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Health Care Management Review:
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The Shocking Cost of Turnover in Health Care

Waldman, J. Deane; Kelly, Frank; Aurora, Sanjeev; Smith, Howard L.

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Abstract

Abstract: Review of turnover costs at a major medical center helps health care managers gain insights about the magnitude and determinants of this managerial challenge and assess the implications for organizational effectiveness. Here, turnover includes hiring, training, and productivity loss costs. Minimum cost of turnover represented a loss of >5 percent of the total annual operating budget.

Clinicians and other health care providers frequently hear the latest news-someone else is leaving for a position across town, elsewhere in the state, or in a new region. In some cases, this may be a cause for celebration. A departing person sometimes cuts corners, compromises quality and safety, risks malpractice claims, or exemplifies any number of adverse traits, behaviors, and attitudes that staff may find offensive. In other situations, a resignation, early retirement, or sudden unexplained departure marks a major loss for an organization and staff. The announcement may be unanticipated or well publicized beforehand, bitter or upbeat, and happy or sad. Innumerable reactions accompany the realization that someone is leaving while everyone else is staying-the ambiguity of collegial turnover.

Cost of turnover-a non-value-adding element in the organizational budget-forces managers to focus on retention. The huge recurring expense created by turnover offers opportunities to improve employee satisfaction, reduce turnover, improve quality, and cut costs by diverting the current financial drain into programs and policies that encourage retention.

Experienced health care providers, those having served many years with the same organization, are cautiously critical about how the practice environment contributes to turnover. Management investigators find profile of turnover that identifies startling trends: excessively high rates of departure by experienced registered nurses, a series of revolving laboratory personnel, or predictable vacancies in a specialty or subspecialty with the negative downstream effects.

Many health care providers see employee turnover of physicians, nurses, and support staff as a necessary and inevitable cost of doing business. Seldom do health care executives make a rigorous attempt to measure accurately this hidden outlay. As executives' plates overflow, stretching them beyond their limits, turnover suffers benign neglect. When an organization experiences consistently high turnover, especially among high-priced clinicians or hard-to-find nurses, the situation warrants another look.

This paper examines turnover and its costs in the health care environment. Pertinent literature helps to understand the perceived significance of provider turnover and how this perception balances with reality when attempts have been made to measure turnover expenses. Prior empirical work on costing turnover was used as a basis for the development of a new, improved and rigorous accounting methodology. This analytical model was applied to a large academic medical center. Results are discussed in terms of implications for health care policy, research and practice.

© 2004 Lippincott Williams & Wilkins, Inc.

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