What health system leaders can learn from Costco’s 7% turnover rate

Tony Barzar has spent almost 40 years working as a cashier at Costco, long enough to retire as a millionaire without ever moving into a supervisory role. His experience is unusual in one sense, but not in another: at Costco, one-year turnover is about 7%, according to The Wall Street Journal’s July 8 report. For health system leaders dealing with a workforce crisis of their own, that figure and the way Costco has achieved it are worth a closer look.

Costco has long paid more than most U.S. retailers, and its founders believed that approach would reduce the cost of training new hires while also improving customer service, the Journal reported. Barzar, who is 60, earns $32.90 an hour. He has also built his 401(k) to more than $1 million, one of “many thousands” of hourly workers at the company to reach that level, according to Costco CFO Gary Millerchip. Under Costco’s health plan, Barzar pays $15 for a standard physician office visit and $25 for a specialty visit, both below national averages. The company recently raised its maximum hourly wage from $31.90 to $32.90, increased its annual bonus and added a week of vacation for employees with at least 30 years of tenure.

Hospitals and health systems are facing a similar need to keep workers, but the stakes are different and often higher. National turnover among registered nurses rose to 17.6% in 2025, up 1.2 percentage points and reversing the previous year’s decline. In healthcare, matching Costco’s pay strategy is much harder than it is in retail. Workforce costs at U.S. hospitals rose 5.6% in 2025 and remained the industry’s largest expense, accounting for 60% of all costs, according to the American Hospital Association. Margins are also being squeezed by rising pharmacy costs and delayed insurer payments.

Those pressures have been compounded by federal policy. HR 1, signed into law in July 2025, will cut federal Medicaid spending by $90.9 billion in 2029 alone, according to a June 9 Commonwealth Fund report. The law is projected to reduce federal Medicaid spending by $911 billion and leave about 10 million more Americans uninsured by 2034. At the same time, wage expectations continue to climb. An AHA analysis of Lightcast data found that advertised salaries for registered nurses have grown 26.6% faster than inflation over the past four years, and union pressure on pay has continued into 2026.

At Renton, Wash.-based Providence, about 38% of caregivers are represented by a union. Chief People Officer Greg Till told Becker’s in October that the starting point for working through those constraints is shared purpose with labor. “We all want the same basic things: to keep our hospitals open and caring for communities, and to ensure our caregivers have fair wages, good benefits and safe work environments,” Till said. “We’re aligned on those goals. Where it gets difficult is in the details — how to achieve all that within today’s cost- and revenue-constrained environment. We’re working through that in our contracts with labor partners and also for non-union caregivers.”

Even so, some systems are finding that retention investments can pay off. The Journal cited a McKinsey estimate that losing a front-line retail worker costs employers about $10,000. The comparable healthcare cost is much higher: turnover of a full-time registered nurse cost $60,090 in 2025. That math helped drive a major decision at Baton Rouge, La.-based FMOL Health. The system had budgeted $11 million for its workforce in 2025, but President and CEO E.J. Kuiper approved nearly five times that amount after the system’s chief human resources officer made the case for a larger investment. FMOL Health’s RN turnover rate has since fallen below 10%, below the national healthcare average, Kuiper recently told Becker’s.

“So take care of people, make sure that they feel they’re taken care of, that they’re in an exceptional workplace, and then they stick around and help us take care of the patients and the communities that we serve,” Kuiper said.

Costco’s leaders describe their wage strategy as a long-term bet that has already paid off. Over nearly two decades, the company’s annual sales have grown and its stock has risen more than 2,000%. Millerchip has said the approach also saves money over time. Beyond loyalty, Costco also depends on its longest-tenured workers for institutional knowledge. That matters because some healthcare leaders are worried about a wave of baby boomer retirements that could remove experience from the workforce faster than it can be replaced.

To keep veteran staff engaged longer and preserve what they know, health systems have begun building structures that resemble Costco’s approach in some ways. Annapolis, Md.-based Luminis Health and Santa Barbara, Calif.-based Cottage Health, for example, are using flexible scheduling and phased retirement to retain experienced employees while strengthening mentorship. At Costco, mentorship does not depend on being a manager. Many stores have created “culture coach” roles so long-tenured hourly workers such as Barzar can train newer employees without supervising them.

Becker’s has reported a similar shift in nursing. Intermountain Health’s Saint Joseph Hospital in Denver moved to group mentoring led by nursing professional-development staff instead of managers after losing many of its most experienced nurses to turnover. The pilot helped push the hospital’s nurse retention rate to 97% as of January 2025.

The broader lesson appears similar in both industries: keeping employees satisfied can improve the experience of the people they serve. A 2023 McKinsey study cited by the Journal found that retailers in the top 25% for employee satisfaction were more than twice as likely to also rank in the top 25% for customer satisfaction. In healthcare, a June Press Ganey report found that hospitals in the top quartile for employee engagement are 4.2 times more likely to achieve top patient experience scores.

For health system leaders, Costco’s 7% turnover rate does not offer a simple blueprint. Hospitals cannot easily replicate retail pay scales or absorb labor costs in the same way. But Costco’s example does show how consistent investment, strong benefits, and a structure that values long-tenured employees can support retention. In a sector where labor is the largest expense and turnover carries high costs, that may be the part worth studying most carefully.