It’s much worse than you think! The financial cost of physician burnout.
By now, nearly all medical executives understand that their physicians are burning out at an alarming rate. However, very few grasp the full economic cost to their system. When a physician resigns, the replacement recruiting costs and the direct opportunity costs of missed patient visits are fairly obvious, but these account for just half of the overall financial impact to the system. Early retirement causes an expensive ripple effect which is often overlooked. And for the burned out physicians that have not yet quit, the malpractice risks to the system are substantial. In the context of primary care, these elements are explained and quantified below. We conclude that a burned out primary care physician creates an actuarial cost of increased malpractice risk of $37K per year and that the early retirement of a primary care physician triggers a loss in excess of $1.0MM to the system. The assumptions, sources, and calculations behind these conclusions can be found in this Excel spreadsheet.
Of course, this analysis still omits the human side of burnout, which will be discussed in a future article.
Burnout in a nutshell
Burnout manifests in physical and emotional exhaustion, depersonalization, and a reduced sense of personal accomplishment. Sadly, this has become a nationwide phenomenon, affecting upwards of 44% of physicians.
The undisputed drivers of physician burnout are the EHR and related non-physician work. Physicians find themselves staring at the computer screen instead of engaging with their patients face to face. As documentation requirements for billing, for compliance, and for meaningful use standards continue to climb, their take-home work (e.g. “pajama time”) consumes their evenings. As a result, their personal lives suffer and work becomes all-consuming.
Burnout creates medical errors and increased malpractice risk
Sadly, when a physician begins to experience burnout, patient health is jeopardized. The 2019 Medscape Survey revealed 26% of depressed doctors say they are less careful when completing the visit documentation and 14% said they are making errors they wouldn’t ordinarily make.
At TCM, we have encountered burned out physicians running up to 6 weeks behind in closing their charts! For medical malpractice trial attorneys this circumstance is a “dream come true”, making the line of questioning about chart accuracy an easy path to large jury awards.
Survey results in a recent Mayo Clinic Proceedings article suggest a burned out doctor is 120% more likely to make a medical error than a doctor that is not. Not only does this jeopardize patient wellbeing, it also substantially elevates the risk of malpractice lawsuits. We calculate the actuarial risk at an incremental $37K per year per burned out doctor. Though most systems provide malpractice insurance for their physicians, these incremental claims translate into higher premiums and higher deductibles that hit the bottom line.
Burnout drives attrition, which is more expensive than you think
Direct Hiring Expense
Replacing a physician is a costly and time-consuming endeavor. Recruiter fees typically run one-third of base salary, whether an external cost or an internal overhead charge. A typical signing bonus is 15% of base salary. When training and legal costs are included, we see $161K in direct hiring expenses.
Direct Revenue Opportunity Cost
The loss of a tenured primary care physician leads to significant direct revenue loss as the panel disperses and patients must see another provider for their care. The direct revenue loss can be split into two phases.
First, while the position remains open, there is an obvious loss of revenue. In most cases, TCM has seen other providers in the practice shouldering one-third of the visits that would otherwise have been taken by the lost physician (adding to their own burnout risk). The remaining two-thirds is simply lost revenue. With primary care docs increasingly scarce, we see a typical recruiting period of roughly 6 months from day of resignation to first day of work for the replacement. The direct loss of revenue during the replacement hiring period averages $161K, during which time overhead charges continue to accrue.
Second, even after the position is filled, the new physician typically cannot restore the full lost panel on Day One. Instead, they ramp up to full capacity over a 2-year period, operating with a 30% smaller panel in Year 1 and a 15% smaller panel in Year 2. The direct loss of revenue during the ramp up period for the new physician, compared to the lost physician practicing at full capacity, is $193K.
Thus, between the replacement hiring period and the replacement ramp up period, the direct revenues lost by the system add up to $354K.
Referral Revenue Opportunity Cost
When contemplating the cost of a lost physician and the merits of investing in physician wellbeing, corporate finance teams often overlook the lost referral revenues when a physician resigns. Here, too, the costs are borne during both the replacement hiring period and during the replacement ramp up period. ReferralMD reports that, after accounting for referral leakage, the average physician generates $672K per year in referral revenue to their system. During the replacement hiring period, this translates into $224K in missed revenues, even after accounting for some incremental visit volumes for the other physicians that retained one third of the panel. Likewise, during the replacement ramp up period, the system loses referral revenues of $302K. Combined, $526K of downstream referral revenues are lost by the specialists in the system when a primary care provider burns out and quits.
Where to from here?
When a burned out physician finally quits, it costs the system $1,042K after all the costs enumerated above are tallied up. And prior to quitting, the physician costs the system an extra $37K year-in and year-out in elevated malpractice risk. Investing against burnout is not only the right thing to do, it’s the rational thing to do.
Against a panoply of half-measures and flawed approaches, one solution stands out as an empirically-proven solution to burnout. The TCM Model is gaining traction nationwide and has been proven to significantly reduce or completely eliminate physician overtime (often referred to as “pajama time”). Survey results from TCM clients consistently show significant gains in provider satisfaction as the provider is freed from the myriad administrative tasks that weigh them down and enabled to focus on the patient face-to-face again. Numerous physicians that have deployed the TCM Model have put off planned retirements to practice longer and have cancelled plans to move to a concierge practice, saving their systems millions.
The TCM Model was developed by Dr. Peter Anderson in Yorktown, Virginia. Prior to developing the TCM Model in his practice, he was one of the 383,250 doctors totally burned out, frustrated and hating medicine. Once perfected, the TCM Model allowed him to triple his revenues, become the highest revenue producing doctor in his hospital system, and increase daily visit volume from 18 patients per day to 35 patients per day. The best part, though, was completing his charts before leaving the office so he could go home with nothing to do but enjoy his family time and relax.