Excellence as a Strategy to Reduce Physician Referral Leakage

Referring physician shaking patient's hand

Healthcare organizations depend on patients to stay in business, as anyone will tell you. Like any other industry or enterprise, hospital and healthcare systems alike must keep consumers coming back to sustain their business. But unique to healthcare, patient consumerism is highly influenced by providers, and referrals (or lack thereof) play a large role in the profitability and growth of a healthcare organization. Should a patient be sent out of the network, the organization loses that business, not just for the specialist visit, but for any tests, procedures, or hospital stays. Additionally, there also exists a risk of losing that patient for future care should their experience be excellent within the other network, as patient preference and loyalty are typically driven by excellence.

Most healthcare organizations don’t realize the amount of revenue they miss out on as a result of this dilemma. Recent reports show patient referral leakage costs nearly half of U.S. healthcare organizations 10% of their annual revenue[i]. Reducing leakage can help your organization become and stay more profitable.

So how can you ensure your physicians keep patients in network more often and reduce lost revenue? Understanding the barriers physicians face when referring their patients is key to minimizing leakage. Referrals out of network happen most commonly when the network does not provide the specialties needed, such as psychiatric care or pediatric specialties. However, when physicians choose to refer outside your network for services you do offer, the reasons cited in PRC research are most often related to the provider’s perception of lower quality of care, access issues, and a lack of follow-up communication with the referring physician.

As referral networks strive to build relationships with their physicians and earn more of their business, a focused strategy on excellence is key. PRC’s research confirms that a referring physicians’ perception of the quality of the clinical skills of specialists is the top driver for how they feel about a health system’s referral network. This implies that if a physician feels confident in the quality of care a specialist is delivering that they are willing to ask their patients to drive farther or even wait for an appointment to receive care.

Validating PRC’s findings, independent research has also shown out-of-network referrals could be avoided if providers had more information on in-network doctors’ specialties and areas of focus[ii]. Many physicians recognize the importance of keeping patients in-network, but the majority admit to commonly referring patients out-of-network. Does your organization know how its physicians perceive the specialists in network? What messages are you intentionally conveying to your physicians about the strengths and successes of their in-network colleagues? Are you providing opportunities for physicians to meet new specialists and build trust? As previously stated, the strength of a referral network, as perceived by its physicians, is highly influenced when the specialists’ clinical skills are viewed as excellent.

Joining together and developing a collaboration where hospital leaders communicate about how to minimize physician leakage is very important to reduce leakage and help improve patient retention.

Understanding gaps in how your physician network is perceived, what drives your physicians’ referrals both in and out of network, and what actions are needed is a crucial first step to reducing your Physician Referral Patient Leakage and increasing your organization’s overall revenue. PRC’s Referring Physician Experience Survey can capture these insights. Let us know if we can help!


[i] Gooch, Kelly. “Patient Leakage costs nearly half of healthcare organizations 10% of annual revenue, survey finds.” Becker Hospital Review, 01 November 2018, https://www.beckershospitalreview.com/finance/patient-leakage-costs-nearly-half-of-healthcare-organizations-10-of-annual-revenue-survey-finds.html

[ii] Masterson, Les. “Physician referral issues causing more out-of-network care.” Healthcare Dive, 23 August 2018, https://www.healthcaredive.com/news/physician-referral-issues-causing-more-out-of-network-care/530726/.