Addressing Network Leakage in the Value-Based World

By Kashish Goyal, MBA, Director of Analytics, SpectraMedix

Healthcare Executives know that network leakage, also known as patient or patient referral leakage, is a huge and ongoing issue. Value-based arrangements are accelerating their concern. In a recent study, “80 percent of healthcare executives say addressing patient leakage has become more important as value-based payments have increased[i].” Risk-based arrangements and network leakage are at odds, as value-based programs rely on continuity across care settings and providers—it’s a key strategy to drive better outcomes with a lower cost of care. Network leakage threatens the financial health and stability of risk-bearing entities (hospital systems, ACOs, IPAs, etc.).

While healthcare executives worry about network leakage, this same study noted that only “31 percent of health systems have the right tools in place to accomplish their goals.” Basically, many healthcare systems participating in value-based care have a leak in their house but no plumber to help them stop the steady flow of patients headed outside their sphere of care network. Network leakage is a real threat to the success of risk-based arrangements.

Getting the Strategy Right

Network leakage is derived from and dependent on some key factors like:

  • Network composition
  • Provider education & enablement
  • Technology infrastructure & systems integration

Leakage leads into several other concepts like network efficiency, specialist referral efficiency, narrow networks, etc. The result of all this is that entities are often overwhelmed by related initiatives and are unable to effectively strategize.

Key considerations for your strategy:

  • Understand your network topography – identify your network insufficiencies. Do you have robust Primary Care Provider coverage? How about cardiologists or oncologists?
  • Define leakage – Leakage needs a definition that is network-specific. Oftentimes, leakage is calculated with all services aggregated together which leads to inflated estimates of leakage
  • Define expectations – your network can only provide services based on its composition. It is important to make this distinction and define expectations correctly. Several studies have indicated that managing PCP-related services leakage alone can lead to significant gains in overall network leakage
  • Identify key available levers to reduce leakage – there are tactics ranging from provider education and enablement, refining networks, technology, and data solutions that all require different investments and commitment and have different sets of associated challenges

As an example, below are three actions for provider enablement and education that can help reduce network leakage, keep patients in your care network, and allow you to thrive in value-based arrangements.

  1. Educate Your Providers
  2. Arm Your Providers
  3. Actively Monitor and Manage Leakage Events

Educate Your Providers

Value-based care has a business component to it. Educate providers on the financial impact of referring patients outside the network. Your care network, under a value-based arrangement, is incentivized to provide outstanding care at the lowest possible cost. There is a personal financial impact for providers who choose to refer outside the network even when trained and competent providers reside in-network. Providers often just don’t realize the implications of a simple out-of-network referral.

I recommend you consistently and proactively educate your providers on the importance of in-network referrals. Remind them of the capable colleagues who comprise your care network. Show them that in-network referrals mean better care and better financial performance.

Arm Your Providers

In some cases, network leakage is unavoidable. If there is a care treatment that requires expertise not resident within your care network, the needs of the patient must take precedent. However, in most cases, your network has reputable providers for most care scenarios. Perhaps those new providers just don’t know the specialists within your network sphere. Your providers need to have a ready list of other in-network providers to whom they can refer patients across different clinical disciplines. You need to arm them so they can easily and confidently make those referrals.

Don’t assume your providers know your network referral list. Don’t expect them to jump through hoops to ensure that the referrals are in-network choices. Arm them with ways to easily access this information and do it within their workflow. You’ll be surprised at the impact this will have on referral adherence.

Actively Monitor and Manage Leakage Events

Successful value-based arrangements have a strong in-network referral pattern and reduced leakage activity. Even with educated and armed providers, having vision and insight into leakage issues and referral patterns is vital for sustained value-based payment success. Not every provider will follow the script. Not every provider will integrate this into their workflow. Not every provider will be on board. As previously noted, one-offs may be necessary. However, you want to identify patterns of leakage early and ensure the leak doesn’t turn into a flood.

Make sure you have the analytics and processes in place to actively monitor and manage leakage events. Set organizational thresholds on acceptable leakage percentages. Identify and coach providers that consistently refer patients out of network. In some cases, consider pruning those providers that refuse to operate within your boundaries. Effectively managing this is impossible without the visibility that the right analytics provide and the processes that make it actionable.

Hope for the Future

The shift to value-based payments is here. It will continue to gain momentum. Network leakage is a solvable challenge. With the right provider education, information, and management, in-network referrals will increase and the rate of network leakage will decline. The entire value-based construct for optimized care will work as intended. In this new world risk-bearing entities, their provider network, and patients, all benefit.


Tags: Value Based, Health Plans

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