Economic benefit of chemical dependency treatment to employers

Journal of Substance Abuse Tre

Regular article

Economic benefit of chemical dependency treatment to employers

Neil Jordan, (Ph.D.)a,b, Grant Grissom, (Ph.D.)c,4, Gregory Alonzo, (M.B.A.)c,

Laura Dietzen, (M.A.)c, Scott Sangsland, (M.A.)d

aMental Health Services and Policy Program, Department of Psychiatry and Behavioral Sciences, Feinberg School of Medicine, Northwestern University,

Chicago, IL 60611, USAbCenter for Management of Complex Chronic Care, Hines VA Hospital, Hines, IL 60141, USA

cPolaris Health Directions, Fairless Hills, PA 19030, USAdKaiser Permanente, Pasadena, CA 91188, USA

Received 25 October 2006; received in revised form 16 April 2007; accepted 1 May 2007

Abstract

Using assessment data from the Substance Abuse Treatment Support System, we estimated the economic benefit of chemical dependency

treatment to employers. A cohort of individuals (N = 498) treated at Kaiser Permanente’s Addiction Medicine programs in Southern

California completed assessments before and at least 30 days after treatment began. Compared to intake, subsequent assessments indicated

substantial reduction in the number of patients who missed work, were late for work, were less productive than usual at work, and/or had

conflict with coworkers or management. The net economic value of these improvements to their employers depended upon the utilization rate

of the benefit and the salary level of the employees receiving treatment. For a utilization rate of 0.9% and a mean annual salary of US$45,000,

the net benefit of treatment was US$1,538 for z 61 days of treatment. Based solely upon these employment-related measures, without

factoring in the medical cost offset or indirect benefits of treatment that may help employees to maintain higher levels of productivity,

employers break even on an investment of US$30 per member per year for a chemical dependency treatment benefit if the mean annual salary

of the employees participating in treatment is US$36,565. D 2008 Elsevier Inc. All rights reserved.

Keywords: Substance abuse; Treatment use; Economic benefit; Employers; Workplace productivity

1. Introduction

The benefits of substance abuse treatment are well

established. Numerous studies have demonstrated a pos-

itive effect of treatment on reducing substance use and

improving health status and social functioning (McLellan,

Belding, McKay, Zanis, & Alterman, 1996; Prendergast,

Podus, & Chang, 2000). In addition to recovery from

addiction, patients who comply with substance abuse

treatment often experience gains in family functioning,

mental health, and employment (Cartwright, 2000; Jofre-

Bonet & Sindelar, 2004).

0740-5472/08/$ – see front matter D 2008 Elsevier Inc. All rights reserved.

doi:10.1016/j.jsat.2007.05.001

4 Corresponding author. Polaris Health Directions, 446 Lincoln High-

way, Fairless Hills, PA 19030, USA. Tel.: +1 267 583 6330; fax: +1 267

583 6335.

E-mail address: [email protected] (G. Grissom).

In the last 20 years, many studies have established the

economic benefits of substance abuse treatment. One of the

main conclusions from a recent literature review of cost-

effectiveness and cost–benefit analyses of substance abuse

treatment is that the economic benefits of treatment

generally exceed the cost of treatment (Harwood et al.,

2002). Reduced criminal behavior and increased employ-

ment were found to be key drivers of the economic benefits

of treatment. Most of these studies focused on publicly

funded treatment and examined benefits from the perspec-

tive of patients, treatment programs, or society.

Relatively few studies have considered the economic

benefits of substance abuse treatment from the perspective

of employers. Some studies have focused on the relation-

ship between substance abuse and labor outcomes without

considering the impact of treatment (Bray, Zarkin, Dennis,

& French, 2000; French, Zarkin, & Dunlap, 1998). The

employer perspective is important because a sizable

atment 34 (2008) 311–319

N. Jordan et al. / Journal of Substance Abuse Treatment 34 (2008) 311–319312

number of individuals with substance dependence have

full-time or part-time jobs (Office of Applied Studies,

Substance Abuse and Mental Health Services Adminis-

tration, 1999), and just b 50% of persons with alcohol or

drug disorders in need of treatment are privately insured

(Mark et al., 2000). Most employee health plans cover

alcohol and drug detoxification and outpatient treatment

(Bureau of Labor Statistics, 2003), although the extent of

coverage varies widely.

