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    Robert Jacob LaGesse
    Robert Jacob LaGesse, MSM, FACHE

    In this era of declining reimbursements, healthcare organizations must find ways to improve revenue without increasing costs. Many are confronting this dilemma by improving quality, leveraging performance-based pay, improving customer service through automation and convenience and bolstering productivity while maintaining high standards of care and service.

    Over the past 15 years, healthcare systems and large multispecialty physician practices have grown by vertically integrating primary care and specialty services. The underlying assumption is that employed or aligned physicians and providers will refer patients internally to the organization’s specialty and ancillary services. Monitoring referral patterns offers a quick and straightforward way to assess whether this assumption holds true. Yet many organizations overlook the possibility that referrals may not always stay within their network as expected. 

    There are two ways to monitor referrals to your organization:

    • External third-party insurance data aggregators
    • Referrals of internal organizational providers

    Using third-party insurance data aggregators. This purchasable data offers insights into commercial insurance information, including patient services and the providers who deliver them. This is a valuable resource for identifying potential referral leakage and developing strategies to increase referrals from nonorganizational providers.

    However, this method has shortcomings when it comes to increasing referrals:

    • The data is generally at least 3 to 6 months old.
    • The data comes at a cost.
    • It doesn’t give management an immediate view of issues within the organization that may be inhibiting referrals (barriers caused by systems within the organization).
    • Finally, it doesn’t give management a direct view of opportunities that may exist for new services that can be gained because volume reflects a need for a service not currently provided within the organization.

     

    Monitoring referrals of internal organizational providers. This method is more direct. If set up properly, a referral monitoring system can:

    • Show where referrals are going inside and outside of the organizational network.
    • Identify factors for internal and external referral sources causing leaks from your system. If your internal provider’s offices find obstacles to referring, most of the time this will apply to external providers attempting to access the organization’s services.
    • Combined with other data, identify opportunities for the organization to expand a service or start a new service to meet a need being met outside their organization.
    • Help in managing a successful population health strategy by using consistent clinical practices within the referral network.

     

    There are many online resources that highlight the importance of referral management, often offering consulting services to help you develop an effective system and collect the necessary data. However, most practice management and EHR systems include built-in tools that allow you to set up referral management with just a few steps. This article will guide you through a practical way to set up this process within your existing system.

     

    The guide

    Most practice management and EHR systems provide a method to track referrals into and out of the organization. Understanding that each has a slightly different method, this outline is broken down into fundamental steps that can then be applied to the organization’s information system. Once the steps are translated into the information system, you should be able to obtain effective data analytics for a high-functioning referral management system.

     Step 1. Identify all services available to your patients through your organization that are being referred out. Most healthcare information systems can flag these services.  For example, if your organization has an open MRI or employs a pediatric cardiology group, make sure these services are identified as available in your system. You will do this with each type of service or specialty for which the organization offers.

    Step 2. Define what you want the data to tell you. Establish categories of required information to effectively manage referrals. Keeping the categories simple and discrete helps avoid overwhelming users with too many options. If the data isn’t clearly defined, it becomes extremely difficult or even impossible to interpret accurately. In my previous experience setting up similar systems, we limited the reason codes to five distinct categories, making it easier for referral coordinators to record why a referral was leaving our system:

    1. Access: The service was not available in time to meet our patient’s treatment plan needs.
    2. Availability: The requested service was unavailable within the system and had to be referred externally.
    3. Quality: The provider has significant concerns about the quality of the service available to the patient.
    4. Patient request: The patient requested a different provider due to a previous relationship, concerns about quality or other personal reasons.
    5. Insurance: The patient’s insurance requires them to use a specific provider network or ancillary service that is out of network for the organization.

     

    You will enter the five reason codes into your referral system. As you log the referral, the system will identify whether the service is available within the organization’s network. By using the internal report writer, you can generate reports with referral data based on these reason codes.

    Step 3. Establish a policy that requires the use of your referral system and begin staff training. From my experience, some initial resistance to providing this information is common. During training, emphasize that the data is intended to improve service access and quality, not to penalize anyone. Allow staff a 60-day warm-up period to become familiar with the system. Closely monitor the data during this time for any signs of problems. Here are some key things to watch for:

    1. Low data submission. If the amount of data collected is insignificant compared to the total number of referrals from a given provider or office, it is typically a sign of personnel issues, insufficient training or the provider’s reluctance to have the staff input the codes into the system.
    2. Overuse of a single referral code. Frequent use of the same referral code, particularly “Patient Preference” or “Insurance,” should raise concerns. Conduct audits with the report in hand to verify if the patient truly had a preference, including following up with them to understand why. Also, check the insurance details to confirm whether it was truly a barrier.
    3. Frequent use of the “Quality” code. When the “Quality” code is used often, it signals a potential red flag. Have a conversation with the provider to identify any specific quality concerns so they can be addressed. However, his code is often used when a provider simply prefers to refer outside your system. A brief discussion with the provider about modifying their referral patterns can usually solve this problem.

