Why employee retention is key to optimizing practice operations

Employee retention in healthcare is a serious problem. The average employee quit rate across all industries in June 2023 was 2.4%, according to the U.S. Bureau of Labor Statistics. Healthcare employee turnover is significantly higher, with hospitals experiencing a turnover rate of 22.7%, according to the 2023 NSI National Healthcare Retention & RN Staffing Report.

The report breaks down healthcare turnover by position:

According to the Association of American Medical Colleges (AAMC), the turnover rate for physicians is slightly lower, averaging between 6% and 7% annually. 

While these numbers reflect hospital-based employees, they provide important context for exploring turnover rates for private practices. Earlier this year, the American Medical Association (AMA) released an analysis of physician practice arrangements. The report found that between 2012 and 2022, the number of physicians working in private practices steadily decreased, dropping by 13% over the course of the decade, from 60.1% to 46.7%. 

What’s driving this trend? 

It will come as no surprise to physicians in private practice that, according to AMA president Jesse M. Ehrenfeld, MD, MPH, the shift away from independent practices reflects “the fiscal uncertainty and economic stress many physicians face due to statutory payment cuts in Medicare, rising practice costs, and intrusive administrative burdens.” 

Since individual providers have little control over Medicare payments and reimbursements, finding ways to reign in runaway practice costs is critical to maintaining margins and optimizing operations. And since employee payroll represents a huge percentage of a practice’s operating costs, it’s worth investigating how increasing employee retention can help independent practices thrive in today’s economic landscape.

Small business owners of all kinds know that employing staff is expensive. For independent medical practices, the costs can be prohibitive — especially when factoring in the costs associated with healthcare employee turnover. 

In 2022, research by the Medical Group Management Association found that physician-owned groups with primary and specialty care experienced a 6.5% one-year increase in total support staff expense from $370,060 to $393,961 per full-time-equivalent (FTE) physician. And these are just fixed costs. Employee turnover drives the number up even higher.

Research shows that approximately 40% or healthcare workers think about quitting their job multiple times each month. The Society for Human Resources Management estimates that the average cost of recruiting new employees is approximately $4,700, however, many employers find that the true cost of hiring a new employee can be as much as 3 to 4 times the position’s salary. For an independent practice, the toll taken by employee turnover can be catastrophic. 

To understand the true costs of turnover in healthcare — and the importance of finding ways to increase employee retention — it’s important to understand the difference between hard and soft costs. 

Onboarding a new employee at a private medical practice involves both hard costs, which are tangible and quantifiable expenses that are directly related to bringing a new hire into the organization, and soft costs, which are harder to quantify. 

Salary and benefits top the list of hard costs for employing new staff at a private medical practice. This also includes any benefits provided as part of the compensation package, such as health insurance, retirement contributions, and paid time off. Hard costs also include funds spent on recruitment, such as advertising job openings, using job boards, working with recruitment agencies, and conducting background checks. 

If a new hire is relocating for the position, your practice may be responsible for relocation costs, including moving, temporary housing, and transportation. Similarly, if a new hire is moving from another practice jurisdiction or has recently finished their training, you may incur licensing and credentialing costs, such as application, exam, and processing fees. If a clinical professional requires malpractice insurance and your practice covers all or part of the premiums, the premiums are hard costs, too.

Similarly, costs associated with background checks and screenings, such as fingerprinting and background investigation, are hard costs. If your practice requires drug testing and health screenings during onboarding, these costs, including laboratory fees, are hard costs.

For clinical staff, you may need to purchase uniforms and personal equipment, such as lab coats and stethoscopes, further adding to hard costs. If the practice needs to allocate office space for the new employee or purchase specialized equipment, such as a desk, computer, or medical devices, these are hard costs. Factor in additional software licenses for electronic health records (EHRs), practice management systems, and other medical software.

While hard costs vary depending on the employee’s position, the practice location, and the specific role requirements, they are a significant expense when planning for new hires. Minimizing them can be an important way to optimize operations and promote the overall financial health of the practice. 

Unlike hard costs, soft costs are indirect or intangible and more challenging to measure. Soft costs often relate to human resources, communication, and overall organizational efficiency. Even though soft costs don’t necessarily correlate to a line item in a budget, they are essential to consider when evaluating the overall financial impact of recruiting and onboarding new staff at your medical practice. 

For starters, soft costs include the time and effort spent by trainers and mentors during training and onboarding to bring the new employee up to speed. This can involve explaining the practice's procedures, protocols, and technology systems, as well as time spent shadowing or mentoring. This, in turn, contributes to lost productivity, since during onboarding the new employee will not be at full productivity. Established staff members will also need to divert some of their time to assist and train the newcomer, further contributing to lost productivity.