There are several employment-related outcomes that

should be considered in evaluating the economic benefit

of substance abuse treatment to employers. Studies to date

have focused on absenteeism (Foster & Vaughan, 2005) or

increase in employment hours (Worner, Chen, Ma, Xu, &

McCarthy, 1993). One of those studies argued that employer

costs due to substance-abuse-related absenteeism are not

large enough to justify employer funding of treatment, but

the authors lacked data on the costs associated with

decreased performance, lateness, and disruption to business

(Foster & Vaughan, 2005). Although there are two recent

publications that analyze the economic benefits to employ-

ers of improved productivity due to depression treatment

(LoSasso, Rost, & Beck, 2006; Wang et al., 2006), there

have been no published studies in the substance abuse

literature that have included measures of absenteeism,

conflict with managers and coworkers, or productivity more

broadly. Because N 70% of the estimated costs of alcohol

abuse for 1998 can be ascribed to lost productivity (Har-

wood, 2000), understanding the effects of substance abuse

treatment on workplace productivity may be of significant

value to employers.

The primary data for this study come from Kaiser

Permanente’s Addiction Medicine (KPAM) program, a

multisite substance abuse treatment provider serving

private health plan patients at four locations participating

in the study. This article describes the type, amount, and

economic benefit of workplace performance improvements

reported by patients who were treated for at least 30 days,

and also examines whether there is an additional economic

benefit to employers for patients who remain in treatment

for N 60 days.

2. Materials and methods

2.1. Procedures

Patients were assessed using the Substance Abuse

Treatment Support System (SATSS). SATSS is a custom-

ized version of Polaris CD, an addictions treatment decision

support system developed by Polaris Health Directions with

funding support from the National Institute on Drug Abuse

(Grissom, Sangsland, Jaeger, & Beers, 2004). The SATSS

provides for computerized collection, storage, analysis, and

real-time reporting of patient self-report data at the start of

treatment and concurrently with treatment.

Outpatients at each of the four KPAM programs

complete an intake assessment upon admission to treatment.

Patients seeking treatment are asked to arrive 30 minutes

prior to their scheduled appointment to complete the SATSS

assessment. When the patient arrives, a staff person explains

that, in order for the program to provide the best possible

care, a thorough assessment is necessary, which begins with

a computerized questionnaire prior to meeting with a

clinician. Computer literacy is not required. All questions

can be answered using only numeric keys and the bEnterQkey. All new patients should complete the assessment,

except those who (in the judgment of staff) are unable to

provide reliable self-report due to impairment or lack of

sixth-grade English literacy.

The assessment includes demographic items and

questions relating to treatment history, motivation,

strengths, self-efficacy, and risk factors for dropout and

relapse. Quantitative measures include the severity of

alcohol, drug, psychiatric, family/social, and medical

problems, using the scales of the Addiction Severity

Index (ASI; McLellan, Cacciola, Kushner, & Peters,

1992), and severity of employment problems, using a

scale based upon the ASI model (see Measures section).

The intake assessment provides a broad range of informa-

tion relating to the patient’s clinical condition, including risk

factors for dropout and relapse, and severity data identifying

the need for supplemental services based upon a 5-year

study of treatment–services bmatchingQ (Grissom, 2001;

McLellan et al., 1997).

Each location has one or more computers available to

patients for completing SATSS assessments. Patients are

asked to complete an update SATSS assessment after every

30 days of treatment. Questions on this assessment relate

to the patient’s condition, progress, services received, and

satisfaction with treatment. The ASI Alcohol, Drugs,

Psychiatric, Medical, and Family/Social scales adminis-

tered at intake are included in update assessment, as are

questions relating to employment problems. Patient pro-

gress is evaluated using change scores (intake to update)

on each of the scales separately. Changes in item-level

data, as reported in this article, provide a concrete

indication of the nature and the extent of patient progress.

Counselors are encouraged to review progress reports with

their patients to identify areas of improvement and areas

that remain problematic.

Update assessments require about 15 minutes to com-

plete. Completion rates are substantially lower for update

assessment than for intake assessment, primarily due to

dropout. Other reasons for noncompletion are absence on

the scheduled assessment date, lack of time, and unavail-

ability of a SATSS computer. The most common reason for

noncompletion is failure to provide reminders to patients to

arrive early or to stay after their treatment session when an

update assessment is due.

Completion rates are related to the degree to which

update assessments are integrated into the treatment process.

N. Jordan et al. / Journal of Substance Abuse Treatment 34 (2008) 311–319 313

At one location, update assessments are formally integrated:

Patients and support staff monitor the assessment schedule

and notify patients when they are due to complete an update

assessment; counselors are expected to review reports with

patients; and counselors refer to reports during staff

discussions of patient progress. Completion rates for this

program have reached 100% for some months and average

about 60%.

