Physician Recruitment: The True Cost to Your Organization

0www.IHStrategies.com
Exclusive to Healthcare. Dedicated to People. SM
Physician Recruitment:
The True Cost to Your Organization
Presented to:
Ohio Hospital Association Members
June 16, 2009
Presented By:
Michael Hogue, M.D., Senior Vice President

www.IHStrategies.com
11
Physician Recruitment a Significant Concern
Number one issue for healthcare system CEOs
 2008 Advisory Board survey
 49% of hospital administrators described recruiting new physicians
“Extremely Challenging”
 55% of hospital administrators described the change in recruiting
difficulty as “More Difficult” over the last 48 months

2
By 2020, the Council on Graduate Medical Education predicts a
10% shortage of necessary providers (96,000 physicians)
 Growing population but capped medical school and residency
positions
 Aging population with increasing health care demands on the
system
 Increasing patients under proposed universal health care
programs
 Increasing number of retiring physicians
 Changing work habits of all physicians
 Senior physicians cutting back hours
 Increasing number of administrative physicians
 Lifestyle a greater issue for younger physicians
 Increasing number of female physicians of childbearing age
 Mal-distribution of currently practicing physicians

3
 Fewer physicians choosing primary care specialties
 Delayed workforce entry with prolonged specialty/subspecialty
training
 35% of physicians currently practicing are over the age of 55
 Approximately 15% retirement rate per year

44
Recruitment Today is Highly Competitive
Employment of physicians by systems is on the rise
 Financially challenging to operate a private practice in today’s
environment
 Increasing number of physicians looking for employment model
 Beneficial for system to not compete for ancillary services
 System desire to captivate “splitters”
 Joint ventures difficult to implement in the face of Stark 2.5
Recruitment is expensive and time-consuming
 Entire cost burden placed on system
Combination of factors creates recruitment issue in both near
and distant future

5
Recruitment Costs
Difficult to quantify all costs related to recruitment
Easy to quantify “hard” costs, including dollars utilized for:
 Advertising
 Retained search firms
 Travel arrangements
 Lodging
 Social engagements
 Direct costs associated with recruitment visit

6
Interventional Cardiologist Recruitment Example
Direct costs associated with recruitment of one candidate:
Average organization interviews 6 candidates over a 1 year
period for each open position
 Direct expenses for recruitment are $109,500 (travel cost x 6)
 Does not include “soft” costs
Source Average Cost
Advertising
(Internet, print ads, and mailings)
$4,500
Site Visit
(Travel, lodging, car rental, meals)*
$3,000
Second Visit for Home Search $2,000
Relocation Costs $15,000
Signing Bonus $40,000
Contingency Firm Fee $30,000
Total: $94,500
*Not including family members

7
Opportunity Costs Interventional Cardiology
Most important cost/expense is opportunity cost:
No budget line item accurately reflects turnover
 “Silent killer” of an organization
 Loss of revenues, especially for a high volume procedural
specialist, significantly impacts bottom line performance of
system
Practice Net Revenue $1,124,000
Hospital Net Revenue $2,662,000
Total Net Revenue $3,786,000
Assumed Margin 20% $757,200
Recruitment Expense $109,500
Total Recruitment Expense $866,700

8
Soft Costs
Difficult to quantify “soft” costs, including dollars spent on:
 Manpower hours put in to evaluate need for new provider
 Productive time of practicing physicians and senior executives
 Time and compensation of recruiting department staff
 Politicking time
 e.g., for “system need” recruit

9
Other Cost Considerations in Recruitment
 Recruitment process may take longer than 12 months
 Costs associated with recruiting a physician whose spouse and
family members need to review the community
 Increasing costs in light of the current economy
 Costs associated with maintaining office staff and space
throughout the vacancy if replacing a relocating provider
Combination of “hard” and “soft” costs equals the true cost of
recruitment

10
Average Recruitment Times*
Gastroenterology 20 months
Neurosurgery 30 months
Cardiology 16 months
Orthopedic Surgery 19 months
* Advisory Board: Physician Recruitment Attracting Talent in a Competitive Market, May 2008

11
Physician Demand*
Anesthesiology 615 Hospitals 2 positions
Gen. Surgery 1,229 Hospitals 1 position
Internal Med. 1,639 Hospitals 3 positions
Cardiology 1,118 Hospitals 1 position
Family Med. 1,762 Hospitals 3 positions

12
Key Issue
Candidates typically narrow decision to “top three” positions
 System needs to evaluate what it’s doing to put its opportunity in
top three

13
Successful Recruiting
Four lines of questioning successful systems address in the
recruitment process:
 How do I attract the candidates I need to fill my practice
openings? Am I reaching the candidate base I need to reach with
the right information?
 What is my recruitment process? Am I maximizing my efforts
when candidates arrive to distinguish myself from my
competitors?
 How do we structure a fair deal to ensure fair treatment of the
system and the physician?
 What am I doing to address the long-term retention of this
candidate (and am I addressing the same concern with my
current physician staff)?

