Poor referral management adversely impacts health systems and referring providers

Optimal management of a referral network offers many potential benefits for health systems and providers which may include better care quality due to more coordinated and preventive care, enhanced patient engagement and satisfaction, and increased patient volume which helps maximize ROI. Efficient referral management leading to positive patient flow is, in fact, more essential than ever in helping health systems realize value from the millions of dollars in new investments they spend on acquiring physician practices, upgrading technology and building infrastructure. Yet seamless referral management remains a vexing challenge for many organizations.

Q:  The traditional hospital landscape has changed tremendously in the past 10 years.  What challenges do you discover when dealing with different health systems? 

A:  My observation is hospital leadership tends to be insular, instead of focusing on external constituents (such as independent referring providers, consumers and large self-insured employers) that have the greatest opportunity to create real advantage and growth.  No revenue originates inside a hospital.  Non-academic hospitals typically have four sources of revenue – physician orders, patient referrals, transfers and emergency department visits.  With the exception of employed physicians, this revenue is driven by people and entities that are external to the health system.  Yet, nearly all new capital allocation – financial and human capital – has been focused inside the health system, i.e., hospital and physician practice acquisitions, construction of new hospital beds, implementation of EMRs.  These massive expenses have produced sparse evidence of risk-adjusted returns.  From the consolidation have emerged large, regional health systems that have achieved scale, but increasingly struggle to capture the economic benefit of that scale operationally.  From the viewpoint of consumers and referring providers, these larger health systems have almost all become more complicated and difficult to access and navigate.   

Q. How does inappropriate or inefficient management of the patient referral process impact a health system’s bottom line? 

A. Currently only 54% of patient referrals become appointments.[1]  This means 46% of the time, patients do not receive care they need and destination providers do not realize the revenue they could have.  The more important metric, therefore, is not how many referrals are sent but how many are converted into appointments and what proportion of those appointments are kept and appropriately paid.  Additionally, many of those referrals that do become appointments need to be rescheduled due to lack of insurance prior-authorizations.  Rescheduling these appointments is a terrible customer service experience for patients and the lost appointment slot often results in unrealized revenue potential while the fixed and variable costs are still absorbed. 

 Q.  Discuss the concept of revenue leakage. 

A.  Network leakage, shown to represent one-third of patients[2], takes place when patients under the care of a physician employed by a health system end up receiving care from a competitive provider.  Some leakage can be expected based on lack of clinical specialties, capacity constraints, geographic proximity, narrow network exclusions or patient preference.  Much of it, however, can be prevented with contemporary cloud based referral and appointment management tools.     

 In the next article, we will discuss how referral technology can have a significant impact on value based care. 

About the author: Joel French has more than 25 years of experience in healthcare technology leadership. Prior to joining SCI, Joel founded, led, or provided consulting on behalf of various publicly traded and privately held technology services firms. He has been an active contributor to the growing body of health industry knowledge as a widely published author and speaker.

Interviewer: Claude Blenman has more than 17 years of experience successfully selling a broad range of products and services and is the owner of Quest Biomedical International, Inc.



[2] Hospitals Employing Physicians See Greater Losses. Medical Economics, January 11, 2015. http://medicaleconomics.modernmedicine.com/medical-economics/news/hospitals-employing-physicians-see-greater-losses