Patient Leakage Costing Hospitals More Than $2.5 Billion Annually

By Palak Shah, PT, founder of Luna

Recent research indicates that provider organizations are leaving more than $2.5 billion on the table due to patient leakage. 

More than half of patients referred to health system physical therapy clinics end up seeking care at third-party clinics or pursuing other options, according to The Hidden Problem Costing Health Systems Millions: Rehab Referral Leakage.

The report analyzed commercial claims data from 3.4 million patients and found that most health systems have leakage rates of more than 50%, and in some cases, nearly 80% of an organization’s referrals will go outside of the system. Each leaked patient represents several thousand dollars of lost revenue, and some providers have stated that leakage costs at least 10% of their annual revenues.

A major contributor to those rehabilitation leakage trends is proximity to treatment, as patients are unwilling to travel more than a few miles to an affiliated clinic if they can receive treatment somewhere closer to them.

Beyond the financial impact, patient leakage also disrupts the clinical process. Directives from a doctor can be interrupted if a patient goes outside the organization to continue care, at which point standardization can become difficult or nearly impossible.

When a patient goes to the hospital, there’s a certain pattern that clinicians and healthcare leaders want them to follow.

Patients should receive quality treatment, get discharged, and be able to continue on their care journeys in a straightforward, seamless way. Some patients may require short-term or long-term physical therapy following a procedure but shouldn’t fall through the cracks and face additional issues down the line due to leakage. 

Still, provider organizations are finding themselves increasingly vulnerable to the financial perils associated with patient leakage.

Every year, healthcare organizations operating on already compressed margins continue to hemorrhage patients and revenue due to unresolved leakage issues. Patient leakage stems from several different factors across the broader healthcare industry, with rehabilitation referrals serving as the largest driver of leakage in health systems. 

Patient leakage is not an issue unique to only one sector of the industry; it afflicts all types of provider organizations, including some of the largest and most efficient hospitals and health systems in the nation. Every organization has room for improvement and the ability to capture significant upside from physical therapy, which is typically regarded as a low- to mid-margin service line.

In the face of these lingering challenges, provider executives may ask themselves several questions about what can be done about patient leakage and how to get on the right track. 

The answer is twofold: embrace technology and local solutions to recapture patients going to third-party physical therapy clinics.

Over the past 18 months, healthcare organizations have continued to care for their patients despite the major complications introduced by the COVID-19 pandemic. 

In the face of the temporary cancellation of elective procedures during the spring of 2020, hospitals, health systems, and physician practices adopted telemedicine as a critical asset to deliver care and utilize modern technological innovations to meet their patients where they are. Ultimately, the value of virtual care services delivered to patients in the comfort of their own homes cannot be understated.

Physical therapy is not always convenient for patients and oftentimes, referrals will fall through the cracks and contribute to patient leakage. Distance from care sites can increase the likelihood of leakage, so many providers are exploring options to bring physical therapy closer to the patient. 

Large health systems have the benefit of sizable resources to fund these efforts, but also have a wide-ranging geographic reach, so another solution for leakage is to embrace the role of local physical therapists. They are eager to help patients recover in the most effective way possible, and patients want to be assured that their care is in line with the hospital treatment they initially received.  

Additionally, while some appointments may require therapy-specific equipment, most physical therapy can be administered in the home, which reduces another key barrier to delivering care. Patients get the care to come to them, and physical therapists keep them from leaving the system.

That is a dynamic that works to the advantage of both providers and patients as leaders examine methods to curbing leakage issues.

Patients expect to receive the best available high-quality care, which can take the form of home-based physical therapy.  

Executives at hospitals and health systems know that every dollar earned, and every patient kept, is necessary to maintaining the operational success of the enterprise. So, if there’s a new way to engage patients and shore up a costly vulnerability, it’s in the organization’s best interest from a business perspective to pursue that option.

Recognizing the flaws in physical therapy referrals, utilizing local and virtual solutions, and improving clinical standardization, as well as the bottom line, are possible for forward-thinking providers.