How To Take Charge Of Your Patient Referral Leakage

Health providers throughout the world rely on patients to practice and stay in business. Whether as part of a hospital, health network, or private practice, healthcare practitioners depend on incoming patient referrals from other health providers and entities.  Providers tend to refer patients to other providers within the same hospital or health network. This is mainly due to them all being under the same health plan umbrella. This article will review patient leakage and its important role in revenues for a healthcare practice.

For example, any individuals joining Kaiser Permanente and enrolling in the Kaiser Foundation Health Plan primarily receive their medical services at Kaiser Foundation Hospitals or regional Permanente Medical Groups.


Private providers refer patients based on numerous factors, including personal relationships, quality outcomes, proximity, and, most importantly, patient preference.

What is Patient Leakage?

Patient leakage denotes the process of patients seeking out or being referred out of the network by healthcare providers. Accordingly, patient leakage is sometimes known as network leakage or referral leakage.

Let’s go over some definitions first.


In-network refers to care within a network of doctors, hospitals, and other health providers that an insurance company has contracted with. Patients seeking care within their network are seeing only those providers that their specific insurance company has agreed to can be seen under the insurance terms. In-network care is cheaper due to discounted rates that an insurance company has negotiated ahead of time with the various health networks.

Most insurance companies contract with managed care consortiums such as health maintenance organizations (HMOs) or preferred provider organizations (PPOs).


Out-of-network refers to patients looking for or being sent for care outside of their current health network. This means that they seek care outside of the network of providers that their insurance has arranged for. As mentioned above, patients seeking care or being referred out of network is the main reason for patient leakage.

Most health care organizations don’t realize the amount of revenue that is leaking out.

patient referral leakage

Below is an example of a large multi-state health system called Dignity Health. This graphic shows only a small subset of money that they are leaking out to competitors in the state of California. Extrapolating from this information, we can predict that most health systems are losing on average anywhere from $200 to $500M per year to competitors.

leakage rates


A solution like referralMD’s referral management solution can help save a health system millions.

Health Maintenance Organizations (HMOs)icon_Medicare_HMO

HMOs, give you access to doctors, hospitals, and care centers within a certain health network. These providers in-network are held to certain quality standards and contracted to provide care at lower rates to those enrolled in their plans. However, HMOs only allow for care to be covered by providers within the network. This is not true for other managed care entities.

Preferred Provider Organizations (PPOs)icon_Medicare_PPO

The other big type of managed care organization is the PPO. PPOs are very similar to HMOs in that they provide discounted rates to providers within their network. However, there is a lot more flexibility under a PPO plan. There are fewer restrictions on seeing providers that are not in your network.

Screen Shot 2016-06-06 at 10.05.40 AM Source

Here is another great resource further outlining the specific differences between HMOs and PPOs.


How Does Patient Leakage Happen?

Sometimes patient leakage is unavoidable. For example, when patients require certain care or treatment unavailable within their network, a referring provider must accommodate the patient’s needs.

However, there are occasions where in-network providers may refer patients to out-of-network providers on purpose.

1. The reputation of the Provider

Sometimes, a provider will refer their patients out-of-network to see another provider who is more reputable in a certain field, specialty, or procedure. This could be due to a current health network not employing a reputable specialist or employing someone who is not as experienced or successful. In the end, a provider is responsible for their patient’s health and well-being. Therefore, ensuring that a patient gets the best treatment possible trumps any in-network loyalties.

mghThat being said, most large health networks employ some of the most successful and well-renowned health providers. For example, Massachusetts General Hospital (MGH) in Boston, MA, has incredible brand recognition because their physicians are some of the nation’s most recognized, highly rated, well-published, and experienced doctors. This is a prime example of how patient leakage occurs. Many patients having elective procedures or surgeries will tend to go out-of-network to large academic hospitals, such as MGH (affiliated with Harvard University School of Medicine), due to their facilities and physicians’ stellar reputation.

2. Lack of Knowledge or Insight

Providers in a community that has just joined a health system do not yet know about the specialists in their network. This could cause some confusion when it comes time to refer a patient somewhere. If a system doesn’t do a good job of having specialists laid out or making it easy for providers to refer within a network, there is a much higher chance of patient leakage.

3. Patient’s ChoiceAt least they're talking.

When certain care is not available within a network or a patient is thinking of going out of network, it is up to the provider to listen to the patient’s needs and recommend the next best course of treatment. Patients tend to take the provider’s judgment into their final decisions, but ultimately, the choice is up to the patient. This is why certain amounts of patient leakage will always exist.


Why Is Referral Leakage Bad?

Missed Revenue and Reimbursement Opportunities


The main problem with patient leakage is the missed revenue opportunities for health systems. These organizations miss out on reimbursement for medical services that are provided elsewhere. This is especially important in those systems that adopt value-based care or payment models, such as accountable care organizations (discussed further below). When patient leakage does occur, these health networks lose the ability to manage patient care and cost, effectively altering reimbursement structures.

Lose Chance to Establish Relationships with Referring Providers and Patients

Another problem with patient leakage is that providers lose out on building relationships with referring providers and patients. Many health systems have spent resources building clinical alignment through quality-based care models and uniform EHR (electronic health records) software. Unfortunately, when patients go out of the system, providers lose the ability to coordinate care, which is key to building relationships among referral networks.

