In healthcare, out-of-network referrals create a serious problem – for patients and health systems alike.
When a patient is referred to a specialist or healthcare provider that doesn’t take his or her insurance, high out-of-network costs and surprise bills can create an unnecessary financial burden.
But patients aren’t the only ones impacted. For hospitals and health systems, referral leakage results in a number of significant consequences, including:
- Loss of revenue. Referral leakage affects a hospital’s financial health. In the United States, the cost of out-of-network referrals for health systems is estimated at upwards of $97 million for every 100 affiliated physicians.[i] The lost revenue from these referrals can add up to a 20% drop in a health system’s annual revenue. In fact, a recent healthcare innovation article noted that most health systems lose an average of $200 to $500 million to competitors each year due to the outward migration of patients.
- Patient dissatisfaction. When a patient receives an out-of-network referral, it can negatively impact the patient experience. This is especially true if the patient was not well-informed about the potential higher costs or why it’s necessary to seek care outside their insurance network. As a result, out-of-network referrals often lead to a drop in patient trust, satisfaction, and loyalty toward the referring hospital or health system. So not only will your organization miss out on the revenue from multiple specialist visits – but you may lose the entire lifetime value of that patient.
- Poor care coordination. Because of the data silos that can exist between different hospitals, physician practices, and health systems, out-of-network referrals tend to disrupt the continuity of care. If a patient is referred to a provider who is not part of their established network, it may require them to establish new relationships and re-share medical records. This can lead to fragmented care, unnecessary testing, and additional communication challenges.
- Administrative and billing challenges. Billing and collecting payments for out-of-network services can be more complex and time-consuming for hospitals and health systems. As a result, you may need to navigate different reimbursement processes, negotiate with insurance companies, and handle disputes or denials. This administrative burden can strain resources and impact cash flow.
- Low provider utilization. If your health system can’t provide access to the right type of specialist, it may be medically necessary to provide an out-of-network referral. But according to one recent physician survey, about one-third of all out-of-network referrals could be avoided if better provider information was available. For health systems, these unnecessary referrals can result in lower utilization rates for contracted providers.
A Root Cause of Out-of-Network Referrals: Bad Provider Data
We’ve established that out-of-network referrals cost patients and health systems millions of dollars each year – while negatively impacting care coordination. So why does referral leakage remain such a difficult problem for hospitals and health systems to solve? In many instances, it’s because physicians and referral coordinators don’t have the data they need to keep patient referrals in-network.
Across most health systems, provider information is fragmented. Directories contain inaccurate and out-of-date information. And even when accurate data is published, it may not contain enough of the right details to make an informed referral.
Consider this: The average provider is contracted with more than 10 different insurance plans[ii] – and the record of a provider organization can change up to 25% each year. With provider data in a near-constant state of change, it’s no surprise that keeping patients in-network is such a challenge.
Recent HIMSS Market Insights research underscores this problem. In a survey of 100 healthcare organization (HCO) executives, one-third of respondents said that 21% or more of their organization’s provider directory data is of poor quality – and only 8% characterized their provider data as “excellent.” The study also revealed that perceptions related to both the quality and importance of provider data varied significantly based on the size of the organization – with large, multi-facility organizations facing more difficulties. This data is further supported by a 2018 CMS review of Medicare Advantage Organization provider directories, which found nearly 49% of directories contained inaccurate information.
The Solution: Provider Data Management
To help reduce the number of out-of-network referrals, many hospitals and health systems are investing in provider data management strategies to improve the accuracy of provider data.
According to HIMSS Market Insights, half of the HCO executives surveyed said referral management was a top challenge they are trying to solve with a provider data management system. And when asked what was the highest priority for investment, improving referral management was the top response.
While reducing out-of-network referrals through provider data management is a significant undertaking, the good news is that advancements in technology are making it easier than ever before.
In the past, verifying and updating provider data was an overwhelming (and highly manual) task. But modern provider data management systems – such as InterSystems HealthShare Provider Directory – can now automate the process of collecting and distributing clean provider data in real time. This is accomplished by creating a single source of truth which contains the most accurate and up-to-date data on providers and provider organizations.
With an accurate and comprehensive record available for each provider, hospitals and health systems can effectively reduce the number of patients lost to referral leakage. Meanwhile, providing better visibility to provider specialties and availability across an organization can minimize bottlenecks by improving provider utilization rates.
The result? Better patient care, higher levels of patient satisfaction, and higher referral revenues.