Do you know the differences between having an open versus closed referral network? This is why an open post-acute network is vital. In a recent survey, 95 percent of executives said this is a key area of focus over the next three years.

Closed Referral Networks vs. Open Referral Networks

As these referral networks are created, some health systems are limiting their potential for effective integration with post-acute providers by creating closed referral networks reliant on only one provider or a handful. An open referral network, to which any post-acute provider can gain entrance by demonstrating that they meet hospital standards, is better for hospitals and better for patients.

Closed Referral Network

Historically, patient referrals to post-acute care were left to hospital discharge planners, whose recommendations often were based on long-standing relationships with post-acute care facilities. However, when the Centers for Medicare and Medicaid Services began reducing reimbursements to hospitals with too many readmissions, hospitals began setting up networks, using performance data to determine which post-acute providers were most clinically successful, and most desirable as a partner.

In the interest of maximizing efficiency, many hospitals have created closed networks with a single provider or just a few. And sometimes, having an arrangement with a single provider can be financially beneficial to a hospital or health system, if, for example, the hospital and the post-acute care provider have a bundled payment agreement in which they share in savings from coordinating care. In addition, closed networks are relatively easy to manage – you know who your providers are and you refer your patients to them.

While the desire to create a closed network is understandable, that approach effectively exchanges short-term efficiency – and possible financial gain — for the possibility of maintaining effectiveness over the long run. It also does not insure the highest quality of care, and offers reduced choice for consumers.

Open Referral Networks

A stronger approach is to go with an open network. That means that any post-acute provider can gain inclusion in the network if they demonstrate that they meet hospital standards. One standard might be that the provider have a strong medical oversight program in which the medical director reviews patterns in prescription data, as well as other patterns of care, and orders changes if needed. An effective medical oversight program also reviews each unplanned discharge to a hospital, analyzing the reason it occurred, and ordering changes in care procedures if necessary.

Open networks create an incentive for non-network post-acute care providers to continuously improve their performance in hopes of being included in a hospital referral network. It also provides an incentive for existing network members to keep upping their game so they can maintain their membership in the network.

While an open network may require a greater investment of hospital resources – either in-house or through a contractor — to manage, that investment can pay off in the form of fewer readmissions because post-acute care providers will be constantly competing to do a better job.

To learn more about the our post-acute care services, please contact Andrew McDonald 615-309-2474 or

LBMC offers a Guide to Post-Acute Care as a free download.