Rae Woods (00:09):
From Advisory Board, we're bringing you A Radio Advisory, your weekly download on how to untangle health care's most pressing challenges. My name is Raechel Woods. You can call me Rae. Two weeks ago, we released an episode on health system growth. Our experts told Abby that when it comes to growth, the number one thing that systems are focused on is operational excellence. And that has to include capturing as close to 100% of the revenue on the table from your medical group. Now I am positive that none of you are even close to that number. You might be employing PCPs, you might be trying to control the entry point and capture those specialty referrals, but the assumption that employing physicians will drive referrals is false. And frankly, it's a bit outdated.

(00:57):
I bet that you've spent a lot of money on physician acquisition over the last few years, and I also bet that you still have a network integrity problem. I clearly have serious questions, maybe even serious doubts that primary care referrals are actually feeding into the enterprise the way that we all hope that they will. If I have those questions, I know you do too. The answers are going to come from Advisory Board physician experts Eliza Dailey and Colleen Wagner. Colleen, Eliza, welcome to Radio Advisory.

Eliza Dailey (01:27):
Hey, Rae.

Colleen Wagner (01:28):
Thanks for having us.

Rae Woods (01:30):
So you probably heard some of the passion in my voice kicking off this episode. And I'm not sure that our listeners know why I am so damn passionate about referrals, and that is because back in the day, Eliza and I did research on primary care referrals. This was 2019, so several years ago, and I will fully admit, I'm excited to learn from you, Eliza, and you, Colleen, on what's changed since then.

Eliza Dailey (01:57):
2019, nothing has changed about healthcare referrals, the world.

Rae Woods (02:03):
Nothing's changed in healthcare. But five years is a long time for things to change. And on that note, I kind of want you to start with just giving me an update on the landscape itself. I know that it's no secret that health systems have spent a lot of time, they've spent a lot of money buying up medical groups and employing docs. Eliza, you are a regular on this very podcast talking about this topic. Where are things today?

Eliza Dailey (02:26):
We've talked about some of these numbers in a past podcast, but just to quickly get everyone up to speed, we know that health systems own about 28% of practices today, but they actually employ 55% of physicians. So they're the primary employer of over half of the physician workforce. And one of the main reasons that health systems have employed so many doctors is for the promise of downstream revenue. There has kind of been this inherent belief, if we employ the doctors, they'll feel some sort of affiliation to us, probably send us their referrals and downstream business. And as you mentioned, Rae, this has been a focus of health systems for a really long time, but we've seen a lot of renewed focus in the last couple years, just because health systems are under so much cost pressure. Costs are really outpacing revenue right now, so there's more pressure than ever to see ROI from your employee medical group, really making sure that you're capturing the full value of your employed physician network.

Rae Woods (03:28):
And we're probably going to name a couple buzzwords here. People want to see the full value of their network integrity. They want to have their keepage remain high, my least favorite word in healthcare. They want to make sure their physicians are aligned, which really often practically means sending referrals. And you just said it yourself, Eliza, this is a long held belief or a long held hope that employment will lead to that network integrity. My question though is: Is that belief true? Does it actually hold true in the data?

Eliza Dailey (03:57):
No. Podcast over. We can end it here. So Rae, we had that exact same question. We've had it for many years. So we actually ran a data analysis this past year to really put some numbers and identify some truths here, and kind of challenge the prevailing conventional wisdom. So we did some data analysis, kind of looking at referral revenue that was coming from employed PCPs and really trying to break down how much of that business are they sending to their employed health system. How much are they sending to competitors?

Rae Woods (04:35):
And what did the data tell us?

Eliza Dailey (04:38):
I think the data's going to surprise people. So employed PCPs only send 55% of their referral revenue to their employer health system.

Rae Woods (04:50):
Whoa, hold on. That is very low. I want to put that number in context. The number that I have in my head when we think of what's kind of good enough with referral integrity is 70%, 80%. And 55% is pretty far of that goal.

Eliza Dailey (05:06):
Yeah. The other way we've been thinking about it is, it's slightly better than a coin toss, whether your employed PCPs are going to refer in or out of network for specialty care.

Rae Woods (05:16):
This is a very big deal. Right, Colleen?

Colleen Wagner (05:19):
Absolutely. And Rae, you mentioned that 70% to 80% number, and what we found in our conversations is that's also a bit of an arbitrary target, but the reality being that only roughly 55% go in network shows that health systems are not aware of the full scope of the problem.

