pareto principle referralsWho’s this guy Vilfredo Pareto and what makes him a partner in my practice?

Anyone with a specialty healthcare business –one that is primarily fueled by referrals from other professional practices–should recognize the business rule named after a turn-of-the-century Italian economist.

The “Pareto Principle” is better known as “the 80-20 rule.” And, as it turns out, Vilfredo Pareto didn’t actually invent the rule that has long been attached to his name–but that’s a story for another time.

What’s important here… what’s really vital for referral dependent businesses…is the formula that predicts with a high degree of mathematical certainty, that only 20% of referring practices will refer 80% of your professionally referred patients.

We’d like to emphasize just how important this is by presenting it again another way: A referral-reliant organization could easily go out of business if a small and select group of practices stopped referring. Another name for this observation is the “vital few and trivial many.” And that’s a sobering thought, especially if you don’t know which practices are in the 80% and which are in the 20%.

The importance of the vital few.

Having worked with many specialty organizations, it is very easy for this principle to be overlooked, or the proper “care and feeding” of referring physicians to become automatic and taken for granted. Everyone’s busy… especially specialists. But there are three highly significant reasons to identify the 20 among the 80.

  1. The 80/20 rule allows you to properly prioritize your resources and put them to work where they will do the most good. When you clearly know which physicians referer the most, you can apply the extra effort to seeing that they remain at the top of the list.
  2. This is an opportunity to grow your business significantly. Increasing the number of key referring practices even a little can boost the number of cases astronomically.
  3. This is also a defensive strategy. Your “vital few” are critical to your success, and you can bet there are other practices that would like to win them away from you and onto their own A-list. You’ve got to take care of the people who refer to you or they will quickly disappear. A little inadvertent neglect can cause deep scars.

Find them and find out what makes them happy.

First: find out exactly who’s who.
If you have not compiled the list of referring practices lately, it’s well worth the time and effort to refresh this scorecard (or start it). Have someone go back over every chart for the past several months, or longer if needed, and document each and every generalist or primary care practice that makes referrals to your specialty. You’ll find the Pareto Principle is alive and well in your office.

Second: organize and maintain a database.
If you don’t have a system, establish a new means to accurately record the source of all referred patients. You’ll want this info in the patient’s chart of course, but you also need to keep a running report on which practices are referring. Don’t try to keep this “in your head” or do it once in a while. You want a system that helps you communicate and reward the referral pattern you want to grow.

Third: identify the A-list, the B-list and the C-list.
The “A-group” is that essential group of practices that refer all the time and are responsible for the success of your practice. You would really notice the absence if they stopped. This A-list is where you want to invest the greatest amount of time, energy and resources in keeping them happy (and keeping them referring.)

The “B-group” includes those practices that refer regularly, but not as often as the “A-crowd.” Your mission with the B-crowd is to groom them to move up to be on the A-list

And finally, there is the “C-group” that does not refer often… for whatever reason. Maybe they are too far away or they are not quite connected with you. For whatever reason, they are the tail of your list and the lowest priority.

Fourth: Ask them the Golden Question.
Your objective is to give referring doctors what they want the most. So ask them, personally and directly “What’s most important to you regarding how we take care of your patient?” What’s important for you is to listen to their answer (whatever it is), put this information in your database and then work out the strategies that let you give them exactly what they want from you as a specialist that gives them confidence in continuing to refer.

Fifth: Build your database to build relationships.
Doctors and their staff refer to people they like, trust, feel are competent and believe are successful. Add details to your database about the referring doctors, staff and practice to help you build personal and direct relationships.

One of the all-time masters of building strong relationships is business author Harvey Mackay who uses “the Mackay 66” -a list of details about customers’ interests, education, family and special interests. A profile about referring practices helps you know them better and to meet and exceed their expectations.

Pareto is an important partner in the practice.

Keeping Pareto close at hand helps keep focus on the 20 percent that matters the most. A concept that can produce big dividends in professional referrals, and also help us to work smarter and on the most important things in our day.

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Stewart Gandolf

Stewart Gandolf

Chief Executive Officer and Co-Founder at Healthcare Success Strategies
Stewart Gandolf, MBA, is CEO of Healthcare Success, a medical marketing and health care advertising agency. He is also a frequent writer and speaker. Most importantly, he is happily married and a "rock-n-roll daddy" to two wonderful girls.
Stewart Gandolf
Stewart Gandolf


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