Many providers struggle to create profitable practices because they’re no longer just a physician –they’re also a business owner. Healthcare practices are struggling with the business side of medicine in part due to the fragmented solutions that are available, multiple vendors needed and a general lack of understanding of how to successfully market themselves and their practice. After all, physicians went to medical school to practice medicine. Most of them didn’t go into medicine with the intention of also running a business. However, the independence of having one’s own practice continues to open the doors of new healthcare practices across the country every day.
How can providers not only keep their doors open but actually turn a profit, especially with reimbursement rates plummeting? The key is to make informed business decisions using the right data, which starts with having a clear understanding of what the LTV is of the practice’s own patients.
When establishing what the practices average LTV of a patient is allows you to then benchmark that number for continued monitoring. When considering the significant role that patient retention plays, by keeping a pulse on the practices LTV, it’s more likely that a practice will be able to quickly identify areas within the practices that might need improvement. Otherwise, patient turnover could easily be overlooked until it’s too late and has already been to the bottom line and potentially the provider’s reputation.
Calculating what the LTV is of a practice is a fairly easy equation. For example, let’s take a dental practice whose average patient has three appointments a year, worth $175 each and they stay with that practice an average of six years. The average lifetime value of that practice’s patients would be three times $175 times six or $3,150.
Healthcare practice’s that develop years- or even decades-long relationships with its patients—like family doctors or pediatricians—may want to segment patients to more accurately determine the LTV. Pediatrician’s for example, oftentimes have patients that stay with the practice until they are 14 to 18 years old. If those patients book an average of ten $200 appointments annually, the LTV could be up to $36,000! However, on the other hand, patients of the same practice that are over the age of 10 that don’t require many visits might have a lifetime value of just $2,000 before moving on to another practice.
Once a practice is able to determine the LTV of its patients, it’s not unusual to discover they are spending more to acquire a patient than that patient will ultimately generate. With practices that are spending $150 to acquire a new patient that only comes in once and doesn’t return, the LTV could be very low, potentially barely covering the cost of acquiring them. However, this does not mean a practice is spending too much to acquire a new patient but could be an indication that there’s a flaw in the patient experience causing the patient not to return.
However, if that $150 acquires a long-term patient with an LTV of $20,000 or more, that’s a good indication that the marketing and patient experience are aligned, not to mention the practice is getting a hefty return on its marketing spend.
A practice’s bottom line takes a hard hit if having to constantly focus on acquiring new patients. This is particularly true in highly competitive markets like New York City or Los Angeles, where the competition is fierce. The cost to market and attract new local patients in these markets can be incredibly expensive with no guarantees that the efforts will result in new patients. It’s important that practices are able to establish what the average cost is to acquire a new patient to use as a baseline. If the new patient costs more or as much as the practice bills for on the first visit, the practice and staff can keep that top of mind when thinking about how that patient’s experience was and the likelihood that they’ll return.
In fact, according to Harvard Business Review, it costs five to 25 times more than retaining existing ones. Not to mention more than one-third (38 percent) of patients have switched service providers at least twice in the last year. With over one million active physicians in the United States, patients have plenty of other options should they not be happy with their current provider.
However, keeping existing patients is among the easiest and most cost-effective ways to positively impact a practice’s bottom line while at the same time driving patient loyalty. In a report by Harvard Business School it is suggested that increasing patient retention fees by 5 percent could maximize profits by about 25 percent to 95 percent.
Patient retention is about relationship building and taking a 360-degree approach to the experience they have with a practice. Oftentimes the patient experience starts online, however, according to a PatientPop survey report over 47 percent of healthcare providers aren’t sure how to positively affect their reputation. It’s easy to think about the patient’s experience in the exam room when administering care, but that’s only a small part of the journey.
Simple things like having a stellar online presence where prospective patients can read reviews about a provider and mobile-friendly websites that are up-to-date can start the patient journey off on the right foot. Creating a welcoming and comfortable office atmosphere and having modern technology that makes it easy for patients to book appoints and communicate with the practice have a big impact when it comes to patient retention. If your practice tends to run behind, let your patients know this in advance so it causes as little disruption in their day as possible.
Don’t let the patient experience stop when they leave the office, take the time and follow-up. Follow-up can be in part automated but it’s also important to let the patient know you care by giving them a call to see how their experience was and to thank them for trusting your practice with their healthcare needs. With all the choices patients have now, practices must shift their attention to the patient experience.
Indeed, just knowing a patient’s LTV isn’t enough–patient retention is the key to keeping LTV high. It’s imperative that practices implement best practices and deploy modern technology that allows them to create a consistent and positive patient experience that attracts and retains patients for life.