How To Calculate Physician Turnover Costs

SEPTEMBER 27, 2016
David Alemian

Physician turnover costs can range from a half-million to well over a million dollars.  That’s a pretty wide range, but I’m going to give you a more accurate way to calculate the cost of physician turnover for your particular organization.

First, we need to look at the factors that affect physician turnover costs. The biggest factor is lost revenue, because physicians generate revenue for healthcare organizations. When a healthcare organization loses a physician, it also loses the revenue generated by that physician.  As a result, the longer it takes to replace a physician, the greater the loss of revenue. 

The average amount of revenue generated by a physician is approximately $1 million per year. The difference in revenue generated can depend on such factors as physician specialty, hours worked, and so on.

Calculating the amount of revenue lost by a particular physician is simple math:

1)     Determine the amount of monthly revenue generated by the physician who has left or is leaving the organization.

2)     Multiply that amount by the number of months it takes replaces the physician.

The other costs to include are: agency recruiting fees, advertising, interview costs, signing bonuses, and moving expenses.  Some of the costs on this list are easy to figure because they are simply line items, such as $30,000 for a signing bonus or $10,000 for advertising costs.  However, interview costs can include hidden costs that many organizations miss when calculating physician turnover costs. 

Interview costs can include: travel costs for the candidate, airline tickets, car rental, hotels, and meals.These costs also include the number of hours spent by the organization’s staff that interviews the physician candidates.

Let’s say, for example, an organization interviews five candidates for one position, the costs I’ve just mentioned can quickly add over $30,000 to the turnover cost of a single physician. Finally, you also want to include first year training costs for the new physician who comes on board.  When you add these costs on a case-by-case basis, you’ll have a good idea of how much physician turnover is costing your organization.

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