Physician Recruitment: The True Cost to Your Organization

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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

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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


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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


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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


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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


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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


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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


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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


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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


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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


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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



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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


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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)?


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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


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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


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Advertising

Quality

System quality initiatives

Recognition and performance awards

Technology

Services offered

Equipment

Patient Satisfaction

System satisfaction scores


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Recruitment Process

Evaluate recruitment process from start to finish

Advertising the position

Sourcing candidates

Interviewing

Take-away materials

Follow-up


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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


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Recruitment Process

Recruit the spouse/family

Contact the spouse to determine relevant issues

Realty tour

Scenic tour

Community facilities

Educational facilities

Employment opportunities


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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


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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


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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


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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


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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


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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


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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


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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


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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


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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


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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


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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


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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

Healthcare

Transcript of Physician Recruitment: The True Cost to Your Organization