Rae Woods (05:37):
So they don't even realize that they're actually just doing a coin flip for all of their physicians that represent an enormous part of their budget. I want to keep pushing on numbers for a minute here. If it's virtually a coin toss, help me understand what the risk actually means for health systems in terms of the dollar amount.

Eliza Dailey (05:59):
So you're looking at about $388 million in annual revenue that's being lost to competitors. We analyze data from over 60 health systems in our analysis, so there's a pretty wide range. Sometimes it's as little as $6 million. Sometimes you're losing as much as $3.9 billion, that's billion with a B, so really, some pretty significant financial losses here.

Rae Woods (06:28):
And I want to be clear, this is not money that health systems have to lose. Right? That's exactly what I heard loud and clear from the episode that Abby hosted two weeks ago on health system growth.

Eliza Dailey (06:37):
Exactly.

Rae Woods (06:38):
I actually do want to talk about growth for a moment because the growth imperative is top of mind for all of our listeners. And if I think back to some of our research on growth, one of the biggest things that I heard is you have to have this relentless focus on operating efficiency. And it sounds to me like you're saying that health systems are just missing the mark so substantially when it comes to that referral integrity. This is a complete missed opportunity that health systems can't even afford to make right now. My question is: Why is that happening? Why are things so much worse than we would've thought?

Colleen Wagner (07:13):
I think it's happening for a couple of reasons, Rae. First and foremost, it's important to address that some degree of leakage is inevitable. Right? You aren't going to get to 100% referral integrity, and some drivers of leakage, health systems just can't control, things like patient insurance, patient preferences, and geographic location.

Rae Woods (07:33):
And it's probably worth saying why you're never going to get to 100%. You don't have a closed system. Right? You can't pay for referrals. There are rules and laws in place that are going to prevent us from getting to that 100%. And that's why I think the industry felt okay with that 70% to 80% number. But it sounds to me like you're saying that there are a lot more holes in the pipe that they need to be plugging.

Colleen Wagner (08:00):
Exactly. The biggest reasons organizations are falling short of even the 70% to 80% target is because there are three times as many drivers of leakage as they're aware of. So if you think of referrals like water flowing through a pipe, there are multiple holes in this pipe, and they're only focused on patching one.

Rae Woods (08:20):
Which one are they focused on patching?

Colleen Wagner (08:22):
So an easy way to think of all the referral leakage points is the three Ps, and that first leakage point is physician driven. So this happens at the point of care when the referral is made, and leakage happens because a PCP sends the referral to an out of network specialist.

(08:40):
And that's the one that most health systems are focused on today because-

Rae Woods (08:45):
That sounds like what I did my research on five years ago. It's easier for physicians to make this point of care referral.

Eliza Dailey (08:52):
Exactly.

Rae Woods (08:52):
Telling me clearly that I didn't do enough back then.

Eliza Dailey (08:57):
It's the most obvious. I think it's also the most visible. You naturally think that referrals are going out of network because it has something to do with the employed PCP, but Colleen and I have actually identified two other leakage points that are often ignored.

Rae Woods (09:13):
What are those?

Colleen Wagner (09:14):
The second leakage point is process driven, and this happens between when the referral is made and when it's converted to a scheduled appointment. So leakage here often happens because of delays in processing the appointment, or patient experience in actually scheduling the appointment. Do you have online scheduling options? Are you going to call the patient? Are you waiting for the patient to call you? And delays here often lead to leakage that the health systems aren't necessarily aware of or tracking.

Rae Woods (09:44):
So let me summarize for now. It sounds like most health systems are only focused on one point of the problem, the point of care referral. And there are other problems you need to be aware of, but the first two that you named thus far, they're pretty transactional. Right? We need to make sure that systems are smoother, they're easier to operate, they're centralized. Those feel like, dare I say, tactical problems that we can wrap our hands around. Is that right?

Colleen Wagner (10:10):
Absolutely. This may seem like a big problem, but the good news is this is fully within health systems' control. There are many tactics organizations can deploy to actively address and prevent leakage at these points.

Rae Woods (10:23):
What's the third one? Is it also transactional?

Colleen Wagner (10:27):
The third one is a bit more ambiguous. We say it's patient driven and that is because in this scenario, the patient either no shows, cancels, or gets care elsewhere.

Rae Woods (10:40):
And therefore, we have a lot less control over what happens in this third piece than in the first two.

Colleen Wagner (10:47):
I would say there's less control overall, but more control than organizations may think.

Rae Woods (10:52):
Tell me about that.

Colleen Wagner (10:54):
So what we say is, "At this leakage point, it's actually a lot less of a referrals problem and more of an access problem."

