Most physicians know what they earn. Far fewer know what it costs to hire them or replace them. A colleague once told me in frustration, “It takes me two years to get my money back on a new hire.” I understood the frustration, but not the math. I thought of hiring the way many physicians do: salary, benefits, maybe a signing bonus. It seemed straightforward. It is not. Hiring a physician is not a single expense. It is a chain of costs incurred over months, many of them before the first dollar is ever collected. Look closely enough, and the process breaks into four parts: direct costs, carrying costs, vacancy and delay, and risk. They do not arrive all at once. That is part of why the math is so easy to miss.
The most visible costs are the ones that appear early. Recruiter fees alone may run 20 to 30 percent of first-year salary, or roughly $40,000 to $60,000 for a physician. A signing bonus or relocation package may add another $10,000 to $30,000. Then come the quieter line items: state licensure, DEA registration, credentialing fees, malpractice coverage, legal review, contract work, electronic medical record access, equipment, workspace, administrative setup. None of these is unusual on its own. Together, they amount to a serious upfront investment. Less visible, but just as real, are the carrying costs. A physician may be hired and even seeing patients without yet producing at full capacity. Salary and benefits start immediately. Staff time is diverted to onboarding and training. Schedules are lighter at first. Documentation takes longer. Billing may be less efficient. The doctor is there, but the practice is still carrying the transition.
Vacancy costs begin earlier still. In many outpatient settings, it may take 4 to 6 months to recruit and onboard a new physician. During that time, appointment slots go unfilled, wait times grow, and some patients seek care elsewhere and do not come back. Sometimes the practice pays for overtime or locum coverage. Sometimes it simply absorbs the loss. Either way, the absence carries a cost. Part of that loss is delayed revenue. Part of it is revenue gone for good. There is a second delay inside the first. Credentialing and payer enrollment can stretch the time between hiring and billing. A physician may be in the clinic, seeing patients, and still not fully billable. Costs continue to accumulate. Collections trail behind. Risk is the least discussed part of the process, but it is always there. Not every hire unfolds as planned. Productivity may ramp more slowly than expected. The fit may be wrong. In some cases, the physician leaves early and the whole process starts again. These outcomes are not constant, but they are common enough to matter.
Put all of that together, and the math becomes harder to dismiss. Take a small outpatient psychiatry practice. A fully productive physician might generate about $50,000 a month in collections. Leave that position vacant for five months, and the missing revenue looks like this:
- $50,000 x 5 = $250,000
Recruitment costs might look like this:
- Recruiter fee: ~$50,000
- Signing bonus and relocation: ~$20,000
- Interview, legal, and administrative costs: ~$10,000
- Total recruitment cost ≈ $80,000
Licensure, credentialing, malpractice, and onboarding may add another $20,000 to $40,000. Then comes the ramp. In the first several months, reduced schedules and lower efficiency may mean another $50,000 to $70,000 in collections that never materialize. Taken together, the rough total begins to look like this:
- $250,000 (vacancy)
- $80,000 (recruitment)
- $30,000 (credentialing and onboarding)
- $60,000 (ramp inefficiency)
- = $420,000
These are not exact figures, but they describe a plausible outpatient scenario. Once fully productive, after salary, benefits, staffing, and overhead, that physician may contribute $10,000 to $15,000 a month. At a midpoint of $12,000, recovering a $420,000 investment would take:
- $420,000 / $12,000 ≈ 35 months
Use more generous assumptions, shorter vacancy, lower recruitment cost, faster ramp, and the recovery period may fall closer to 12 to 24 months. Under less favorable conditions, it may run longer. This is what is meant by “getting the money back.” None of these elements is surprising on its own. Most are familiar to anyone involved in hiring. What is easier to miss is the way they accumulate across time. The process begins before a physician is hired and continues well after that physician starts working. Revenue and cost do not arrive on the same schedule. Most physicians never see this side of the equation. We track productivity, compensation, and schedules. The financial structure underneath all of it tends to stay out of view. The numbers will vary by specialty and setting. The structure rarely does. If the recovery period for a new hire stretches across years, then the stability of an existing physician has a financial value that is rarely stated plainly. Losing a physician is the loss of an investment that may not yet have been recovered. Once you see the numbers, it becomes harder to think about hiring the same way.
Timothy Lesaca is a psychiatrist in private practice at New Directions Mental Health in Pittsburgh, Pennsylvania, with more than forty years of experience treating children, adolescents, and adults across outpatient, inpatient, and community mental health settings. He has published in peer-reviewed and professional venues including the Patient Experience Journal, Psychiatric Times, the Allegheny County Medical Society Bulletin, and other clinical journals, with work addressing topics such as open-access scheduling, Landau-Kleffner syndrome, physician suicide, and the dynamics of contemporary medical practice. His recent writing examines issues of identity, ethical complexity, and patient–clinician relationships in modern health care. Additional information about his clinical practice and professional work is available on his website, timothylesacamd.com. His professional profile also appears on his ResearchGate profile, where further publications and details may be found.
