Can You Trust Your Physician’s Referral Process?

Referrals are big business for insurers and employers, and that can hurt patients.

The current health care model requires a patient to first present to their primary care physician with any medical issue. If the primary care physician believes additional diagnostic testing or consultation/treatment with a specialized physician is required, the primary care physician will then refer the patient for the test or to the specialist. Because patients have become accustomed to this process, they trust their primary care doctor to refer them for the appropriate testing or to the specialist who is the best fit.

Sadly, like mostly everything else, the medical referral process is a business. In today’s revenue-fueled health industry, the patient’s needs often take a back seat to profits. A whistle-blower lawsuit filed by one physician against Massachusetts-based Steward Health Care illustrates what can happen behind the scenes, outside of the patient-physician relationship.

The doctor, a urologist, alleged he and other physicians employed by Steward Health Care were put under “immense personal and financial pressure” to only refer patients to Steward hospitals and specialists. When they did refer outside Steward’s own facility and provider network, the doctor reported Steward representatives would call patients and pressure them directly, even to the point of cancelling appointments the physician had made for his patients if those appointments were with providers at competing hospitals. His claims were backed up by current and former Steward doctors.

For not complying with Steward’s referral policies, the doctor claimed he was disciplined for minor infractions and his privileges to operate at a Steward hospital were revoked. The attorney for Steward subsequently told a judge that such discouraging policies were common practice. For the record, the judge responded that was akin to a child telling a parent, “[a]ll the other kids do it.”

Steward is far from alone. There’s a term healthcare companies use for outside referrals – “leakage.” The implication is clear – a patient’s referral is viewed as a revenue source, and an outside referral then becomes lost or “leaked” income. Consequently, hospitals and medical groups employ a range of tactics, including positive and negative reinforcement, to keep referrals in-house. According to a Wall Street Journal article, “[p]atients are often in the dark about why their doctors referred them to a particular physician or facility. Increasingly, those calls are being driven by pressure to keep business with a hospital system, even if an outside referral might benefit the patient.…”

The following are just a few of the consequences of such practices:

• Patients may not be referred to the best provider for them. While an in-house referral may neatly coincide with a “best” option in business terms, that will not always translate to the best medical care for the patient.

• Patients have less information and may receive substandard care. As The Wall Street Journal outlined in another article, “[d]ominant hospital systems use an array of secret contract terms to protect their turf and block efforts to curb health-care costs. …hospitals can demand insurers include them in every plan…discourage use of less expensive rivals…mask prices from consumers…(and) add extra fees and block efforts to exclude health-care providers based on quality or cost.”

• With less competition, patients often pay more. Hospital mergers and acquisitions have resulted in fewer players, with an estimated 77% of Americans living in metropolitan areas with hospital markets considered “highly concentrated” in market terms (dominated by few competitors). When competition is squelched, information is withheld, profit drives the referral process, and patients pay the ultimate price.

It is important patients understand that more may be driving their referral than a straightforward consideration of their best interests. Asking why your provider is referring you to a particular specialist is a good first step in ensuring your referral is the best one for you. If you or a loved one has suffered as a result of a bad referral, please contact us to talk about your options.