At the other extreme, at a second location, update

assessments are not integrated into the treatment process.

Counselors are not expected to use update reports, and do

so only upon their own initiative. Patients complete

update assessments only if they are asked to do so by

their counselor. This program has the lowest overall rate

of completion (20%); monthly completion rates rarely

exceed 30%.

2.2. Measures

An employment scale was constructed based on inter-

views with program administrators and clinicians

(Sangsland, 2000). They felt that the employment scale of

the ASI was not well suited for assessing the severity of

their patients’ employment problems. It was decided to

retain the two ASI items that are common to all seven ASI

scales (bHow much have you been troubled or bothered [by

employment problems]?Q and bHow important to you now is

treatment for [employment problems]?Q) while replacing the

remaining items with five performance indicators that are

important to employers: being (1) late or (2) missing work;

conflict with (3) coworkers or (4) supervisors; and (5)

productivity on the job. As for standard ASI items, the

patient is asked in each case to report behavior during the

prior 30 days (e.g., bIn the past 30 days, how many days

were you late for work?Q).The psychometric properties of the SATSS scales,

including internal consistency and test–retest reliabilities,

concurrent and predictive validity, and sensitivity to

change, are described in Grissom et al. (2004). Internal

consistency scale reliabilities (Cronbach’s a) are as follows:.91 (Medical), .76 (Family/Social), .83 (Psychiatric), .91

(Drugs), .91 (Alcohol), and .70 (Employment). The rela-

tively low reliability of the employment scale is due to the

heterogeneity of the items. Among employees reporting

workplace difficulties, there is considerable variation

regarding the nature and the severity of the problems. Few

patients report all five of the problems covered by the scale.

Eight of 10 interitem correlations, although all statistically

significant and in the expected direction, are below .30.

Treatment outcomes related to employment are measured

using changes in the five workplace performance indicators

in the course of treatment by comparing data collected at the

start of treatment (intake assessment) with data collected

after z 30 days of treatment (update assessments).

Aggregate program-level patient outcomes data are reported

to Kaiser Permanente both in terms of raw change scores

(percentage of patients improved) and case mix adjusted

data, showing the proportion of patients whose improve-

ment equals or exceeds severity-adjusted expectation.

Workplace performance data for patients who report

employment problems at intake indicate that about 70% of

these patients have improved workplace performance after

1 month of treatment.

2.3. Setting

Subjects comprised patients receiving treatment for

chemical dependency at four KPAM outpatient programs

in Southern California: Fontana, San Diego, and Los

Angeles (West Los Angeles and Carson locations). Addic-

tion medicine physician specialists lead multidisciplined

treatment teams. All of the programs offer a full range of

chemical dependency services, including inpatient detox-

ification, outpatient detoxification, day treatment, and

intensive outpatient services. Outpatient treatment occurs

about 65% of the time in group settings, with specialized

groups addressing anger management, gender-specific

issues, relapse prevention, and so on. Comprehensive

mental health services that are not already integrated into

chemical dependency programs are available within the

Kaiser Permanente system. Adjunctive community services

vary by location based on the availability of community

resources but may include Alcoholics Anonymous, Nar-

cotics Anonymous, and Al-Anon groups; gay and lesbian

issues; job skills; and other workshops or programs.

Patient populations served by the four programs were

similar with regard to gender (approximately two thirds of

patients at each location were male) and employment (about

70% of patients at each location reported paid employment).

About half of the patients at each site had a history of arrest.

Other patient characteristics varied widely. The proportion

of White patients at the San Diego program (70%) was

twice that of the West Los Angeles program (35%). The

proportion of married patients varied from one third (West

Los Angeles, 34%) to nearly half (Fontana, 46%). The

proportion with college degrees ranged from 16% (Fontana)

to 27% (West Los Angeles). Eighty-four percent of patients

seeking services at Fontana acknowledged their need for

addictions treatment, versus three fourths at the San Diego

(74.9%) and West Los Angeles (71.4%) locations. The

remainder presented for treatment solely because of some

form of compulsion (e.g., court, employer).

Addictions treatment in KPAM programs varies in the

nature and the duration of bstandardQ treatment, but patients

are encouraged to attend as long as they find it helpful. Of

thosewho engage in treatment,most attend sessions for at least

1–2 months, and some continue treatment for a year or more.

