Video Presentations
White Papers
Audiocasts
Leaders Guide Subscription 
Books
Articles
Newsletter Briefs
Case Studies
Physician Relations Programs Can Increase Referrals
Article by: Kriss Barlow, RN, MBA
This article originally appeared in Healthcare Financial Management. The content was updated in 2009 to reflect current market trends.
A physician relations program can enhance an organization's relationship with both staff and community physicians, leading to an increased referral base and improved physician satisfaction and productivity. A tactical plan is essential for developing such a program. In formulating its plan, the organization should examine its goals and market opportunities with respect to physicians, as well as its current approach to physician relations and the current status of its relationship with physicians. With solid background there is opportunity to use physician representatives to implement the tactical plan. Representatives may be charged with tasks such as increasing referrals to specific clinical services areas and developing relationships with physicians. The organization's financial management should establish a baseline for financial returns to provide representatives with clear targets for increasing referral volumes.
The financial viability of healthcare providers depends on the organization's ability to work effectively with physicians. Recent surveys demonstrate that a large percentage of CEO's have physician relations and recruitment as one of their top priorities. While recognized, all too often, there is a lack of clear strategy for maintaining positive working relationships with physicians and building referral volume.
Historically the accountability for physician relations has been fragmented with different people at different levels addressing physician-related issues as they arise. Such circumstances may be based on the reasonable assumption that everyone should be responsible for promoting good physician relations, but the result may be that no one actually takes on the responsibility of effectively managing the internal communication and the overall approach for relationship management with the medical staff. As a result, the healthcare organization may not adequately address the needs of physicians' and many physicians may not recognize their referral opportunities within the system.
An organization can effectively address physicians' needs, and thereby enhance referrals, by implementing a physician relations program with clearly defined roles for individuals charged with carrying out the organization's physician strategy. Such a program might entail making regular visits to physician offices to ensure that there is ongoing dialogue regarding physicians' needs and how the organization and other members of the medical staff might fulfill those needs. Or it might involve facilitating ongoing physician education or other forms of outreach. The program should be tracked for results that can reveal whether the program is cost-justified.
Developing the Tactical Plan
Implementation of the physician relations program should begin with development of a clear tactical plan that includes the program's specific goals based on quantifiable data and direct input from physicians. To develop an appropriate tactical plan, an organization should review three aspects of its current relationship with physicians:
- Goals and market opportunities with respect to physicians;
- Current physician strategy; and
- Current status of the hospital -physician relationship.
Goals and market opportunities.
The organization should evaluate its market opportunities and determine how it wishes to work with physicians. This evaluation should involve a business analysis of all contractual referral and working relationship issues. If for example, the hospital already owns physician practices, it should evaluate the volume of secondary referrals coming from the owned practices relative to the total referral base.
The market evaluation also should include a demographic assessment of which physicians are referring to which service lines and the geographic distribution of the patients being referred. For example, the hospital might find that most patients in the past year were referred by 40 physicians, whereas in the previous year, most referrals were attributable to 50 physicians. In addition, the hospital might find that the geographic distribution of patients declined to just three zip codes from four zip codes in the previous year. Such findings might indicate specific target areas in which the organization could work to improve physician relations and expand its market.
Current physician strategy.
The organization should consider how it defines its physician strategy, how it measures results, and how frequently it reviews and updates the strategy. In addition, evaluate who makes the decisions with respect to the physician strategy. Important issues to consider are whether a single individual is involved in all decisions and whether decisions are made using a formal process. If a formal process exists, it is important to define the elements of that process.
The organization also should consider whether it has clearly defined referral expectations (e.g., by physician and by clinical service line) and the degree to which all physicians have benefited equally from the physician strategy. A strategy that tends to favor specialists, for example, may inadvertently alienate primary care physicians. Or an organization's decision to open an occupational health clinic to serve an industrial park, for example, may alienate physicians whose offices are near the industrial park because the physicians could perceive the strategy as direct competition for patients.
Current status of physician relations.