Rae Woods (11:02):
Ah, okay.

Eliza Dailey (11:04):
So we say that this third and final leakage source is patient driven, but I would actually argue that the root causes are still very much health system driven and organizational driven. So you can solve this leakage point by improving your wait times, offering care navigation services. It looks like a patient leakage problem on the surface, but actually, most of it stems from issues actually going on within the health system itself.

Rae Woods (11:33):
And is that something that in your conversations with health systems and physician leaders that they're starting to understand as they hopefully now grapple with the size of the problem?

Eliza Dailey (11:43):
I would say this is where the most progressive health systems are focused. What has surprised a lot of the organizations we've talked to is they're focused on access for the sake of access, but they don't always make the referrals connection. And I think we actually have good news for health systems here, which is you don't actually need a referral specific access strategy. The same things that you're doing to improve specialist access for the sake of improving specialist access are also going to help your referral leakage problem.

Rae Woods (12:16):
That sounds like great news for our listeners. We don't often always give great news to our listeners. But I want to put a finer point on the things that you want to see our audience do next. There are these three points of leakage. Do all of our listeners need to be addressing all three in the same way? How might an individual organization approach the fact that there is this seriously good problem that looks different?

Colleen Wagner (12:42):
All organizations absolutely need to address all three leakage points, but the strategy might look different depending on where your health system is currently at. So for organizations at or below that average network integrity of 55%, more likely than not, they're going to have to start at leakage point one because that's most likely the root of their problem.

Rae Woods (13:03):
Meaning they have to start at the actual physician referral process, the point of care referral that provider is doing.

Colleen Wagner (13:11):
Yep, exactly. For organizations who are at the median or a little bit above, they might be a little bit more progressive already, so for them, it's really important to size and segment and get a holistic picture of their leakage. And you can do that in a few ways by collecting data. First, you can pull a report in your EHR on provider intent to refer, and then you can go ahead and compare that to claims data, so you can see what percentage of your physicians are sending their referrals in network and what percentage of those patients are actually receiving specialty care within your health system.

Rae Woods (13:47):
So said differently, you'll see exactly how much leakage you have.

Colleen Wagner (13:51):
Exactly how much and where.

Rae Woods (13:54):
How about on these second and third points of leakage, what do you want to see organizations do when it comes to enabling the next part of the process and helping make sure we don't lose patients in this kind of last mile?

Colleen Wagner (14:06):
For the second leakage point, it is incredibly important to centralize your referral management across all service lines. Primary care physicians send referrals to specialties across the health system, so having a centralized process that they can send each referral to is going to increase efficiency and reduce that potential for leakage.

Rae Woods (14:28):
Which by the way, the physicians want as well. They want an easier referral process themselves.

Colleen Wagner (14:33):
Exactly. They want it to be as efficient and streamlined as possible at the point of care so that they can get the patients the care they need in the most timely manner possible.

Rae Woods (14:42):
The physicians benefit, the patients benefit from an easier referral, and then the larger system benefits as well. Love it.

Colleen Wagner (14:47):
Exactly.

Rae Woods (14:48):
How about that last mile?

Colleen Wagner (14:50):
In that last mile, Eliza touched on this a little bit, it's really important to improve your access strategy. And like she said, this can overlap with some of your other ongoing access initiatives. But I think a potentially untapped opportunity here is tighter patient care navigation. So once the PCP determines a referral is needed for that patient, can you have that patient meet with a care navigator that same day? Can they help your patient schedule the appointment before they even leave the office? Can they explain why you might need to wait a couple weeks to get in with this specialist? But providing that transparency inherently increases trust between the patient and the system.

Rae Woods (17:09):
We started off this conversation by sizing the problem, which is a bigger deal than our listeners probably think that it is. I now want to talk about how much they can win back. Let's say that all of our listeners take the advice that you have been telling me is so important across the course of this conversation. How much business can they stand to actually win back?

Eliza Dailey (17:32):
So I think first, I would actually lower the bar a little bit for everyone. So as we've been talking about, the goal has traditional been 70% to 80% referral keepage. Colleen and I would actually advise health systems just strive for 5% to 10% improvement. Really, the goal here is marginal improvement, and that can translate to some pretty significant dollar amounts.

Rae Woods (17:59):
Like what?

Eliza Dailey (18:00):
So take your median health system, health system that's getting about 55% referrals in network right now. If you improved every PCP's performance by 5%, you could realize $30,000. If you improved every PCP's performance by 10%, you could realize $61 million. And that's just going from 55% to 60% or 65%.

