How Much Are Your Referrals Worth?

For most ACOs coordinating care in a high value referral network is the highest yielding clinical and financial ROI with the lowest required upfront investment.

Mark Hefner, CEO

Mark Hefner, CEO Follow

July 9, 2019

Specialist reviewing an x-ray with a patient.

Ask any ACO executive and he or she will tell you that managing the day to day operations of an ACO while improving care processes and engaging stakeholders is like trying to change the tires on a car while going 70 miles per hour. It’s a huge undertaking to prioritize the initiatives that will have the most impact on near term and long term success, and with the aggressive move toward two-sided risk, the pressure is only going to increase. So, how much are your referrals worth? Specifically, are they worth prioritizing due to their impact?

Early on in the value based reimbursement discussion, industry leaders, Farzad Mostashari, MD, MPH, Darshak Sanghavi, MD, and Mark McClellan, MD, PhD, put a spotlight on the reality that PCPs have far more of an impact on total patient spend than most physicians ever realize. In fact, in an article they wrote for JAMA Network, they proposed that “a group of 100 adult primary care physicians could potentially influence almost $1 billion in health care spending” making each PCP “the chief executive officer (CEO) in charge of approximately $10 million in annual revenue.”  The article makes the case for a high value specialist network as a critical success factor for ACO’s. When we think of referrals as representing dollars, the minute a PCP makes a referral to a specialist a domino effect of dollars being spent across the community (and from ACO funds and the patient’s wallet) is set in motion.

A more recent study published in JAMA concluded that optimal ACO savings occurred when 40% to 45% of patient office visits were with specialists. Lesser or greater specialist involvement reduced savings. It doesn’t take much imagination to understand that the nature of specialist involvement matters as well. Are the specialists your ACO refers to serving as good partners to your PCPs to optimize clinical care and cost outcomes, or are they still practicing the same way they have been?

It can take years of trial and error for many ACOs to recognize the critical missing piece to effectively managing risk; a closed loop referral process between primary care providers and high value specialists that accounts for every patient. For most ACOs, coordinating care in a high value referral network is the highest yielding clinical and financial ROI with the lowest required upfront investment. Yet referral management often doesn’t make the priority list. In fact, few executives, including physicians actually realize the true ‘worth’ of a referral from both a clinical and financial standpoint.

From a macro perspective, it’s easy to understand why. With decades of a fee-for-service reimbursement model combined with disparate operational systems, physicians have learned to ‘stay in their lanes’. There’s no malintent, it’s simply how the system operates. We schedule a visit with our primary care physician (PCP) because of a particular symptom or cluster of symptoms. The PCP does a diagnostic workup and if the diagnosis falls outside of his or her lane, they refer us to a specialist and move on to the next patient. It’s the same process with the specialist and the hospital in the event we need acute stabilization. Yes, as patients in this system we grumble while filling out different forms with the same information, but it’s what we expect because it’s the way it’s always been. At every fork in the care road there’s a referral. And for the most part referrals have been regarded as a ‘one and done’ administrative task. That’s why there’s been little to no investment in measuring and tracking the impact of referrals on total medical cost. That is, until accountable care came along, and especially now as ACOs consider more risk-based contracts.

The best way to implement a referral management strategy is to instill it rather than install it. You absolutely need a shared common referral management platform that interoperates across disparate EHRs but it’s only half of the equation. The second half is building a high value network and instilling a team mindset with a laser focus on reducing network leakage. How do you instill rather than just install referral management? Stay tuned for our next blog, Referral Management: Don’t Install it. Instill it.


Mark Hefner, CEO

Mark serves as Infina Connect's Chief Executive Officer and leading evangelist for value based care. He has seen firsthand the impact of care coordination in the hospital and post acute market while at Allscripts and now with Infina Connect's Intelligent Care Coordinator (ICC), the first referral coordination solution to be adopted by a majority of providers across a major metropolitan area. Mark is passionate about his faith and making a difference in others' lives, his family and outdoor fun like boating and hiking.

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