Lance FusacchiaToday’s referral process suffers from an array of challenges that often make it difficult for patients to obtain the care they need. Given that an increasing number of patients are scheduling their appointments on their own, it is no wonder that one-third of patients never follow through on their referral.

From a financial perspective, this lack of patient follow-through has deep ramifications. When patients forgo referrals, provider organizations lose revenue because the missed opportunities translate into problems such as low completion rates (no-shows), lost staff efficiency from time spent coordinating appointments, and a poor patient experience for those who never receive the care they were prescribed. The losses are real, but many healthcare organization executives do not fully recognize them. Senior finance executives therefore have an important role to play in educating executive teams on the financial impact of losing network referrals, or what is sometimes called “outward migration.”

The need for such education is all the more acute because of the growth of value-based care, and the increased financial risk providers are assuming as a consequence. These factors make it all the more important for healthcare organizations to rethink how to streamline physician and patient communication, strengthen patient education, and create visibility for providers to track a patient’s care across the care continuum.

The Cause of Outward Migration

Studies show that approximately 20 to 40 percent of patients who receive referrals never complete them, possibly because they were never scheduled or they became no-shows due to bad appointment timing. Patients also miss referral visits for other reasons, such as when their medical situation resolves itself, a conflict arises, or they disagree with the referral in the first place.

The following factors contribute to low referral completion.

Poor communication and education. Patients need to understand why their referral visit is necessary and what outcome the appointment is intended to accomplish. Patients who have a clear understanding of why the referral is necessary are more likely to show up.

Weak patient-physician relationships. A patient who has a long-term relationship with his or her primary care physician is more likely to follow the physician’s advice.

Difficult communication processes for patients to gain access to care. The process of scheduling a referral often is lengthy, plagued by three-way calls and long lead times. Patients may become frustrated and give up on scheduling.

Clearly, some dropped referrals are unavoidable, but many can be prevented. It’s in every healthcare finance leader’s best interest to ensure there are mechanisms in place to do so.

The reality is, low patient show rates contribute to poor outcomes for patients, as well as for both the referring and the target providers. Patients miss out on the care they need, while referrers and target providers lose patients, time, and ultimately revenue.

The Benefits of Better Referral Management

Stronger referral management should incorporate a full picture of telehealth, education, and outreach initiatives to improve patient compliance and prevent network leakage. According to recent statistics, an estimated 25 to 50 percent of referring providers do not know whether their patients have completed their referrals and 50 percent of referring and specialist providers do not communicate with each other. The first order of business for healthcare providers, therefore, should be to address these deficiencies. Physicians who have visibility across the care continuum are in the best position to help patients continue to receive recommended care.

Improved communication and education tactics combined with new services like follow-up e-visits via telehealth solutions, could increase referral completion rates, staff efficiency, and referral capture exponentially. The effectiveness of these efforts can be enhanced using online tools that facilitate referral tracking and follow-up with patients.

Consider, for a moment, the potential financial losses of referral no-shows in terms of actual dollars. As an example, a typical healthcare system with 200 providers, each serving a panel of 2,000 patients. Of those 400,000 patients, it is fair to estimate that 50 percent visit their physicians and 30 percent of those visits result in a referral. That makes 60,000 potential referral visits. If 30 percent of those referrals don’t happen (the average number of no-shows, as cited previously), that’s approximately 18,000 lost referrals. According to findings of one recent study, a single no-show costs a provider, on average, $210. Multiplying that amount by 18,000 no-shows results in $3.78 million in lost revenue. If a health system could avert even 25 percent of those lost referrals, it could recover nearly $1 million in lost revenue.

Numbers make it incumbent on every senior finance leader to take an interest in ensuring that referrals don’t become no-shows. Doing so can help both the health system and its patients.


Lance Fusacchia is the CFO of MyHealthDirect, Nashville, Tenn.

Publication Date: Friday, July 08, 2016