Formula For Calculating the Lifetime Value of Your Patients

How Much Is a New Patient Worth to Your Medical Practice?

A = Average Value of Appointments

P = Average Number of Appointments In A Year

Y = Average Number of Years A Patient Remains At A Practice

Lifetime Value of a Patient = A x P x Y

One of the overall marketing goals is to get patients to come to a medical practice. The other is to make sure a marketing budget does not put a medical practice out of business. A practice always wants a positive return on investment, or ROI, in its marketing efforts. Patients should generate more money than it costs to secure an appointment from them. For a business to get a good overview of how effective their marketing is, they need to calculate the lifetime value of a patient. Focusing only on the cost per lead or cost per appointment does not paint a complete picture. The lifetime value of a patient, also known as the LTV, is vital to the planning and marketing a medical practice and helps owners understand how profitable a practice is moving forward.  

For example, if a medical practice spends $100 for a patient that generates $110 of income for an appointment, that is not an excellent overall ROI. However, if that patient keeps returning with minimum additional engagement and generates $5,000 worth of appointments over five years, that is an excellent ROI. Knowing the lifetime value of patients visiting a medical practice is critical in evaluating the effectiveness of a medical marketing plan. Owners of a medical practice need to understand the concept and be able to calculate this important metric.  

Are there other benefits for calculating the lifetime value of patients?  

Other than evaluating marketing campaigns, there are other advantages to calculating the LTV of patients for a medical practice. Tracking this metric will help a practice assess different areas of its business. A factor that helps boost long-term LTV is a practice’s patient retention efforts. If a practice does not do an excellent job at retaining the patients they receive, then the lifetime value of patients will drop as marketing costs go up. This may be an area that a practice will want to examine and improve to maximize the overall LTV of patients. If a practice sees the general LTV trend upwards, they know their marketing efforts and any changes they have made to it are effective. Effective retention can boost the income from a patient by 95% in some cases.  

Another metric many practices benefit from looking at is the lifetime value of patients in different demographic groups. This information can let a practice better customize and prioritize its marketing efforts. For example, if young adult males produce high LTV values but middle-aged adult males do not, a new campaign tailored to their unique medical needs could be created. Getting detailed data will help connect enough data points to enable a practice to better advertise to their target audience.  

Is calculating the lifetime value of a patient difficult?  

Calculating the overall LTV of patients can prove to be a challenge for a medical practice. It requires a practice to come up with accurate estimates of future activity, which can be difficult. A practice may struggle with figuring out how long a patient will remain with a practice and how much money their visit will generate at a medical practice. This question is challenging to answer when a patient is brand new. Another stumbling block is that sometimes the data, metrics, and values needed to calculate an accurate LTV are not available or are not considered to be very reliable. With all of that in mind, it is crucial to get as much data as possible to generate an accurate lifetime value of a patient. Data required to perform the calculations may not be not readily available.

How does a medical practice calculate the lifetime value of a patient for their marketing plan?  

While the concept may seem complicated, the formula to figure out the lifetime value of a patient is relatively straightforward. A practice takes the average value of an appointment and multiplies it by the average number of appointments a patient has in a year. Then, you multiply that number by the average years they remain a patient at the medical practice. So that would look like this:

A = Average Value of Appointments

P = Average Number of Appointments In A Year

Y = Average Number of Years A Patient Remains At A Practice

Lifetime Value of a Patient = A x P x Y

Using that formula, let’s say that an urgent care center sees a patient for their urgent care needs five times a year. Each visit is worth about $200 overall, and most patients tend to return to this urgent care center for at least eight years. So, the average lifetime value of an urgent care patient would be 5 X $200 X 8, or worth $8,000. Keep in mind that this formula produces the average value. Some patients will generate more income, and some patients will generate less.  

A medical practice can get an even better picture of their average lifetime value of patients by segmenting their patients into different groups and calculating them. Continuing with the urgent care example, it would be valuable for this healthcare facility to divide up the lifetime value of their patients by zip code. Patients from neighboring zip codes will likely have a higher lifetime value for an urgent care center as they are more likely to come back again than someone who lives further away or out of state. Another way patients could be segmented to see if they produce a different lifetime value number is to group them by age. An urgent care center may see different LTV numbers for those aged 1 to 15, 16 to 35, 45 to 65, and 66 and older. This information will help them develop a more accurate number which will help them customize their marketing efforts.  

For other medical practices, age may be a significant factor in determining the lifetime value of a patient. For example, as a pediatrician, doctors will not see a patient beyond the age of 18. If patients visit twice a year and generate $100 with each appointment, the lifetime value of a newborn patient when they first visit will be vastly different than a new patient who first visits at the age of 16. Pediatricians want to have as many new patients as possible, but they will have to replace a new patient who is 16 years old quicker than a newborn patient.  

