Managed care plans are designed to provide plan members access to the care they need but at the same time they also need to control health care costs. This is accomplished in part by making sure that some front end controls are in place. One such control is the Referral.

Some types of managed care plans do not allow a patient to see any provider they choose to (unless they are willing to pay for the visit in full) without a referral on file. 

Let’s say that a plan member has noticed that her hearing has started to decline in her right ear. She decides to see a doctor and discovers that there is an Ear, Nose and Throat doctor located in the medical center just down the street.

If she has an HMO plan, she may not have access to this ENT doctor, ever, unless she is granted a referral. Without a valid referral she must be willing to pay for the visit, and all subsequent follow up care, in full with no chance of being reimbursed by her health plan.

If she has a PPO she could have some coverage as an out of network provider.


What is a referral?

Depending on the rules of the managed care plan, some patients that are in need of specialty care, whether it be care that is not available in the current network or simply a wish to see that new doctor down the street, must first obtain written permission from their Primary Care Physician.

This permission slip is called a referral  

A referral provides written authorization for patients to obtain services or specialty care that either, cannot be provided by the Primary Care Physician or cannot be provided in network. Seeking a referral based on a desire to see any doctor of their choice is usually not approved. 

The PCP’s office is responsible for determining, in advance, if the request is warranted; based on medical necessity. If approved, the PCP will provide a copy for the patient to take with them to their initial visit with the out-of-network provider or specialist.

So how does a referral control health care cost?

Providers that enroll with managed care plans agree to accept the allowed amount that the health carrier deems appropriate and not balance bill the patient for the difference. Since the health carrier is not going to pay the claim at the amount the provider would normally bill, which is usually much higher than the allowed amount, the plan is saving money.

Primary care doctors usually refer patients only to contracted providers, this way the provider can expect to be paid at the allowed amount and the health carrier is saving money.

Primary Care doctors are tasked with making sure that the level of care fits the condition. Meaning you will not be referred to a surgeon with a complaint of arm pain. The Primary Care doctor will manage your care with conservative treatment first i.e. x-rays, splints, prescriptions, etc., and if no improvement has been made you will move to the next level of care. Monitoring and directing the level of care needed based on condition, saves money. 

In a nutshell

Under some plans a Referral is mandatory.

Failure to obtain a needed referral, prior to the visit, could result in nonpayment of the claim.

Back to Chapter Three

Next to Eligibility