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Leakage Rather than Loyalty: Only in Healthcare


Author: Michael Hein, MD

Leakage is a bad thing everywhere.

In health care, we have created this term to describe patients who seek care from physicians “out-of-network.” They are seen someplace other than within the company that employs the referring physician or the defined network of providers in the health insurance plan. Leakage could also mean that the provider has joined an organization that financially rewards them for delivering measurably high quality and low-cost health care, and the patient has been sent to or sought care outside of that organization. The primary care provider is usually held accountable for the leak.

There is no such thing as ‘leakage’ in other service industries. There is loyalty, not leakage. Loyalty demands a customer-centric perspective. The company is to blame for disloyalty, not the customer.

“If you want to build customer loyalty, start by making a decision: Are you willing to put the customer at the center of everything you do: at the center of your company or department, your daily routines, the way you hire…”

Not in health care. Instead, we show our true colors by blaming the customer and their advocate the primary care provider. Leakage implies that we are entitled to ‘our’ patients. Metaphorically, the system is presumed to be a good bucket; providers and patients are water misbehaving.

Leaks must be stopped, of course. Since the bucket is fine, the problem must be with the water. So we create a referral policy, often tap-dancing around the legality of requiring or forcing in-network referrals. We blame providers for the leaks, police for misbehavior, and then impose penalties on the violators.

But the bucket is not fine. It is easier to blame the physician than to find and fix the underlying reasons for disloyalty. It’s more difficult to build loyalty than it is to punish leakage. If you’re interested in building loyalty, consider these four things:

Be a magnet, not a bucket

Referrals are earned by, not owed to, a health care system. The best networks are not buckets; they are magnets. They have fine-tuned their processes, people, providers, communication, reputation, and brand so that they the very best at being referral receivers. They have earned loyalty and thereby minimized leakage.

Referrals are relational, not transactional

Referrals are fundamentally about people, their relationships, and their experiential histories related to past exchanges. Referrals are not transactional. The best networks have been intentional about building relationships between providers, and then delivering on service, responsiveness, and collegiality. Over time, this healthy long-term strategy has grown their favorable brand equity. It’s a more difficult and slower path, but a much better one to take.

Referrals are a process; deploy process improvement

Referrals are also a process. There are drivers for referrals. Some are flawed and generate unwanted or unnecessary referrals (diagnose with a driver diagram). Referrals rely upon a stepwise process. Sometimes those steps are unreliable, introducing delays or missed appointments (use process mapping). The referral process unfolds over time with inherent inefficiencies resulting in between step queues (use a time study) or non-value added steps (create a process improvement culture). There are multiple people who touch the process, so pull them in to help fix it. There are definitive desired outcomes (outcome metrics) and clearly defined steps (process metrics) that can be selected and monitored. The entire process and each step has degrees of reliability that can be calculated, measured, reported and monitored. Finally, it’s about the patient receiving the care they need, and the referring provider the help they want, so the patient and provider experience matters. Measure that too.

Referral decisions are complex

Imposing penalties on primary providers for leakage implies a blame-based culture with an overly simplistic, unidimensional understanding of the referral process. The source of and purpose for referrals is complex. Providers contribute to the referral decision, but are rarely the sole determinant, and often are not the most influential decision-makers. Here are some key reasons:

  • Patients are not lemmings. They often do not show up at the provider they were referred to, and they often self-refer out of network. Referral appointments are canceled, sometimes repeatedly, and then patients or their family self-refer elsewhere.
  • Patients have choices. They may want to see a specific individual or they may want to go to a specific place. There are providers they will refuse to see. If the patient lives where specialty care is limited, they will be referred elsewhere, possibly out of network based on convenience rather than affiliation. Family and friends, and increasingly the internet, influence patient decisions. Sometimes the patient wants a referral to a community or health system near their family, in a different part of the country. When building loyalty, acknowledging the complexity is the best starting place.
  • Providers refer for many reasons. The patient may not trust the referring physician’s diagnosis. The provider is too busy to spend the time necessary for figure out what might be wrong. The provider has already done all that they know to do. The provider is uncertain about their diagnosis. A patient family member is insisting on a second opinion. The overall need for the provider is help. Understanding and meeting the needs of the primary care provider for referrals, and there are many, will help systems create the ‘magnetism’ necessary to stop leakage.

Referral management is an important component of assuming the financial risk for a population of patients. There is a justified focus on keeping patients within the defined network. Building loyalty will draw providers and patients to the network, focus the organization on continuously improving referral management, and over time grow market share while decreasing out of network referrals. Stopping leakage will drive a wedge between the provider and the network, undermine brand equity, and distract the organization from focusing on the underlying cause of leakage.

Advice: Fix the bucket, not the water.

Photo: Mandy Klein, Bockhorn, Deutschland, 4/15/2007 on Pixabay, http://pixabay.com/en/child-play-water-drip-bucket-392971/


  1. This is a brilliant assessment of one of the biggest problems in healthcare – the insularity and sometimes arrogance that prevents us from looking outside our industry to see how we can do things better. It is, for example, unfortunate that organizations blazing the trail on cultural excellence are in high tech and not in healthcare. Thanks for sharing this.

    • Joe,

      Thank you for sharing your thoughts. I agree that in general we in healthcare think we’re a “special case.” In most ways, we are not. We have much to learn from our non-healthcare colleagues. Not the least of which is what it really means to be customer focused.

  2. Pingback: Network Leakage: “Fixing the Bucket” | EagleDream Health

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