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The Shocking Cost of Physician Turnover

May 26, 2011
We’ve spoken with several hospital Chief Medical Officers over the past few months.  They all tell the same story:
  • Building a team of employed physicians is core to the hospital’s survival strategy.
  • The recruiting and selection process has not changed in twenty years.  It’s all based on credentials and informal interviews.
  • They are surprised when physicians leave.
  • They go back and do the same thing again.
  • No one looks at the financial implications of this cycle.  They are too focused on rushing to fill the spot again.
Actual calculations of physician turnover are an inexact science, but no matter how you do the math, it is stunningly high. The basics:
  • Salary
  • Sign on bonuses, income guarantees, and relocation costs
  • Recruiting costs on the low end at $40,000 per position, considering advertising, administrative time, recruiting fees, and interview costs.  It can be significantly higher.
  • The lost revenue while the position is open.  A primary care physician can generate over $1 Million annually for the hospital.  Certain specialties generate several times this much.
Then consider:
  • Cost of the administrative time taken up during the separation process.  On-boarding, credentialing and training costs for new physicians.
  • Decreased productivity and revenue while a new physician’s practice gets up and running.
And some can’t even be calculated: Effects on patient satisfaction; Impact on continuity of quality improvement initiatives; Impact on other providers and referral patterns. See the interesting article:  American Journal of Medical Quality, Review of Physician Turnover: Rates, Causes and Consequences.The loss and replacement of a single primary care physician starts at $250,000.  The real cost is over $1 Million. A few other interesting points, from the New England Journal of Medicine Career Center:
  • A common contributor to turnover is the mismatch between physician expectations and organizational culture or rules.
  • 54% of physicians leave their group within the first five years.
  • Practice issues cause physicians to leave 30% of the time, the most cited reason (not compensation).  Physicians often leave due to disappointment over “broken promises” about patient volume and administrative support.
  • Only 27% of physicians report that their group has a written or formal retention plan.
physician hiringWhat does all of this mean?
  • It is MORE expensive in the long run to move hastily and make a bad hire.
  • There are tools available to understand physician expectations, and to build a long term, successful practice.
  • There are physician-specific tools to ensure that the candidate fits your culture.  Consider the last physician you brought in that didn’t work out because of his personality or behavior, or expectations simply didn’t fit your organization.  What would you have given to know this before making the offer?
  • These are $200,000 to $1 Million positions.  In other industries, we apply far more rigor to the selection process for positions that pay anything above $100,000, because we’ve done the math and know the real cost.

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Bryan Warren Bryan Warren is the President of J3 Personica, a consulting, assessment, training, and coaching firm, and a guest blogger for PSI. Bryan is an expert in progressive talent strategies, with a particular focus on leader and physician selection and development.