The Enormous Cost of Physician Turnover

I recently spoke with a colleague who was seeking some advice regarding their upcoming contract re-negotiation. In discussing how they were assessing their value and what they planned to negotiate, I brought up how the healthcare system would rather keep their employees due to the high cost of physician turnover.

When I said this, my colleague was shocked. Why would physician turnover cost a lot? And what makes up these costs? Was this actually enough to make healthcare systems and physician employers keep their current doctors around?

It got me thinking. I bring up the importance of knowing your value as a physician all the time. But I’ve actually left out an important part of that equation. And that is how much it actually costs to replace a doctor. Knowing and understanding this only helps doctors even more.

What is the cost of physician turnover?

Multiple studies have examined and calculated the estimated cost of replacing a single physician within a healthcare system.

One range that comes up is from $250,000 to $1 million. However, these are estimates that are often based on studies of primary care physicians.

Other studies show that, regardless of specialty, the cost of replacing a physician is two to three times that physician’s annual salary. Let that sink in! It costs 2-3x your salary to replace you.

That means that if your employer gets you to stay, they just pay your salary. But if they don’t, they have to pay double or triple your salary. That’s a pretty big incentive to keep you happy…even when they give you that raise you are asking for!

Addressing the macro scale

This post is really focused on the cost of physician turnover at the individual level.

However, if you look at a broader, systems-based view, the cost of replacing physicians for a practice or healthcare system is even more enormous!

For instance, the AMA provides a calculator for practices to calculate the financial cost of burnout in their organization. The huge component of these costs is physician turnover. The claulcator will estimate how many physicians will leave in how many years and the cost of that exodus.

For example, if 60ish physicians left a major healthcare organization within 2 years (a not unreasonable assumption), it would cost that organization a median of $30-40 million!

Here is an example of this calculation using average numbers across the American healthcare landscape:

This means, on average in the US, each healthcare organization is losing ~$5 million due to physician turnover secondary to burnout alone! The actual cost is likely higher due to non-burnout related physician turnover.

Again, massive incentive to for them to prioritize physician well-being…

What makes up the enormous cost of physician turnover?

Let’s go through the major components of these costs…

Physician recruitment

It costs a lot to find and hire new physicians. This includes advertising, travel costs for interviews, and recruiters if utilized.

Signing bonuses

Signing bonuses are a large lump sum, one-time cost of an employer for new doctor hires. When you keep a physician with a new contract, you usually don’t pay a signing bonus. But a new hire does need one. So higher cost for a new doctor.

Onboarding costs

Materials and labor of getting the new physician on staff. Things like making sure they are registered for insurances, training, etc. Not needed for the physician that stays but needed for every new one.

Lost billings

This is where maybe the largest chunk of the cost comes from. Whenever these is physician turnover, there are massive lost billings and payments for the employer. For many reasons:

1. When a physician leaves, they no longer are seeing patients and generating compensation for the practice. And no one else is until another doctor is hired, which takes time.
2. When a new physician is hired, it takes time for them to build up their practice. Usually in the range of 2 years. During that time, billings are down.
3. The physician who leaves will likely have some patients follow them and never return. Those are lost billings in perpetuity.
4. Lastly, when a younger, less experienced physician replaces a more senior physician, there is loss of efficiency and expertise in practice. This also results in lost billings and profit for the practice.

And finally…

Future burnout

An organization or practice that loses physicians and experience high turnover does not prioritize doctor well-being.

And it is unlikely that this will change in the future for such an organization.

As a result, they stand at greater risk of having more burnout which will result in lost income and increased costs for their physicians who remain in the practice due to lower productivity.

They will also continue to experience higher turnover and increased costs to replace a higher number of physicians. It’s a vicious cycle.

Why does this matter?

It matters of doctors because it demonstrates just how much we do matter.

It is way too often that I hear physicians say they are sticking to a job they don’t like or that doesn’t value them because they feel like just another cog in the wheel. If they leave,. they will just be a cog in another wheel. And if they ask to improve their situation, their practice will just get rid of them or refuse. Because they could always just find another interchangeable cog.

I’ll admit, it can be easy to feel this way. Because that is often the way we are made to feel.

But it is not the reality! And you can see that illustrated in real numbers here.

It is not to the healthcare organization’s benefit that you know just how difficult and expensive it is to replace you. But it is to your benefit.

Knowing this should empower you. The possibility of leaving gives you real leverage in any negotiation. Because it will hurt the employer where they feel it most…their wallet. So, you have the power to ask for what you want, to negotiate in good faith to create a working situation that is mutually beneficial.

What should you do with this knowledge?

Use it.

If you are not happy with your current work situation, think of what would need to happen for you to be happy. And then meet with your organization or practice to make it happen.

Even if you are happy currently, make sure that you are being compensated your fair value. And don’t hesitate to ask for more if you deserve more. The massive cost of physician turnover is on your side. I’d also recommend demonstrating to your practice all of the things that you can do that other doctors can’t that further show your value to the practice.

What you don’t want to do is to go in waving this information in your practice manager’s face. Negotiate in good faith. But they have to do the same thing. So don’t let them make you think you are a cog. You aren’t. And use this knowledge to back yourself up when needed!

Here are additional resources to help you negotiate your contract and optimize your practice:

• Why is Doctor Pay Decreasing and What Can We Do About It? 
• 3 Ways I Defined My Value Ahead of My Contract Negotiation
• Profiling Employers Who Will Hire Doctors as a Contractor
• 9 Steps to Negotiating the Best Physician Contract
• 9 Things You Must Know About Starting a Private Practice

What do you think? Why is physician turnover so high? Were you surprised by how high it is? Does this help or hurt physicians? Let me know in the comments below!