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Importance of Physician Referral Network in Healthcare

How does a physician referral network work?

Referral networks are a powerful tool that lets healthcare practitioners keep a steady track of patient referrals throughout the process of the care continuum. The primary objective is to enhance and streamline communication among all the physicians, healthcare providers, and specialists involved in a patient’s care.

The ultimate aim of a referral network is to increase the quality of treatment and care provided to patients through transparency, decrease any operational inefficiencies, and improve the existing process for both large and small healthcare organizations. 

Why it is important to have a Referral Management Solution 

Healthcare in our country is constantly under scrutiny due to its extremely high costs and several other inefficiencies. Referral management software was designed to create effective solutions for these issues.  


Statistics that show the dire need for a referral system

  • About 46% of the faxed referrals do not end up with a scheduled appointment 
  • Almost 55% of the specialist visit that happens is not necessary
  • There is an annual leaked revenue of $900k per physician
  • 50% of the physicians who refer do not keep track if their patients visit the specialist or not

A referral management solution will help in addressing some of the rampant problems discussed above. 


Listed below are some of the benefits of a referral network. 

  • Prevents revenue leakage 
  • Reduces lead times 
  • Improves completion rates 
  • Enhances utilization 
  • Improves network behavior by identifying competitors’ referral pattern 
  • Accelerates provider/health system communication 
  • Enhances patient access 
  • More patient time 


The healthcare industry is constantly under transformation and is slowly and swiftly evolving from being fee-based to more of a performance-based setup. When it comes to revenue management, referring a patient has its limitations. It has been observed that the revenue inflow which comes from a referral is for the specialist. When a primary care provider, refers a patient to a specialist as it is out of his practice, the patient is no longer under their control. There are chances that the same patient can be referred further to another rival hospital as well or another specialist. Even if a doctor refers a patient to a particular specialist, they can decide to go to another specialist of their choice, whilst the provider will not be aware of this. This means that the provider is likely to face a future loss of revenue. 


Network Effects in the Healthcare Industry

The three main dimensions of the network effect that are ready to transform the healthcare industry are:

  • Administrative automation 
  • Network knowledge 
  • Resource orchestration  


To refer or not

When a person is in need of specialist care or the patient’s health condition is beyond the range of the healthcare provider, then the patient is referred to a specialist. The important point to be noted is that sometimes referrals could go wrong as well. 

Some of the problems could be unnecessary costs or legal action. A wrong referral could lead to unwanted expenses when the specialist that was referred by the provider cannot meet the patient’s health requirement. This could delay the treatment for the patient. If by any chance, the patient’s condition deteriorates due to the delay, then that patient can file a legal case against the doctor. Having a streamlined referral network with ample transparency will help to avoid unnecessary troubles and deliver better care with efficiency.

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