Many patients drop out after one or two sessions due to

the chronic relapsing nature of the disease or, in some cases,

due to dissonance between a program’s objective (absti-

nence) and their personal goals for treatment. At the four

KPAM settings of this study, only 66% of patients seeking

Table 1

Demographic characteristics and treatment history (N = 498)

Characteristics

Patients with

one update

(30–60 days

postintake)

(n = 309)

Patients with

two updates

(30–60 and

z 61 days

postintake)

(n = 189) Significance

Age in years [M (SD)] 41.5 (10.1) 42.9 (9.5) ns

Male (%) 71.8 69.8 ns

Race/ethnicity (%)

Caucasian/White 57.3 63.0 ns

African American 14.6 15.3

Latino 20.1 13.2

Other 8.1 8.5

Highest level of education completed (%)

High school or less 35.0 30.2 ns

Some college 38.8 40.7

College or more 26.2 29.1

Current marital status (%)

Never married 23.6 24.3 ns

Married, remarried,

or living as married

50.5 47.1

Separated/divorced/

widowed

25.9 28.6

With family history

of substance

problems (%)

70.6 75.7 ns

Employment status at intake (%)

Full time 85.8 93.1 v2(1) = 5.56,

p b .05Part time 14.2 6.9

Employment status at 30-day to 60-day update (%)

Full time 89.0 93.0 ns

Part time 11.0 7.0

Pressured to enter treatment by manager/supervisor (%)

Not at all 79.6 77.8 ns

Somewhat 8.7 10.6

Strongly 11.7 11.6

Number of hospitalizations for psychological

or emotional problems in one’s lifetime (%)

0 76.4 84.7 v2(2) = 6.77,

p b .051 7.4 2.6

z 2 16.2 12.7

Has chronic illness

or persistent pain

being treated with

medication (%)

34.1 28.4 ns

General health status (%)

Excellent 12.6 9.5 v2(4) = 12.30,

p b .05Very good 28.5 36.5

Good 36.9 42.9

Fair 19.4 10.1

Poor 2.6 1.1

Number of times entered treatment for substance

abuse in one’s lifetime (%)

0 57.3 54.0 ns

1 22.7 22.2

z 2 20.1 23.8

Number of times entered treatment for detoxification (%)

0 80.3 84.1 ns

1 9.7 11.1

z 2 10.0 4.8


treatment for alcoholism and 78% of patients seeking

treatment for other drugs wanted to remain abstinent.

2.4. Sample

The study sample includes 498 employed patients who

completed SATSS intake assessment in January 1999–May

2005, remained in treatment for at least 1 month, and

completed an update assessment 30–60 days after the intake

assessment. We compared this study sample to all employ-

ees who completed an intake assessment during that time

based on the 14 demographic and treatment history

characteristics shown in Table 1. The only significant

differences were that patients in the sample had a slightly

higher education level and were more likely to be strongly

pressured by their supervisor to enter treatment.

The sample was divided into two groups. The first group

comprised patients who completed an update assessment

30–60 days after their intake assessment but had no further

update assessments (n = 309). This group represents a

common duration of treatment for patients. The median

number of days between intake assessment and update

assessment was 42 days. The second group comprised those

who completed at least two update assessments: one at 30–

60 days after the intake assessment, and the second at least

61 days after the intake assessment (n = 189). The median

number of days between the intake assessment and the

second update assessment was 106 days, representing about

two additional months of treatment.

The demographic characteristics of the sample are shown

in Table 1. The mean age was 42 years, and the majority of

patients were male and Caucasian. Most patients reported

good or better health status, but those with only one update

assessment were more likely to report fair or poor health

status than those who completed at least two update

assessments. A higher proportion of patients with only

one update assessment reported working part time (14.2%)

or having been hospitalized during their lifetime for a

psychological problem (23.6%) than patients with at least

two update assessments (6.9% and 15.3%, respectively).

Almost half of all patients reported having been in substance

abuse treatment prior to their intake assessment.

2.5. Methods for calculating benefits and costs

Formulas used to calculate employer costs and the

benefits of work-related treatment outcomes to employers

are presented.

2.5.1. Hourly/daily employee cost

In each of the benefits analyses, the cost to the employer of

an employee’s time is a key element. Our base case analysis

was for an employee with a US$45,000 annual salary, whose

cost to the employer, including fringe benefits and employer-

paid taxes (e.g., Federal Insurance Contribution Act [FICA/

Social Security] and Federal Unemployment Tax Act


[FUTA]), was estimated to be US$67,500 per year. The cost

to the employer per employee work hour was calculated

based on an annual 1,920 working hours, reflecting paid but

nonworking time off for vacation, holiday, and sick/personal

days employers typically offer employees. The effective

hourly employer cost used in benefits analyses was then

US$35.16 (or US$281.25 for a standard 8-hour day).

