Thursday, July 19, 2007

Costs of Physician Recruiting

I came across this information recently. It is from an article by George Williams, Director NAS Insights. The full text of the article can be found here. The gist of the info is that it is DARN expensive to recruit a physician who doesn’t perform well or who isn’t happy in his/her position and who leaves. It is also DARN expensive to have an open position and to dilly dally with recruiting initiatives. I suggest look at working with a physician recruiter who understands the concept of cultural fit AND who appreciates that the opening is costing your hospital plenty in lost admissions and revenues.

Food for thought. Recruiting physicians well is truly an art.

The Cost of Recruiting Physicians

The cost of recruiting physicians is often not fully understood or accurately quantified. How much money does it take to attract and retain a doctor? By answering this question, hospital administrators can better understand the physician recruiting process and help ensure that their hospitals are using the most effective and cost-efficient recruiting methods. The cost for one search generally falls in the range of $20,000 to $40,000 depending on the specialty, region of the country, and methods used for sourcing candidates. The average cost is about $30,000. Here is a breakdown of the major costs associated with physician recruitment.

1. Staff or recruiter time and fees. Salaries and fees associated with recruiter time can vary greatly. A recent Medical Group Management Association study found that it takes about 350 man-hours for the recruiting process. In-house recruiters often earn a base salary of $35,000 to $65,000 and may receive bonuses based on the number of placements they make. If the salary is $50,000 and the 350 man-hours mentioned above are used, that's $8,400 per recruited doctor. Recruiter fees of contingent and/or retained physician search firms can range from $15,000 to more than $25,000 per placement.

2. Recruiting sources. Thousands of hospitals and medical groups are vying for a limited number of physicians, increasing the difficulty and cost of finding candidates. A wide net should be cast to ensure a job opportunity attracts the largest number of potential candidates. This means collaborating with residency programs, networking among existing staff and administration, advertising in medical journals and on physician Web sites, sending recruiting letters and direct mail pieces, and exhibiting at physician conventions. The expense can range from $2,500 to more than $10,000 per search.

3. Interviewing. The higher the number of candidates you see, the higher the costs, and not only in terms of airfare and hotel suites, but in terms of the man-hours of busy administrators and medical staff getting together however many times. Hospitals generally pay all the costs associated with a physician interview such as travel, accommodations and entertainment. These costs usually range from $1,500 to $3,000 per interview.

4. Relocation. This is another variable cost based on where the physician is coming from. The average relocation allowance is $7,800.

5. Practice marketing. Hospitals often pay to announce a new physician’s practice and help introduce him or her to the community. Marketing costs can range from a few hundred dollars to several thousand.

6. Set-up Costs. Although not normally considered a part of the recruitment cost, they may contribute to your hesitation in moving as quickly as you should in recruiting. The costs to help the doctor set up practice, plus whatever signing incentives are offered, can be from $150,000-$200,000.

7. Salary Guarantee. Salary guarantees and incentives should be factored in as part of the recruitment investment/return equation. Recruiters should take into account not only new doctors’ salaries but also signing incentives and loan repayments. These costs vary widely and can range from $150,000 to $600,000.

8. Time-to-Fill. If you move slowly or your recruiting techniques are ineffective, the cost of recruiting a physician will be much higher. Administrators need to look at the time it takes to fill a position and then consider the revenue lost during this time. Intuition might suggest that you are saving money on the salary and benefits until you hire the doctor. However, every month without a physician in place equals revenue lost. Merritt, Hawkins & Associates recently conducted a survey of hospital CFOs and found that physicians generate an average of more than $1.5 million a year in patient revenue. Therefore, each month a needed physician is not on staff can cost a hospital $100,000 or more. The revenue lost can be much greater when recruiting some specialties such as cardiovascular surgery ($3,134,615 annual revenue), neurological surgery ($2,364,864 annual revenue), and vascular surgery ($2,216,463 annual revenue). A healthcare facility will recover the cost of recruitment, salary and set-up in a short time. In the long run, it’s the cost of inaction that’s highest.

How Can Recruitment Costs be Minimized?

While the expense of identifying, interviewing and relocating candidates can be considerable, a healthcare facility’s greatest financial cost is tied to physician salaries and benefits. Should a newly recruited physician prove unsuccessful in their practice and be unable to sustain a patient base or a meaningful level of referrals, the facility may be unable to recoup the physician’s salary or income guarantee. This most often happens when there is not a sufficient need for the physician in the hospital’s service area. Therefore, a key to minimizing financial exposure is to accurately assess the need for a given medical service in the community prior to recruiting a physician. This can often be done through a medical staff plan that looks at population growth in the service area, the incidence of disease, accessibility of medical services and practice patterns of current physicians. Once a need has been established and a search initiated, it is important that the search be conducted efficiently. Poor search methodologies are costly and waste time.

It is an observation that sometimes the challenge of recruiting well and physician fit with an organization or practice might be because the physician isn't fully aware of his or her expectations about work and how that influences the balance in their lives over time.

Happy and healthy job searching and recruiting new physicians.