14
Initial Steps
Define your recruitment
 What position(s) are you trying to fill
 What characteristics are you looking for in a physician fit and
finish
 Communicate this information to all involved in the recruitment

15
Advertising
Utilize multiple advertising modalities
 System must reach maximum number of candidates while also
focusing recruitment efforts on those most suited to the position
 In-house recruiter
 Retained search firms
Internet is critical with today’s tech-savvy candidates
 Including top-of-the-line website focusing on technological
advancement and quality of patient care
 Outdated websites will strike a negative chord

16
Advertising
Quality
 System quality initiatives
 Recognition and performance awards
Technology
 Services offered
 Equipment
Patient Satisfaction
 System satisfaction scores

17
Recruitment Process
Evaluate recruitment process from start to finish
 Advertising the position
 Sourcing candidates
 Interviewing
 Take-away materials
 Follow-up

18
Recruitment Process
Sourcing Candidates
 Define initial contact process
 Who makes initial contact
 When (time frame to respond)
 Secondary contacts
 Physician from the practice
 Recruitment materials
 E-mails
 Brochures
 Organizational structure
 Mission/Vision/Values
 Bylaws/Rules & Regulations
 Sample Contracts

19
Recruitment Process
Recruit the spouse/family
Contact the spouse to determine relevant issues
 Realty tour
 Scenic tour
 Community facilities
 Educational facilities
 Employment opportunities

20
Recruitment Process
Interview
 Who participates
 CEO
 CMO
 Physicians from practice
 Spouses
 Other
 Where
■ Appropriate local facilities
 What
■ Have everyone on the same page on the relevant issues

21
Employment Offer
Define materials the candidate leaves with
 Leaving empty-handed a critical error
Define follow-up process
 Who and when for follow-up contact
Define time-frame for decision
 Explore the candidate’s mindset
 Define the system’s expectations for the candidate

22
Retention Strategies
Turnover is the silent killer of an organization
Turnover is unavoidable
 Community issues
 Practice issues
 Family Issues
 Retirement
Prevention is the key
 First three years most critical
 “Providing clear expectations about compensation” was the most
highly-rated strategy for retention
 Personal interaction with leadership and peers

23
Considerations
 If integrating providers for the first time, give consideration to the
organizational structure and chart
 If acquiring a physician from private practice, consider the equity
and wealth accumulation opportunities the physician is giving up
by moving away from an ownership model
 New physicians out of training are the highest turnover risk
 46% of physicians that leave a practice do so within the first 3 years
 A successful retention strategy:
 Addresses issues physicians face in initial three-year period
 Focuses on both financial and non-financial issues of the new
provider

24
Cash will not totally differentiate your practice
 Compensation varies in importance depending on the age of the
physician being recruited
 Most practices utilize compensation consultant
 Cash offers are becoming “mirror images” of each other

25
Cash is important, but not the number one issue for younger
physician
Most important factors when choosing a job (in order of
importance)*
Ages 35 and Younger Ages 36 - 40 Ages 41 and Older
Geographic Location Geographic Location Compensation
Call Schedule Compensation Practice Setting
Practice Setting Practice Setting Geographic Location
Compensation
Professional Growth
Opportunity
Professional Growth
Opportunity
Professional Growth
Opportunity
Spouse & Family
Considerations
Spouse & Family
Considerations

26
Effective retention strategies must pay attention to:
 Competitive salary and benefit structures befitting the position
 Work schedules
 Call schedules
 Integration of physician into culture of the organization
 Effective socialization of the physician and his/her family within
the community

27
Role of Physicians and Organizations
 Physicians in the recruiting practice will define call schedules,
work schedules
 Organization will define evaluation process, interaction with
leadership
 Physicians/Organization must jointly work to integrate recruit and
family into the culture of the community and organization

28
Total Compensation
 Variations in cash compensation are insignificant
 Private practice allows physicians opportunity for equity in the
practice/retirement wealth accumulation
 Systems must focus on strategy to accumulate retirement wealth
“Cash Attracts, But Benefits Retain”
 Focus on a benefit strategy designed to retain physicians

29
Historical benefit retention strategies have focused on
penalizing physician for leaving
“If you leave, we will do this to you”
 Non-compete clauses
 Cliff-vested investment strategies
 Repayment of signing incentives

30
Changes in IRS regulations make extending the organization’s
tax-exempt status to the physician increasingly difficult
 Pending 409A/457(f) regulations
Investments tied to the financial viability of the organization are
not successful wealth accumulation vehicles or successful
retention incentives

31
Focus new strategies on incentivizing physicians to stay
 Systems often cannot offer physicians additional pay or time
 Qualified retirement plans inadequate to meet the needs of highly
compensated physicians – increased exposure to market risk
“If you stay we will do this for you”
 Long-term investment in wealth accumulation vehicles
 Personally-owned investments not tied to corporate solvency

3232
Summary
Understand the true recruitment costs in your organization
Position your opportunity to be in the top three choices for
candidates
 Retool your process
Screen candidates appropriately
 Pay attention to the needs of the candidate
Develop retention strategies that will minimize your turnover rate
 Financial retention strategies
 Non-financial retention strategies

Physician Recruitment: The True Cost to Your Organization

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Similar to Physician Recruitment: The True Cost to Your Organization

Similar to Physician Recruitment: The True Cost to Your Organization (20)

More from Integrated Healthcare Strategies

More from Integrated Healthcare Strategies (16)

Recently uploaded

Recently uploaded (20)

Physician Recruitment: The True Cost to Your Organization