Physician Recruitment: The True Cost to Your Organization

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Published on June 12, 2014

Author: INTEGRATEDHS

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Presentation from the Ohio Hospital Association 2009 Annual Meeting.

See more at: http://www.integratedhealthcarestrategies.com/knowledgecenter.aspx.

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

www.IHStrategies.com 2 Physician Recruitment a Significant Concern 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

www.IHStrategies.com 3 Physician Recruitment a Significant Concern  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

www.IHStrategies.com 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

www.IHStrategies.com 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

www.IHStrategies.com 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

www.IHStrategies.com 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

www.IHStrategies.com 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

www.IHStrategies.com 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

www.IHStrategies.com 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

www.IHStrategies.com 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 * Advisory Board: Physician Recruitment Attracting Talent in a Competitive Market, May 2008

www.IHStrategies.com 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

www.IHStrategies.com 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)?

www.IHStrategies.com 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

www.IHStrategies.com 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

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

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

www.IHStrategies.com 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

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

www.IHStrategies.com 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

www.IHStrategies.com 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

www.IHStrategies.com 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

www.IHStrategies.com 23 Retention Strategies 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

www.IHStrategies.com 24 Retention Strategies 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

www.IHStrategies.com 25 Retention Strategies Cash is important, but not the number one issue for younger physician Most important factors when choosing a job (in order of importance)* * Advisory Board: Physician Recruitment Attracting Talent in a Competitive Market, May 2008 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

www.IHStrategies.com 26 Retention Strategies 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

www.IHStrategies.com 27 Retention Strategies 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

www.IHStrategies.com 28 Retention Strategies 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

www.IHStrategies.com 29 Retention Strategies 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

www.IHStrategies.com 30 Retention Strategies 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

www.IHStrategies.com 31 Retention Strategies 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

www.IHStrategies.com 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

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