willing to pay premium prices.

However, the most recent survey of EAP providers conducted by Open Minds shows that the EAP field now consists of half a dozen vendors serving millions of clients and several hundred EAP firms serving much smaller populations. Arguably, the most promising opportunities in the EAP industry exist for vendors attempting to move into the nearly empty field of mid-sized providers and win business away from faltering industry giants (which is not to say that all of the major providers are stumbling).

If you are an EAP vendor wishing to grow your business and you are interested in selling a Core Technology-based onsite model program, you need to segment your potential customers according to type of industry and corporate culture. There is no single "best" EAP; you have to ask yourself for whom an onsite EAP model would be the best fit. The kinds of industries that historically have implemented onsite programs tend to have large numbers of safety-sensitive jobs, such as petrochemicals, pharmaceuticals, heavy manufacturing, utilities, transportation, municipalities, and medical centers.

Industry type is not, however, a sure predictor of a good fit with an onsite EAP, so you have to take corporate culture into consideration as well. There is no easy way to assess corporate culture short of talking with people who have years of service with an organization and have worked in positions within the Human Resources Department or other areas that provide a good vantage point. Otherwise, you can't begin to explain why Chevron-Texaco, Wells Fargo, and Dupont have retained internally staffed programs while Exxon-Mobil, Bank of America, and Dow Chemical have outsourced their EAPs, or why other companies have elected to use a vendor to provide onsite EAP services as opposed to using a pure network model.

DIFFERENTIATING YOUR PRODUCT

If you want to sell a traditional, Core Technology-based EAP, your customers will need to understand how onsite EAPs differ in structure and function from network model programs. The first point to get across is that having an onsite program does not mean having an EA professional at the worksite 40 hours per week, unless the facility has thousands of employees working around the clock (ideally, you want to have one onsite hour per week for every 300 employees, assuming that one-third of total utilization will be onsite). What is necessary is that an EA professional be in the workplace enough hours of the week or month to develop a trusting relationship with key company personnel, such as human resources, medical, health and safety, corporate security, local line management, and labor representatives. Another selling point, which will pay for itself by reinforcing customer loyalty, is having local facility management--primarily HR, medical, and health and safety personnel--participate in selecting their onsite EA professional.

By having the same EA professional provide supervisory training, employee orientations, training for labor-based peer counselors, critical incident stress debriefings, and "Coping with Change" seminars and be on call for management consultation when not in the workplace, you foster a strong identification of the EAP with a specific person. Consequently, when a supervisor, human resources advisor, or shop steward becomes aware of an employee with a problem, s/he will call the identified EA professional for consultation and referral.

The conventional wisdom among human resources professionals (engendered to no small degree by the major EAP vendors) is that employees tend not to use an onsite program due to confidentiality concerns. However, my firm conducted three benchmarking studies of several Fortune 500 companies over the past four years and found that onsite EAPs recorded 50 percent higher overall utilization rates, received 500 percent more supervisory referrals, and identified 300 percent more employee substance abuse cases.

The more safety-sensitive positions a company has, the more likely you are to catch management's attention by pointing out that the New England Journal of Medicine reported in June 2003 that only one of ten alcohol-dependent employees receives appropriate care. You should make sure your potential customers understand that virtually all the EAP research that credibly demonstrates a return on investment applies to traditional, Core Technology-based onsite models. Be sure to leave your customers with supporting materials, such as EAPA's 2003 publication, "The Dollar$ and Sense of Employee Assistance." You should also refer human resources professionals to the Society for Human Resource Management's Web site for the white paper titled, "Buying an Employee Assistance Program with Your Eyes Open."

UNBUNDLING COSTS

If you want to move beyond a commodity pricing paradigm, you will need to educate your customers about the relationship between EAP costs and services. The best way to do this is to separate the cost of onsite services from the back-up network. Onsite services should be billed on a fee-for-service basis, determined by the number of hours actually provided. Make your customers aware of the fact that this model of EAP facilitates follow-up on supervisory referrals, employee substance abuse cases, and more serious psychiatric disorders that typically result in substantial amounts of lost time, whereas the network model typically lacks the flexibility to provide brief but regular contact over one or two years with clients who require additional structure and support to maintain their recovery from addiction or other treatment gains.

When you unbundle the cost of onsite services from the overall pricing, be sure to subtract from the network portion of your pricing model the cost of training, supervisory consultations, client sessions, case management, fitness-for-duty coordination, and call center activity that will be channeled to onsite EA professionals. Calculating EAP costs in this manner will result in a very competitive network price and a highly customized, flexible, transparent cost structure for the onsite services.

Another item worth unbundling is the cost of the account executive. The optimal configuration for customers with several EA professionals assigned to multiple sites is combining the role of account executive with that of clinical supervisor and pricing this as a separate item. By combining these functions and unbundling the cost, you will provide your customer with an accurate sense of how much is being spent for these services, and s/he will receive quarterly, semiannual, and yearly reports from someone who is intimately familiar with the operational details of the EAP and can explain data trends correctly and make specific recommendations to enhance the program's value.

Be sure your customers understand that the largest cost factor in EAP service delivery is the number of face-to-face clinical hours provided by either network or onsite EA professionals. Point out to your customers that utilization rates based on telephone intake rather than cases that involve at least one face-to-face session exaggerate the impact of the program. Train your customers to compare potential EAP vendors according to the number of face-to-face sessions per thousand employees per month, based on paid claims. Finally, make your customers aware that the tradeoff in buying a low cost/low utilization EAP is that they will wind up, in effect, paying more for the actual services provided while reaching far fewer employees and missing many individuals who are most in need of assistance.
Pricing EAPs: Onsite vs. Offsite
(Pricing is based on an actual bidding situation
using utilization rates pegged to cases having
at least one face-to-face EAP session.)

Pricing Assumptions Onsite EAP Offsite EAP

Number of employees 10,000 10,000
1,600 onsite EAP $80,000
 hours @ $50/hr
50% FTE account $40,000
 executive/clinical
 manager
Base rate $12 $18
Annual base rate @ $120,000 $180,000
 10,000 employees
Total annual program $240,000 $180,000
 cost
Annual cost per $24 $18
 employee
Per employee per $2.00 $1.50
 month cost
Total utilization 6% 4%
 (2% onsite and
 4% offsite)
Total number of 600 400
 cases per year
Cost per case $400 $450


Kenneth Collins is an independent behavioral healthcare consultant and serves on the Workplace Health, Safety and Security Committee of the Society for Human Resource Management. For more information, see his Web site, www.KennethRCollins.com.
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Article Details
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Title Annotation:employee assistance programs; Pricing: breaking free of the commodity trap
Author:Collins, Kenneth
Publication:The Journal of Employee Assistance
Geographic Code:1USA
Date:Jun 1, 2003
Words:1941
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