There are administrative soft costs associated with training, obtaining credentials, and processing paperwork, including HR forms, payroll setup, and benefits enrollment. These tasks require time from HR personnel or office managers. Likewise, configuring computer systems, email accounts, and access EHR access for the new employee can be time-consuming. IT staff may need to be involved, resulting in additional soft costs. Furthermore, time spent coordinating schedules, meetings, and communication related to the new employee integration all contribute to soft costs. 

Finally, the learning curve and mistakes that new employees make also contribute to soft costs. At best, these errors can result in additional work to correct and retrain. At worst, they can harm patients or the practice’s reputation or bottom line. 

When considered together, the hard and soft costs associated with onboarding new healthcare hires represent a substantial investment of time and money.

Your profit margin isn’t the only thing that suffers with a high rate of employee turnover, though. The quality of patient care your practice delivers is tied closely to operational efficiency and retaining skilled and dedicated healthcare professionals.

Improving employee retention improves the patient experience for the people in your care in the following ways:

Continuity of care, or the consistent and seamless delivery of healthcare services to patients over time, ensures that your patients receive personalized, coordinated, and integrated care. 

By retaining the same staff, your practice can develop a better understanding of a patient's medical history, including previous diagnoses and the efficacy of past treatments or medications. While this knowledge is crucial for accurate diagnoses, prescribing appropriate medications, and developing effective treatment plans, it’s only a small part of the equation. Patients often develop strong relationships with their healthcare providers. When employees leave frequently, it can disrupt these relationships, leading to patient dissatisfaction and potentially impacting patient outcomes.

Employees who have been with the practice for an extended period are better equipped to provide personalized and effective care, leading to higher patient satisfaction and loyalty.

Retaining skilled and experienced healthcare professionals can lead to improved quality of care. Tenured employees are often more knowledgeable and capable of handling complex medical cases, reducing the risk of medical errors.  

Over time, employees build strong working relationships and develop effective teamwork and collaboration skills. Low turnover ensures that your team can function cohesively, which is critical in a fast-paced and sometimes stressful healthcare environment.

Consistent, high-quality care provided by a stable team enhances your practice's reputation and builds trust with patients. Positive word-of-mouth referrals, online reviews, and patient loyalty are more likely when patients trust the staff's expertise and commitment.

When employees feel valued, supported, and engaged, they are more likely to perform at their best. High turnover can lead to a demoralized workforce, which can negatively impact the overall atmosphere and quality of care.

The average person spends 90,000 hours, or one-third of their life, at work. So, finding ways to make the work environment a positive, enjoyable place can go a long way toward preventing burnout and promoting employee retention in healthcare. 

Pay increases and bonuses top most lists of strategies to boost healthcare employee retention. Yet for small or new practices, or for practices already operating on tight margins, offering more money isn’t always possible. Yes, your practice should absolutely do everything possible to offer competitive wages and monetary bonuses. But you should also consider implementing the following strategies to engage workers and help prevent burnout.

A recent report by Qualtrics found that 52% of frontline employees in healthcare do not believe leaders are investing in their team. At the same time, research shows that employees are far more likely to stay at a job if they feel like their employer is investing in their growth.

Consider:

Investing in professional development might mean paying for continuing education courses, conferences, or memberships to professional associations. But it also means offering flexible scheduling for both clinical and non-clinical employees who pursue additional training or certifications and need time off to attend classes or study for exams.

Supporting personal interests is also a great, low-cost way to boost employee retention in healthcare. If a member of your team is interested in a particular hobby, look for ways the practice can support those interests. Sponsor intramural recreation league sports teams and community events, host employee-led events and classes for patients and families in your office, and find other ways to support and encourage the people who work for you to thrive as individuals, and not just employees. 

Recognition impacts employee motivation. In fact, over 80% of employees agree that recognition for their contributions positively impacts their engagement at work. Building a culture of recognition at your medical practice is critical to boosting morale and promoting employee retention.

While cold, hard cash is always appreciated, employees also value other forms of recognition, both from their supervisors and from their peers. 

Some great way to create a culture of recognition include:

In high-pressure, time-crunched environments like medical practices, investing in modern tools is also critical for enhancing employee retention and overall job satisfaction. Modern, digital tools can help automate and streamline tasks and processes, reducing the time and effort required to complete assignments. Employees can accomplish more in less time, reducing stress and enhancing job satisfaction. When work is less overwhelming, employees are more likely to stay with the organization.

When you equip your team with efficient, modern tools, you not only increase efficiency and productivity, you also help foster a positive work environment where employees feel supported and valued.

Improving employee retention in healthcare is a linchpin for optimizing operations because it directly impacts patient care, cost-effectiveness, and the overall reputation and success of the practice. By investing in strategies to retain skilled and dedicated healthcare professionals, medical practices can provide better care, improve patient satisfaction, and operate more efficiently.