goals of health care provision, transactions costs related to turnover are of significance in this arena. Stiles and Mick (1997) have argued that controlling quality by also controlling the costs of transactions related to turnover is a critical element of health care management today.
A study by Kazemek and Shomaker (1990) noted that many hospitals allocate between 55 and 60 percent of their budgets to costs related to human resources. Turnover costs are of special consideration. A single hospital case study presented by Kazemek and Shomaker (1990) illustrates this phenomenon. The subject hospital was a 350-bed urban full-service hospital experiencing annualized turnover of 20-25 percent. In a single year, this institution incurred the following turnover costs:
. Recruitment and advertising for new staff of $400,000
. Agency or contract personnel to fill staff vacancies
. Non-productive staff time of new hires during orientation,
training, and assimilation of $300,000
. Cost of human resource and in-service staff to recruit,
train, and orient new employees of $350,000 (Kazemek &
These sample expenses, computed in 1990, totaled $3.35 million and demonstrate that costs related to turnover can be significant to a hospital's budget and bottom line.
At the same time, Kazemek and Shomaker (1990) also noted that hospital staff shortages caused by both turnover and national vacancy rates in critical patient care areas pose a considerable revenue threat. A substantial number of health care institutions have begun to reduce their workforce and to eliminate services. Murphy and Murphy (1996) claim that health care organizations which have impleme
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