     Approaches to internal referral policies

    Organizations take different approaches to internal referral policies:

    • Internal referrals mandate: Some organizations require all employed or aligned physicians to refer internally.
    • The “All Things Being Equal Rule” (a more flexible and effective approach): This policy states, “If Quality, Access, Availability, Patient Insurance, and Patient Preference are not concerns, employed physicians and APPs are expected to refer within our system/network. If quality or access issues arise, the referring office must report them to management for resolution.”

    This last part is particularly important — if internal providers face issues with quality or access, it makes sense that external providers are likely encountering the same problems.

    In one case, a new provider who had come from another practice continued referring patients to a specialist they had worked with before, unaware that we offered the same specialty. In another case, new physicians had not met or spoken with the specialists within our system. Recognizing the importance of relationships in healthcare, we facilitated introductions between the new physician and the specialist, allowing the specialist to explain his practice and the services they provided.

    Access issues can be enlightening. In one practice, we found that the orthopedic group was referring a subset of patients employed by the same organization to an external MRI provider. Upon investigation, we discovered that the employer was paying cash for these services because the organization’s fees were $250 higher than the outside MRI provider. Additionally, the orthopedics providers noted difficulty scheduling patients after 4 p.m. due to an arbitrary no-overtime mandate. This rule prevented patients from being scheduled after 4 p.m. to avoid overtime, leading to emergency cases being referred externally, as the orthopedic group continued seeing sports injuries until their closing at 5 p.m.

    Hospital leadership fixed the fee issue by negotiating a discount for the organization in question. They also resolved the overtime mandate, allowing patients to be scheduled until 5 p.m. even if staff needed to be paid overtime to complete procedures. As a result, the orthopedic group increased its referrals to the hospital’s MRI services by 20%. Both changes also brought in more revenue than they cost.

    After your initial implementation phase, you should be able to create reports that identify referral leakage issues. The reason codes should give you a basic understanding of who is referring patients, where they are being referred and why. This should become a standard part of your practice dashboard, enabling management to monitor referral trends on a weekly, monthly and quarterly basis.

    Conducting weekly reviews allows you to quickly address if a particular code is being used often for a specific practice. Immediate action can help prevent further leakage to outside organizations.

    Monthly and quarterly reviews help identify trends that can prevent referral leakage and highlight broader practice issues. For example, the data might reveal providers who are reluctant to change referral patterns, repetitive quality or access issues with certain specialties or ancillary services, or recurring insurance issues that could indicate the need to reassess contracts with specific insurance groups. These trends provide valuable insights for addressing systemic issues.

    A key added benefit of this type of monitoring is its ability to highlight opportunities for service or specialty expansions. For example, the data can reveal a significant number of referrals being sent out due to “Availability” reason code issues. One organization discovered they were losing a substantial number of ultrasound patients from their primary care offices. After investigating, they determined their ultrasound capacity was insufficient, having originally been set up only for their in-house vascular and OB/GYN programs. By adding capacity and staff, they were able to recapture all these referrals at minimal expense.

    Conclusion 

    As revenue pressures on healthcare organizations intensify, continuous process improvement becomes essential. Implementing a high-functioning referral management and monitoring system allows organizations to regularly evaluate referrals from both internal and external sources. A strong referral management system helps reduce leakage from internal providers, identify barriers external providers face in accessing your services and provides you valuable data to evaluate opportunities for service expansion.

    Robert Jacob LaGesse

    Written By

    Robert Jacob LaGesse, MSM, FACHE

    Bob LaGesse is the Chief Operations Executive and also serves as the Interim Executive Director for ECU Physicians. He joined ECU Physicians in July 2015 from his previous position as Senior Vice President and Chief Administrative Officer for Physician Practices at Phoebe Putney Health System in Albany, Ga. Bob has 45 years of experience in healthcare management in a variety of organizations for profit, not-for-profit and academic settings. His experience includes 27 years in physician practice leadership positions in private practice, hospital and corporate-owned practices. He has a master of science degree in management from Troy University, is a Fellow in the American College of Healthcare Executives and is a Certified Medical Practice Executive in the American College of Medical Practice Executives.


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