The market for medical referrals

The medical profession finds (explicit) advertising repugnant, but specialists depend upon referrals, so there's a marketing industry at work: The Surprising Secret Behind Doctor Referrals

"Most patients assume that if they've got an ailment their family doctor can't fix, they'll be referred to a specialist who's, well, special for reasons they expect: ... So it may come as a surprise that the nattily dressed guy or gal sitting two chairs down in the waiting room, the one who brought that jumbo tin of caramel popcorn for the front-desk staff, may play a role in determining the next surgeon they see.


"With specialists' operating margins having fallen in the past decade and health care reforms putting increasing pressure on their bottom line, more are turning to this burgeoning group of marketing pros to open new-patient pipelines. For anywhere from $3,000 to $10,000 a month, these so-called referral-development consultants will provide marketing plans and dispatch a "physician liaison" to pound the pavement and praise the doctors' prowess. The pitches can focus as much on waiting-room decor as on clinical credentials, but in the end, marketers say, they're sparing doctors the roadside-billboard approach to bringing in patients, and reshaping a long-ignored, but important component of doctoring. "I tell doctors how to sell their business without looking needy, cheesy, greedy or sleazy," says Stewart Gandolf, founding partner of Healthcare Success Strategies, a Southern California medical marketing firm, which says it helped double referrals for one Midwest ophthalmologist in a six-month period.

"But while no one can fault a doctor for trying to drum up business in tough times, critics say that medicine and marketing can make for strange bedfellows. To be sure, accepting payment for a referral is illegal and patient advocates say that no doctor will intentionally make a bad referral....[But] a steady stream of thank-you gifts might keep a specialist top-of-mind. (Even years later, the Mobile, Ala., dental community still raves about one oral surgeon's gift basket: ribs and bottles of Jack Daniels.)

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"The American Medical Association's Code of Medical Ethics requires doctors to provide patients with "relevant information" about potential procedures, but has no guidelines on what to tell them about the specialist to whom they're being sent. "It goes against the basic trust that is the centerpiece of the physician patient relationship," says Peter Clark, director of the Institute of Catholic Bioethics 

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"If doctors are just getting in on the referral game, hospitals have been at it for some time -- and on a larger scale. Whereas patients see a hospital only as a place for serious tests and procedures, administrators see a hospital also as a collection of business areas (radiology, ORs, cancer centers) with specific revenue targets -- goals most readily reached when providers send along more patients. When hospitals buy physician practices and become their bosses, federal law prevents them from tying doctors' compensation to in-house referrals. But they are allowed to incentivize them by offering bonuses based on the overall performance of the hospital. "Go into a hospital board room, and 99 percent of the time they're talking about referrals and physician relations," says Timothy Crowley, a former managing director at Leerink Swann, a health care investment bank.

"Indeed, at a recent Hospital and Physician Relations Summit in Scottsdale, Ariz., hospital administrators and doctors gathered for three days to collectively fret about everything from "physician alignment" to "referral leakage." In one session, a Pennsylvania hospital official identifies one type of leak -- proactive patients doing their own doctor research -- as a growing challenge. Not that patients can't be corralled. Many hospitals now employ staffers called "navigators," who help recovering patients with paperwork and follow-up appointments. Part of their job, though, is insuring that the patients' next specialist has the same hospital logo on his or her lab coat.