Also, when patients leave a network, they are more likely to choose to do so again for other medical care. They may even choose to change their insurance plan and leave a health system entirely. This is not as likely if the provider can establish a strong relationship with their patients and persuade them to stay within the network for their care. A provider that can do this is also more likely to be respected within the system and be sent referrals in turn.


Lack of Coordinated, Efficient Careicon-team-care

As mentioned above, patient leakage is particularly troublesome for organizations that have established value-based care models. Once a patient leaves a network at any point of their treatment or care, they are no longer subject to the efficient, data-driven care associated with that health system. It becomes much harder to coordinate care amongst that patient’s providers, whether it be a difference in EHR software or an unfamiliarity between them.

What healthcare providers does patient leakage affect?

1. Large Health Networks/Systemshealthcare-lp-hospital-icon-d

Health networks and systems are very prone to patient leakage. As we discussed above, HMOs and PPOs offer insurance plans that require patients to see certain providers only. When a patient is sent or seeks care outside of that health network, that system loses out on reimbursement and revenue opportunities.

2. Accountable Care Organizations (ACOs)icons-Providers

ACOs are healthcare entities composed of doctors, hospitals, and other health providers committed to payment and care delivery models focused on improved quality and lowered costs.

Patient leakage is a huge barrier to ACOs in accomplishing their goals. This is because once a patient leaves the ACO network, they are effectively obtaining un-managed care. Health providers outside of the ACO network do not adhere to the same quality or cost standards. Indeed, it becomes a huge challenge to coordinate care among the ACO and the out-of-network provider. Additionally, the ACO loses out on the revenue that offering those medical services would have provided.

3. Small Healthcare Providers provider-icon

Small health providers are also affected by patient leakage. Most private providers have the freedom to refer patients to whomever they wish. Well-established providers within a community tend to refer patients based on personal relationships and historical precedent. Newer providers may refer to other providers based on location, patient reviews, advice from colleagues, etc.

Recently, many practices and groups are being purchased or aligned with larger health networks. These networks hope to exert their influence within smaller communities by contracting providers to refer patients to their regional facilities for all medical care. This has largely been successful, yet sometimes patient leakage still occurs due to many of the reasons detailed above.

4. Telemedicine Providersimgres

A relatively new development has been patient leakage to on-demand telehealth providers. Many new telemedicine applications offer e-consults, at-home doctor visits, and online prescription deliveries, to name a few. These innovative companies are siphoning patients from traditional institutions by offering previously unknown value in the healthcare industry. This patient leakage is sure to continue in the future as more telehealth providers emerge with services making it easier and cheaper for prospective patients to receive medical care.

5. Insurance Companiesicon_companies

Last but not least, insurance companies are also affected by patient leakage. Many of these companies agree to discounted rates with certain healthcare providers in their plans. They then offer these plans to the public with the expectation that they will use the aforementioned organizations and providers for their healthcare needs. This is not always the case, and patients do end up seeking care out-of-network for one reason or another. Unfortunately, these insurance companies are left to pay much higher rates to the out-of-network providers than they would normally if their patients had seen providers in-network.


How to Combat Patient Leakage?

Organizations can combat patient leakage by ensuring that they employ the most respected, experienced, and well-regarded providers that they can find. This should help patients who choose to voluntarily go out of network for care provided within their current health system.

Another excellent way to combat patient leakage is to enhance the patient experience. There are a couple of tips that can help your system accomplish this:

  • Make sure that there is clear communication between physicians and patients.


Having clear communication between providers and their patients is key to creating a positive patient experience and engagement. For example, approving a standardized EHR software across the continuum of care allows for convenient and direct access to a patient’s medical records for all providers within the network. This lessens the providers’ burden and eases the patient’s responsibility of having to reiterate the same information multiple times.

Also, a health system can decide to give patients control of their health by implementing e-consults and other software that allow patients to schedule their appointments, talk to providers online, order prescriptions, etc.

  • Be transparent in all aspects of care.

  • icon-home-How-much-will-my-new-health-insurance-costPricing
    • It is important to have prices and pricing structures available to patients. In this day and age, patients are taking more control over their healthcare and their healthcare costs. People are “shopping” for their healthcare online and looking at cost metrics when making their decisions.
    • Systems should provide upfront estimates of costs and detailed end-of-care financial statements.
  • Qualityicon-home-Why-do-I-need-health-insurance
    • The other component of transparent care is quality. Health networks need to make their quality
      metrics readily available. This includes patient outcomes, patient satisfaction scores, physician reviews, etc. 
    • All Medicare and Medicaid data is already made public. Systems should have this data easily accessible for all patients and providers within their network.
  • icon-home-What-will-my-new-health-insurance-plan-coverAccess
    • Ease of use and timely access are crucial aspects of the patient experience. Within a health system, a patient must receive all medical care easily and on time.
    • Having large waiting times for appointments or procedures within a network is a surefire way to get patients to go out-of-network for their care.

Before patient leakage can be addressed, it needs to be visualized in healthcare reporting CRM.

Why is it happening?

Where are patients going?

These questions can only be answered through the tracking of provider referrals. Organizations can only start to accept and manage patient leakage when they can see it with their own eyes.

Here at ReferralMD, we offer solutions to help streamline and standardize the referral process and help manage in-network referrals and reduce patient referral leakage.

Our new competitor report feature gives you visibility into referral trends, specifically where providers in your community or competitors are referring their patients or receiving them from.  Utilizing this data set will help health systems grow the referral volume that is normally lost.

How To Take Charge Of Your Patient Referral Leakage

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