Rae Woods (18:29):
That is great news on top of what I think we started off as a little bit of a grim beginning, talking about how poor performance is. But you're saying a little bit is actually going to go a long way. I want to admit that there is a different change that is kind of in the back of my head that I want to get your take on. You're talking about changing actual referral behaviors. But we started off this conversation by saying that health systems invested in and employed physicians with the goal and the hope of referrals. Are you actually telling me that's something that health systems should not do?

Colleen Wagner (19:07):
Not exactly. We're saying that health systems really need to focus on referral integrity and access, regardless of ownership status. They already employ a lot of physicians. And like Eliza just mentioned, there is a lot of revenue to be gained if you double down on these tactics and focus on preventing referral leakage before it happens.

Eliza Dailey (19:30):
And I would say too, referrals aside, health systems and other players in general are starting to realize the limits of employment at large. There's not that many docs to actually employ anymore who are still willing and able and employable.

Rae Woods (19:50):
Yeah, Eliza, you've been on this podcast before talking about the arms race over physicians. And I imagine there are not that many left that want to be employed.

Eliza Dailey (19:59):
Exactly, referrals isn't the only area where it's hard to influence physician behavior and clinical decision making. So do I think we're going to see even more health system employment across the next several years, that trend picking up? No. But at the same time, we are not going to see mass divestment of medical groups, especially within the context of referrals.

Rae Woods (20:23):
Which is probably a second reason for our listeners to kind of not panic. Right? There are small changes that if you are able to get even incremental improvement can result in very real dollars. And if you haven't made big investments in physicians, that might be okay because this might actually take some of the pressure off when it comes to your employment goals.

Colleen Wagner (20:46):
Exactly. You can and should work with independent and affiliated physicians. But I will say it's also important to centralize and refine your own internal referral processes before extending to try to get referral capture from the broader market because you need to have your own house in order before you go and try to increase referral volumes from other sources.

Rae Woods (21:10):
I'll admit I have found this conversation really, really powerful because together we uncovered a very big problem leading to millions of dollars in lost revenue. But we've also given our listeners some very clear guidance and some very real hope on how small changes can go a long way. Before we close, what do you want our listeners to do first?

Colleen Wagner (21:32):
The first thing I want our listeners to do is recognize that this might be a sizeable problem, but it is also a very solvable one. The solutions that we're talking about aren't necessarily glamorous or new. It's a lot of things that health systems have been doing for years, they just need to double down their focus. So it's things like making in network referrals the path of least resistance. Is it fewer clicks for your primary care physicians to send a referral in network versus to an external provider? You have to double down on centralization. You have to connect your access strategy back to your referral strategy. And these are all things that they've been working on across the past five years since you did this research, Rae, but it's really time to double down.

Rae Woods (22:17):
So I was right.

Colleen Wagner (22:18):
You were right.

Rae Woods (22:21):
How about you, Eliza?

Eliza Dailey (22:23):
Building on our earlier message that the goal really here is marginal improvement, I would say there's a lot of small things health systems can do, little tweaks they can make to their current referral processes to really see sizable gains. So as Colleen mentioned, literally make it fewer clicks to send the referral in network than out of network. For the process driven leakage point, there's a lot to be gained by proactively reaching out to patients to schedule versus waiting for them to call and schedule their own appointments. And then on that last leakage point, it's really all about access, just getting patients in a few days sooner makes it much more likely that they're actually going to follow through and complete the specialist referral. So big problem, really solvable, and you can do it and actually kind of little tweaks and hacks along the way.

Rae Woods (23:17):
I love it, I love it. Colleen, Eliza, thanks so much for coming on Radio Advisory.

Colleen Wagner (23:22):
Thanks, Rae.

Rae Woods (23:29):
Colleen and Eliza told you exactly what you need to do, but I want you to remember the mindset shift that they shared. One of the biggest things standing in your way is recognizing that there are more holes in the referral pipeline than you thought. The good news is small changes are going to go a long way. And remember, as always, we're here to help.

(24:13):
If you like Radio Advisory, please share it with your networks. Subscribe wherever you get your podcasts and leave a rating and a review. Radio Advisory is a production of Advisory Board. This episode was produced by me, Rae Woods, as well as Abby Burns, Chloe Bakst, and Atticus Raasch. The episode was edited by Katy Anderson with technical support provided by Dan Tayag, Chris Phelps, and Joe Shrum. Additional support was provided by Leanne Elston and Erin Collins.