2.5.2. Reduced absenteeism

The annual savings from reduced absenteeism were

calculated as:

s ¼ 12drcd

where dr is the reduction in days absent per month

posttreatment versus pretreatment, and cd is the cost per

working day to the employer (US$281.25).

2.5.3. Reduced tardiness

The annual savings from reduced tardiness were calcu-

lated using the assumption that, when employees were late,

they were, on average, 1 hour late. The savings were

calculated as:

s ¼ 12drch

where dr is the reduction in days late to work per month

posttreatment versus pretreatment, and ch is the cost per

working hour to the employer (US$35.16).

2.5.4. Reduced conflict with managers

The annual savings from reduced conflict with managers

were calculated using the following assumptions: (1)

Managers’ salaries are 33% higher than that of the employee

with whom they had conflict; (2) each day with conflict

resulted in 0.5 hour of unproductive employee time; and (3)

each day with conflict resulted in 0.25 hour of unproductive

manager time.

The savings were then calculated as:

s ¼ drch 0:5þ 0:25� 1:33ð Þð Þ12

where dr is the monthly reduction in days with manager

conflict posttreatment versus pretreatment, and ch is the

employee cost per working hour to the employer (US$35.16).

2.5.5. Reduced conflict with coworkers

The annual savings from reduced conflict with coworkers

were calculated using the following assumptions: (1) Cow-

orkers’ salaries are, on average, the same as that of the

employee with whom they had conflict; (2) the conflict

involved only one coworker; (3) each day with conflict

resulted in 0.5 hour of unproductive employee time; and (4)

each day with conflict resulted in 0.5 hour of unproductive

coworker time.

The savings were then calculated as:

s ¼ 12drch 0:5þ 0:5ð Þ

where dr is the monthly reduction in days with coworker

conflict posttreatment versus pretreatment, and ch is the cost

per working hour to the employer (US$35.16).

2.5.6. Increased productivity

The annual savings from increased personal productivity

were calculated based on the assumption that days on which

the employee reported reduced productivity resulted in a

20% loss of productivity for the day. The savings were then

calculated as:

s ¼ dr � 0:2cd � 12

where dr is the reduction in days with productivity problems

per month posttreatment versus pretreatment, and cd is the

cost per working day to the employer (US$281.25).

2.5.7. Marginal cost

The marginal cost to employers of a chemical depend-

ency benefit is a function of the number of persons covered

by the benefit, the utilization rate of chemical dependency

treatment among those covered, and the per-person-per-year

(PPPY) insurance premium associated with a chemical

dependency benefit. The base case marginal cost was

calculated under the following assumptions, based on

estimates provided by KPAM: (1) 0.9% of employees

covered by a chemical dependency benefit engage in some

chemical dependency treatment during a given year

(utilization rate); (2) 50% of those who engage in chemical

dependency treatment complete at least 1 month of treat-

ment; and (3) the PPPY insurance premium associated with

a chemical dependency benefit is US$30.

The marginal cost was then calculated as:

MC ¼ jpð Þ=k

where MC is the marginal cost per person engaged in

treatment for at least 30 days, j is the total number of

employees covered by the chemical dependency benefit in a

given year, p is the PPPY insurance premium associated

with a chemical dependency benefit, and k is the number of

employees who participate in treatment for at least 30 days.

Via sensitivity analysis, we varied the utilization rate using

the median (0.7%) and 90th percentile (1.2%) utilization

rates for privately insured populations published by the

National Committee for Quality Assurance (2007).

3. Results

The proportion of patients who reported work-related

problems after treatment was lower than the proportion of

patients who reported work-related problems before treat-

ment (Table 2). The proportion that reported past-month

absence from work dropped from 58.5% at admission to

treatment (baseline) to 26.9% after 30–60 days (Mdn =

42 days) of treatment. The proportion of patients who

reported lateness declined from 37.3% to 20.4%. There were

Table 2

Patient-reported work-related problems before and after two periods of treatment (N = 498)

Performance problem

Patients with 30–60 days of treatment (n = 498) Patients with z 61 days of treatment (n = 189)

Baseline Post 30–60 days Baseline Post z 61 days

Absent from work (%) 58.5 26.9 54.7 25.3

Days of work missed [M (SD)] 2.32 (2.98) 1.07 (2.78) 2.40 (3.31) 0.81 (2.12)

Tardiness (%) 37.3 20.4 35.8 22.1

Days arrived late for work [M (SD)] 1.49 (2.87) 0.56 (1.48) 2.21 (5.41) 0.74 (2.11)

