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Lowering the Cost of Healthcare with Pensions


We always hear about how important it is to lower the cost of healthcare in this country. One way to address the problem would be to reduce employee turnover.

The problem of physician recruitment and retention keeps coming up. I spoke about it last week at a conference in North Carolina. Later this month, I’ll be speaking about it again at the annual conference of the California Association of Rural Health Clinics.

The physician shortage has created an enormous recruitment and retention problem for healthcare organizations. However, the problem is compounded by the turnover rate of non-clinical employees. This is a problem that affects the entire country because we all need healthcare. Moreover, the problem is getting worse; by 2025 the US will be short 90,000 physicians. To fix this, we only need to look at history.

Years ago, employees would spend their entire careers with the same company, because at retirement they would get a lifetime pension. However, when employers switched to 401(k)s, the pension plan all but disappeared. The result? Employee turnover rates skyrocketed, because now there was nothing tying the employees to the company.

According to recent numbers from Bureau of Labor Statistics, the average US worker changes jobs every 4.4 years. The cost of replacing an executive is 213% of his or her salary. That means a key executive earning $250,000 per year will cost over $532,000 to replace... Ouch!

We always hear about how important it is to lower the cost of healthcare in this country. Imagine what the turnover cost is for a hospital that has hundreds of high-income-earning employees, with the average employee changing jobs every four-and-a-half years.

So what’s the solution? The solution is to bring back the lifetime pension plan, with a long-term vesting period. It worked amazingly well before the 401(k) came along. We can pay for it with bank financing. Just as bank financing creates leverage to purchase buildings, it can also be used to make pension plans very affordable. The results will be a smoother-running organization and the mitigation of huge employee turnover costs. It’s a very smart strategy.

If you have questions or would like more information about financing pension plans, send an email to, or visit my website

Absolutely, make sure you come back here next week for another edition of The Alemian File.

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