Criteria need to be established and consistently applied to evaluate the organization's current relationship with physicians. Key criteria are the number of inpatient and outpatient referrals and whether physician-driven patient volumes have trended up or down over the past two years. Other criteria include the degree to which staff physicians are involved with committees, the degree to which physicians offer input regarding their concerns, and whether physicians have been offered and accepted hospital support in the past 12 months. The analysis of physician relations should examine how often physicians made requests of administration, and how those requests were handled. The analysis also should seek direct input from physicians through surveys and informal discussions. Such discussions may help reveal unsuspected factors contributing to physician dissatisfaction or changes in referral patterns.
Although some of the data obtained from the foregoing analyses may be qualitative rather than quantitative, the overall results should be telling and may underscore the need to modify the current practices or the healthcare organizations clinical focus. The data might suggest, for example, that 60 percent of the inpatient revenue is coming from just 10 percent of the medical staff, indicating a need to expand the scope of the clinical areas in which the greater profits are being realized, possibly by adding specialists to the areas, To ensure the effectiveness of the plan, specific, targeted expectations and measures must be established.
The Physician Representative
The organization will need to develop the role of physician representative to implement the specific elements of the tactical plan. A primary responsibility of physician representatives should be to position the organization's clinical offerings. For example, if the plan calls for increasing referrals to a newly constructed ambulatory care center, the physician representative might be charged with raising the awareness of primary care physicians regarding the center's ability to perform MRI/CT, mammography, and other outpatient diagnostic services, The representative should be required to document visits to potential referring primary care physicians, the message communicated, and the outcome and be accountable for tracking referrals to the ambulatory care center from these physicians.
Other functions that physician representatives can perform include helping to design and develop physician-based marketing and education materials for referring physicians and working with clinical managers to develop and coordinate public education programs that allow referring physicians to share their expertise with potential patients and their families.
Chief among a physician representative's qualifications should be skill in maintaining ongoing interpersonal relationships with physicians and the ability to facilitate physicians' use of the organization's services. A clinical background is not essential, but physician representatives should have sufficient knowledge of the organization's clinical service offerings o provide reliable information to physicians-or to know where to direct them. The most significant cost for the program is the labor cost. A typical program might include two to six representatives and a director and/or a customer service representative. Salaries average $55,000 to 60,000 and more than half now offer an incentive package of 15 to 20 percent of base pay. Many organizations also will want to purchase a contact management software package to track program results.
Tracking Financial Results
Although the financial effect of employing physician representatives can be difficult to measure, it is important to track results to evaluate the overall financial success of this strategy. A team composed of strategic planning, finance, information technology, and physician program administrators, therefore, should develop a means to forecast, trend, and evaluate financial results. Perhaps the easiest way to measure the financial benefits of a physician relations program is to track referrals to the organization. Financial results can be calculated by analyzing referrals, volume, and revenue associated with targeted clinical areas.
For example, part of an organization's tactical plan may be to increase its volume for certain service lines within an established time frame. The organization would determine the optimum contribution margin associated with each procedure as defined in the tactical plan and then give the physician representative a target number of procedures that need to be scheduled within each clinical service area to achieve the projected growth levels. The measure of the program's effectiveness is the degree to which the representatives achieve these targets. To provide physician representatives with clear targets for increasing case volume and revenue, the organization's financial managers need to establish a baseline for expected financial returns from the physician relations program using past results and realistic forecasts.
Although measurement is easier when physician representatives focus on specific clinical offerings, it also is important to assess program performance against total projected increases in both revenue and volume. If representatives are rewarded only for their ability to increase revenue from a specific service line, representatives may focus their efforts on that service line rather than represent the entire organization. Measuring both service-line and total-case volume and revenue ensures that representatives have an incentive to promote all the services based on the needs of the referring physician.
Conclusion
A physician relations program can reap significant financial benefits for an organization by strengthening the organization's ties with both staff and community physicians and increasing the organization's referral base, The relative effectiveness of a physician relations program depends on how clearly an organization defines its physician strategy and the degree to which the Organization's senior management is committed to the strategy. The CFO can play a crucial role in developing the program and ensuring its success by helping to identify the areas in which the organization has the greatest opportunity for increased referral volume.