Conflict with managers (%) 19.7 14.9 15.3 12.2

Days of conflict with managers [M (SD)] 1.32 (4.58) 0.59 (2.46) 1.17 (4.48) 0.55 (2.84)

Conflict with coworkers (%) 18.1 11.8 18.0 15.3

Days of conflict with coworkers [M (SD)] 1.13 (4.17) 0.51 (2.44) 1.09 (4.01) 0.54 (2.74)

Lost productivity (%) 39.8 25.3 40.7 21.7

Days of reduced productivity [M (SD)] 3.93 (7.29) 1.66 (4.66) 4.32 (7.51) 1.70 (5.26)

Notes. Mean days for each performance problem reflect the mean for everyone in the treatment group; mean values are not limited to only those group

members who reported having the particular performance problem.


also reductions in the proportion of patients reporting lost

productivity, or conflict with managers or coworkers. In

addition to reducing the scope of work-related problems,

addictions treatment also led to substantial reductions in the

severity of these problems. The mean number of days of

reduced productivity per month was reduced by 58% (from

3.93 to 1.66 days). The mean number of workdays missed

was reduced by 54% (from 2.32 to 1.07 days/month).

Patients (n = 189) assessed after N 60 days of treatment

showed similar improvements. The rate of absenteeism

dropped from 54.7% at baseline to 25.3% after 106 days

(median) of treatment. The proportion of patients who

reported lost productivity was reduced by nearly half, falling

from 40.7% at baseline to 21.7%. Reductions in tardiness

and conflict with coworkers were similar to those associated

with 42 days of treatment.

The improvement in performance associated with

z 61 days of substance abuse treatment represents consid-

erable economic value (Table 3). Reduced absenteeism had

the most significant direct economic impact. The 66%

reduction in the mean number of days absent (from 2.40 to

0.81 days/month) represents an annual savings to the

employer of US$5,366 (1.59 � US$281.25 � 12) for an

employee receiving a US$45,000 annual salary. Similarly,

the 61% decline in mean days per month of productivity

problems after z 61 days of treatment was associated with

an economic benefit of US$1,769 (2.62 � 0.2(US$281.25)

Table 3

Average economic value per person associated with substance abuse

treatment (US$)

Performance problem Baseline

Post z 61 days

of treatment

Difference

from baseline

Absenteeism 8,100 2,734 5,366

Tardiness 932 312 620

Conflict with managers 411 193 218

Conflict with coworkers 460 228 232

Lost productivity 2,916 1,147 1,769

Aggregate value 12,819 4,614 8,205

Note. Economic value calculation based on an average salary of US$45,000

plus a 50% fringe benefit rate.

� 12). There was a smaller but positive economic benefit

associated with reduced tardiness and conflict with manag-

ers and coworkers. The aggregate economic benefit

associated with z 61 days of substance abuse treatment

was US$8,205 per person.

After considering the marginal cost of investing in

chemical dependency treatment, there is a considerable net

benefit to employers (Table 4) associated with providing an

insurance benefit that includes such treatment. The net

benefit, however, depends upon the utilization of the benefit

and the mean salary level of the employees receiving

treatment. With the assumptions of our base case (0.9%

utilization, 50% dropout, and US$30 per member per year),

the marginal cost of treatment is US$6,667 PPPY. For the

base case of an individual earning US$45,000 per year

with a 50% fringe benefit loading rate, the net benefit of

z 61 days of treatment related to our five performance

measures is US$1,538, yielding a return on investment

(ROI) of 23%. For an individual earning US$60,000 per

year, the net benefit of z 61 days of treatment is US$4,273

per person, yielding an ROI of 64%. For an individual

earning US$30,000, there is a net cost of US$1,196 per

person associated with z 61 days of treatment, yielding an

ROI of �18%. An employer will break even on an

investment in a chemical dependency benefit, when

considering only absenteeism, tardiness, conflict, and

productivity outcomes, if the mean salary of employees

participating in treatment is US$36,565.

Sensitivity analysis shows that the ROI is highly

sensitive to the utilization rate for chemical dependency

Table 4

Net benefit estimates and ROI for employers associated with z 61 days of

chemical dependency treatment (US$ per worker)

Parameter

Salary level

US$30,000 US$45,000 (base case) US$60,000

Benefits 5,471 8,205 10,940

Marginal cost 6,667 6,667 6,667

Net benefit 1,196 1,538 4,273

ROI (%) �18 23 64

Table 5

Sensitivity analysis for ROI

Utilization rate (%)

Salary level

US$30,000 US$45,000 US$60,000

0.7 �36% �18% 9%

0.9 �4% 23% 64%

1.2 28% 64% 119%


services (Table 5). Increasing the utilization rate to 1.2%

improves the ROI to 64% when the mean salary is

US$45,000 and yields a positive ROI of 28% when the

mean salary is US$30,000. As utilization increases, the

break-even point for investing in a chemical dependency

benefit decreases.

