The Financial Impact of Retention in Healthcare
June 08, 2015
By Frankie Turner, Patient Experience Coach, HealthStream
For healthcare organizations, retention is critical in achieving patient-centered excellence. When retention suffers, the impact is felt across many hospital strategic priorities. Many organizations create a strategic goal around retention or employee turnover; however, retention matters, not in and of itself, but because of the outcome the goal produces. Nearly every leader can name four or five reasons employee retention is important to any industry, for example: employee loyalty, employee engagement, better productivity, and enhanced quality. These are reasons to explore the many aspects of retention’s impact on an organization.
Retention issues can create a significant negative impact on the finances and profitability of an organization. First, there are the easily identifiable direct costs of replacing an employee. It is crucial to calculate the costs of replacing employees. By doing so, you can quantify the financial impact to the organization and begin building the case for an action plan to address the issue.
When calculating costs, you should explore the following: recruiting, hiring, onboarding, and training. Consider the cost of the recruiter, educator, preceptor, and the new employee’s training time when performing the calculation. Also to be considered is the replacement cost from the time the position becomes vacant until the new employee is fully on-boarded. This time can create costly overtime or require the usage of agency personnel.
In today’s healthcare environment, every dollar saved is critical to the financial health of the organization. For example, an article by Robert Wood Johnson Foundation reported that replacing a registered nurse costs between $22,000 and $64,000. There are other less quantifiable costs, but, none the less, these costs are real.
Productivity can be negatively impacted at a time when organizations are tasked with staying on or below budget each day of operation. Hospitals spend thousands of dollars each year on keeping their staff’s competencies up to speed as well as on learning new technologies and approaches. The investment dollars in that individual are left behind and the knowledge leaves the organization when that employee leaves the organization.
Another cost to the organization that cannot be measured in dollars is the emotional effect on the remaining team members. Employee burnout can occur when vested staff must continually train new personnel. This is of particular importance for high achieving staff members as they are the ones appointed to preceptor and train newer employees.