The first step in determining whether your practice can afford the total cost of a new associate is to list all of the first-year costs associated with hiring a new physician. According to Mark E. Kropiewnicki, J.D., LL.M., consultant with the Health Care Group, these costs typically include:

• physical plant adjustments, such as: the number of lanes needed; additional square footage needed; build-out costs; accommodating new non-physician personnel; and personnel support.
• first-year compensation – many compensation arrangements include a base salary plus bonus compensation if the new associate achieves production targets.
• overhead expenses, which can range from utility costs to office and medical supplies.
• recruitment costs, typically including: advertising; recruiter’s fees; and transportation and accommodations for candidates, if needed.
• new equipment, which may be expensive (for example, if you’re hiring a laser specialist and must buy a laser).
• malpractice insurance, benefits, payroll taxes and attorney’s fees.

Also factor in interviewing expenses, such as the time your group’s physicians spend looking for a new associate, reviewing CVs and interviewing candidates. The "lost" patient revenues for the time spent on recruitment are an indirect cost associated with the process of adding a new associate.