4. Discussion

The findings reported in this article indicate that patients

who engage in addictions treatment for z 1 month achieve

sharp reductions in workplace-related problems. Gains

relating to tardiness and workplace conflict are maintained

after 60 days of treatment, whereas absenteeism and

productivity continue to improve. Patients who remained

in treatment beyond 2 months experienced gains that

resulted in an economic benefit to employers if their mean

annual salary was z US$36,565.

ROI estimates reflect a series of assumptions and

outcomes data available for analysis. In addition to the

assumptions identified above concerning the impact

of tardiness, conflict, and reduced productivity, the findings

of this study reflect assumptions concerning the duration of

pretreatment impaired work performance; the duration of

treatment-related performance improvement; and the cost

of absenteeism to the employer. ROI estimates reflect the

economic value of five workplace-related treatment out-

comes available for analysis but do not account for indirect

employer benefits associated with treatment.

Estimates of the economic benefit of addictions treatment

presume that the workplace problems reported by a patient

on SATSS intake assessment are representative of the

12-month period prior to treatment, and that the improve-

ment reflected in update assessments will persist for

12 months. If the employee’s work performance was

impaired for b 1 year prior to treatment or if treatment gains

persisted for less than a year, the ROI would be reduced.

Alternatively, if the employee was impaired for N 1 year prior

to treatment or if the gains in workplace performance

persisted beyond 12 months, the ROI would increase.

Our estimates of the costs of absenteeism are based upon

employee wage rates, which may underestimate the ROI

associated with reduced absenteeism. Employees whose

absenteeism exceeds their paid vacation and sick leave

experience financial strain, which can contribute to

increased stress and reduced productivity on the job.

Productivity gains from interventions that reduce absentee-

ism due to illness are likely to be larger than the wage rate

(Pauly et al., 2002).

The ROI estimates provided in Tables 4 and 5 are

conservative in that they do not account for indirect benefits

associated with addictions treatment and are themselves

based on conservative assumptions of factors driving the

direct costs measured. These indirect benefits include the

decreased cost of work product defects and the decreased

cost of poor decision making that result from improved

employee workplace performance after addictions treat-

ment. The cost of work product defects can be consid-

erable; at a minimum, they require rework and repair,

whereas in the worst case, they could trigger further

mistakes by others downstream, multiplying the negative

impact. As the level of employee decision-making respon-

sibility increases, so do the costs of poor decisions made by

these employees; poor decisions by a front-line worker may

affect a handful of employees and cost hundreds of dollars,

whereas poor decisions by a senior manager could affect

hundreds of employees and incur significant economic loss

to the employer.

Other indirect benefits of chemical dependency treatment

to employees and employers that we were unable to measure

include reduction in medical costs and the value of

improved life functioning (e.g., psychiatric and family/

social functioning). A review of interventions evaluated

during the last 20 years reported that reduced use of medical

services is a significant economic benefit of addictions

treatment (McCollister & French, 2003). Improved life

functioning benefits the employer insofar as it helps the

employee to avoid relapse and to maintain treatment gains,

including improved work performance.

Finally, it should be noted that the posttreatment

reduction in mean days per month of problems reported in

Table 2 (absenteeism, tardiness, and so on) is based upon the

entire sample. To estimate the economic benefit associated

with treatment, everyone in the sample was included in the

analyses regardless of whether the employees reported

problems when admitted to treatment because gains based

upon the entire sample are required to calculate ROI.

Average gains based upon the whole sample are markedly

smaller than the gains of patients who report problems at

intake. For example, 98 (19.7%) of the 498 patients in the

sample reported having had a conflict with managers at

intake. Those 98 persons reported an average of 6.7 days of

prior-month conflict with managers at admission and

3.0 days of prior-month conflict after 30–60 days of

treatment. The reduction in mean days of conflict (3.7

days) is five times greater than for the sample as a whole

(0.73 days).

5. Study limitations

There are several limitations to this study that might be

addressed in future research.


Although the study sample reported significant improve-

ment in work performance following treatment, it cannot be

inferred that the improvement was due to the treatment.

Because work performance data were not available for

impaired employees who did not engage in treatment, it was

not possible to determine how much of the improved

performance can be attributed to participation in treatment.

Costs associated with missed work, lateness, and reduced

productivity vary by type of job (Nicholson et al., 2006).