How can a medical practice keep the lifetime value of a patient as high as possible?  

The key to keeping the LTV of a patient high is ensuring they come back again and again. Capturing a patient’s first appointment at a medical practice is essential, but that is only half the battle, as they say. The more frequently they return to a practice, the higher the LTV. Patient retention plays a significant role in this goal, and there are several ways you can boost it using marketing strategies.  

Email Marketing 

While email marketing may not be as dominant of a tool as it once was, it is still a cost-effective way to market to current patients. An email marketing campaign is a great way to reconnect with existing patients and encourage them to return to a medical practice for additional services. When patients first come to a medical practice for service or treatment, an email address will be one of several information pieces collected on intake forms. (Consider using digital intake forms to make collection emails more effortless.) This will give a practice a growing list of emails to send campaigns to when putting together campaigns. Reminder: Be sure that patients provide explicit permission to be sent emails, and practices must, by law, give them the option to opt-out of emails if they no longer wish to receive them. Email marketing programs and systems generally make this very easy to do.

The email sent to patients must be helpful, engaging, and authoritative. Simply sending an email reminding patients of the hours of operation will lead to low open rates and high unsubscribe rates. Overall unsubscribe rates for the healthcare industry is around 0.4% on average. There needs to be more information in an email than that. Ideally, it will be an email that a patient will open more than once and may even forward to someone else to read. Some popular things to include in an email campaign include:

• Content regarding a current or local health issue
• A link to a recent article about a health issue or service provided at a medical practice
• Highlighting a new staff member or one of their recent accomplishments
• Showcasing a recent review or testimonial (with the patient’s permission)
• The first part of a recent blog post with a link to the rest of it on a medical practice’s website
• Highlighting a service or treatment provided at a medical practice
• Announcing a promotion or discount available
• Announcing upcoming holiday hours
• Reminding of yearly health checkups or screenings

Many medical practices struggle to answer the question of how often an email marketing campaign should go out. Most medical practices know sending out a daily email is too much and will lead to high unsubscribe rates. Some feel that a weekly email marketing campaign should be the goal of a medical practice. Unfortunately, a weekly campaign does not work in most circumstances. Many medical practices will struggle to create a weekly email that interests their patients. A monthly email marketing campaign is much more manageable and more likely to succeed. It is easier for a medical practice to put together a compelling email message 12 times a year than 52 times a year.  

Text Message Marketing

Text message marketing has recently become popular among businesses across many industries, including healthcare. While text message campaigns are more expensive than email campaigns, there are some distinct advantages. Text messages have much higher open and click-through rates than email messages. Almost everyone has a cell phone, and nearly all cell phone owners have text messaging capabilities. On average, an adult spends over 20 hours a week texting. In addition to costing more than email campaigns, there is limited space for content in a text campaign. Generally, text messages can only be 140 to 280 characters, including all spaces and punctuation. Text messages also typically can not contain pictures, but they can (and should) contain links to websites.  

Most text message campaigns are limited to a single topic with limited space. The message generally should be a call to action to encourage the patient to make an appointment for a service, treatment, or follow-up. Sending out a text message reminding people of hours of operation or a link to a blog generally will not see the return on investment most practices would like to see. Instead, those topics are better suited for email campaigns. Medical practices also need to be extra careful when they schedule their messages. While it may not be a big deal to accidentally send an email out at 11 pm instead of 11 am, it will irritate patients if they get a text message alert at 11 pm and may think it is spam. Some popular themes of text message campaigns are:

• Reminders of yearly checkups, like physicals or flu shots
• New treatments or services available  
• Important community updates, like COVID-19 related news

Like email campaigns, text message campaigns can not be sent out too frequently. Even weekly text messages to patients will lead to high unsubscribe rates and possibly some angry phone calls to the front desk. For medical practices, they should only try to send out text messages campaigns out once a month for the most part. There may be a reason to send out a text campaign more frequently during time-sensitive situations, like the availability of COVID-19 testing materials.

A crucial thing to remember with email and text campaigns is that medical practices can not buy emails or cell phone numbers to market to in campaigns. They cannot trade emails or cell phone numbers with other businesses and market to those contacts. Unless a person gives explicit permission to get marketing messages from a medical practice, it is illegal under a federal law known as the CAN-SPAM Act of 2003.

The experts at PatientGain.com are available to help you create a high-performance healthcare website to boost the lifetime value of your patients. Contact us today, and let us show you what we have done for other practices across the country!