Changes in Patient Referrals

April 15, 2016

With the drive to consolidate healthcare delivery, physicians are more often required to refer patients to in-network specialists.

In the mid 90s, I worked to develop a special network of Connecticut physicians who would participate in risk contracts with insurers, while maintaining their independence. The doctors themselves determined who would be invited into the network so that they could have control in the process, working with those physicians they knew were "good."

We believed that if we created a limited network of participating physicians who all ascribed to the same philosophy, we could control costs while also delivering high quality services. Back then, without vertical integration and with information limited to encounter data (much of which was after the fact and delayed by the insurer), the concept was 20 years ahead of today's ACOs. Most importantly, it was based on physician decision making. They had control in the process.

Today, as physicians are moving further away from independence and more and more toward integrated networks and delivery systems, the decision making is also moving further away from those who deliver care toward those who manage care.

Some ACOs have moved the referral process from the hands of the physician to a centralized office, often part of a hospital system or owned system. The goal is to keep the services in a controllable system, but it is also, in large part, a way to capture the care within a system. But once control over the referral process is taken away from the individual physicians, the traditional forces that govern referrals are taken away as well.

To some extent, there have always been limits to where physicians could refer. Physicians were limited by the patient's insurance plan, for example, but they still held the decision-making power. They were motivated to refer a patient to a specific doctor because it would benefit the patient, meet the satisfaction of the patient, and meet their needs. While collegial relationships among physicians were certainly a factor, ultimately, the referral was based on what would serve the patient's needs best. But, now, as ACOs and delivery systems get larger and larger, the economic motivation inevitably takes over the decision making of a doctor. Physicians may be compelled economically to refer from within the network, even if they believe another health provider would be the best place to refer the patient.

As we continue to depersonalize medicine, this change must be closely monitored. Given that the ability to measure costs exists but the measurement of quality, outcome, and performance are largely yet to be developed, it will be cost and competition that drives the referral process.

The hope, of course, is that quality measurement will be developed in physician services as they have been in hospital services, and that economic incentive will align with good outcomes for patients.

Twenty years ago in Connecticut, we learned that services within a limited network could indeed control physician cost, but that the savings were not substantive. However, this is the approach that government and insurers are currently promoting. My belief is that there may be some real hope to save money, but unfortunately there is a "smoke and mirrors" aspect to this change which is designed to reduce costs in a way that is akin to the gaming industry. This new model means there will be some winners and some losers, with the house always winning. And while this approach is better than just reducing fees overall, it eliminates the benefits that come from the referring physician's knowledge and experience.