Many jobs require workers to perform as part of teams, so

performance problems may lead to additional productivity

losses for team members. We lacked data on job type and on

the team orientation of an employee’s job for the individuals

in our sample, so we were unable to account for these

factors in estimating ROI.

The sample may not be representative of all patients

treated for z 1 month because it does not include patients

who remained in treatment for N 30 days but did not complete

an update assessment. According to program staff, it is rare

for patients to refuse to complete the update assessment. The

primary factor in the completion of updates was staff

diligence in reminding patients when the assessments were

due. However, it remains possible that patients who

completed the update were more conscientious about their

treatment than those who did not complete their update.

Workplace improvement for less conscientious patients may

not be as positive as reported for the sample in this study.

This study did not account for employees who benefited

from treatment but were unavailable for the 30-day to the

60-day update, which would increase the ROI, or for

persons who were employed at intake but not at update,

which would reduce ROI. The first group includes persons

who remained in treatment but had transferred to a

different location and did not complete an update (9.7%

of all admissions); persons who baccomplished treatment

goalsQ prior to 30 days (1.2% of admissions); and persons

who dropped out prior to 30 days but nonetheless had

received at least some benefit from treatment. The second

group includes persons who were employed at intake but

were unemployed at the 30-day to the 60-day update

(11.2%). We believe that the benefit derived by the

employer from the first group is offset by the loss of

benefit from the second group because the two groups are

nearly equal in size (10.9% vs. 11.2%). Assuming that

employers derived some benefit from persons who dropped

out before the update, we believe that the absence of data

for these two groups had a negligible impact or may have

underestimated the actual ROI.

The outpatient programs that participated in this study

offer an abstinence-based treatment utilizing a multidiscipli-

nary treatment approach. Modalities include group and

individual counseling, education, and others. Treatment is

targeted primarily at addictions issues, but counselors are

encouraged to address mental health, family, medical, and

employment problems as well. Most of the programs have a

formal treatment model of fixed duration, but patients are

encouraged to remain in treatment as long as they find it

helpful. Findings may not generalize to other treatment

models (e.g., models with a more rigidly fixed term of

treatment, or those based solely upon a 12-step approach).

6. Summary

Employed patients remaining in chemical dependency

treatment for z 1 month reported marked improvement

across multiple dimensions of work performance. The net

economic value of these improvements to their employers

depended upon the treatment utilization rate and the salary

level. For a utilization rate of 0.9% and an employee with

a US$45,000 annual salary, the net benefit of treatment

on these work performance measurements alone was

US$1,538. Based upon the data and assumptions used in

this study, employers can break even on an investment in a

chemical dependency treatment benefit if the mean annual

salary of employees participating in treatment is US$36,565.

Substantial employment-related gains were realized

within the first 30–60 days of treatment. Patients who

remained in treatment for longer periods reported addi-

tional but diminishing gains, primarily in the areas of

absenteeism and productivity on the job. Because there is

no additional cost to employers associated with higher

utilization and longer treatment, and because both are

associated with additional benefits, the ROI for employers

increases along with the utilization and duration of

treatment. It is to the employer’s benefit to encourage

early identification of addiction problems and treatment

engagement, thereby averting costs associated with

employee impairment and realizing enhanced ROI from

the addictions treatment benefit.

For companies with an average salary of b US$36,565,

there is a negative ROI associated with offering a chemical

dependency treatment benefit when considering only the

five outcome dimensions assessed for this study. However,

future research may demonstrate a positive ROI for lower

salary levels when indirect benefits such as medical cost

offsets and improved psychiatric and family/social function-

ing are considered. The latter may help employees to avoid

relapse and to maintain work performance gains beyond

12 months, contributing to a positive ROI.

This study illustrates the benefits of integrating outcomes

assessment into routine clinical care. Such assessments can

enable program managers to better match treatment to

patient needs (Grissom et al., 2004; McLellan et al., 1997;

Sangsland, 2000) and can enable administrators, program

planners, and researchers to better understand the impact of

chemical dependency treatment.

Several threats to the internal validity of the study design

are noted above. These must be weighed against the gains in

external validity derived from studies of patients in actual

treatment settings. Naturalistic studies are free of many of

the threats to external validity (sample exclusions, informed


consent procedures, refusal to participate, and others) that

are common in experimental research designs. Both types of

studies can contribute to improvement in clinical outcomes

and to our understanding of what works. In an era of

declining support for research, it is important to be clear

about the value of experimental research for internal validity

while working to harvest meaningful data from naturalistic

studies of routine treatment.

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Economic benefit of chemical dependency treatment to employers