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How to calculate patient lifetime value — and why LTV matters

To truly understand the return on your patient acquisition investment, you have to look beyond the initial office visit.


Patient acquisition is key for any medical practice looking to grow their business. Attracting new patients in 2019 must include ranking at the top of local search results, engaging prospective patients with the right online content, and offering convenient access to care and information. Equally critical is asking patients for post-visit feedback to keep a practice’s online reputation in superior shape.

Unfortunately, too many healthcare practices are short-changing their business with incomplete marketing strategies that stop there. But addressing further touchpoints is the only way to build patient retention and drive return visits; a true medical business strategy considers the patient lifetime value (or LTV), assessing the potential revenue of all visits for a patient throughout their time as a “customer” of the practice.

Optimizing patient lifetime value

Optimizing that patient lifetime value requires taking action to earn those repeat visits. In terms of general tactics, that means sending follow-up communication to each patient to inspire or encourage them to return your practice. The message you share will differ based on your medical specialty, the patient’s status, and your approach to marketing your services.

For instance, dentists might send text messages reminding patients to book their 6-month checkups. Dermatologists can send emails with skin protection tips for the summer. Plastic surgeons might inform regular patients about new aesthetic-focused services — and even offer a discount.

Determining patient lifetime value

To understand the LTV of a patient, you’ll need to make some educated assumptions about how frequently a patient visits your office. Pediatric practices, for instance, can confidently estimate a certain number of patient visits based on the age of the patient. Obstetricians can apply a similar approach for pregnant patients, based on the standard schedule of appointments before a woman’s due date. If you’d like, look back on a sample of patients to see their number of visits within the past 5 years, and use that to help determine visits per year.

Then, estimate the potential revenue you can expect from those future visits and services. If it’s likely the rates will vary — a practical certainty with people’s needs and the state of healthcare reimbursement — determine an average cost per visit, and then use that as your per-visit revenue. The total revenue number is your estimated patient lifetime value.

Patient lifetime value formula

To better illustrate how LTV works, here’s a sample assessment using a primary care practice.

First, consider how frequently a patient is likely to visit. According to the Centers for Disease Control and Prevention (CDC), people visit their physician’s office 3.1 times per year.

Next, establish the average revenue for a visit. A 2016 Health Care Cost Institute report puts a primary care physician visit at $106, but for simplicity’s sake, we’ll estimate that each visit is worth $100.

From there, determine the number of years that person is likely to be a patient. This will vary by patient age, of course. For this exercise, let’s say the newly acquired patient is 30.

Finally, let’s assume this patient is happy with the practice, receives regular communications, and finds the patient experience convenient. They’re less likely to change providers and may be with the practice for 10 years.

Check out: How healthcare practices can modernize the patient experience

Lifetime value formula

Pre-visit revenue x annual visits x years with practice = patient lifetime value

$100 x 3.1 x 10 = 3,100

The patient lifetime value for this patient is $3,100.

These numbers will differ based on a practice’s specialty and services and other factors. But conducting this rough assessment gives you a business insight you may not have had, and gets you closer to understanding your acquisition return on investment (ROI).

Getting a grasp on patient acquisition ROI

With rare exceptions, converting a prospective patient to a new patient has an acquisition cost.  To understand the ROI of that cost, go beyond that single transaction and compare the cost to the patient lifetime value. Yes, you’ll devote resources later to retain that patient, but you won’t have to spend that acquisition cost again.

To first determine the acquisition cost, let’s go back to the primary care physician in our example, and assume the practice is acquiring patients via paid online advertising. The cost to bring in one patient via online advertising can vary widely based on types of services promoted and the level of advertising competition in that specific market. (The cost per lead, or CPL, might be anywhere from $25 to $225.) With that in mind, let’s use a hypothetical cost of $125 per patient lead for our calculation.

Return on investment formula

Profit (LTV – CPL) ÷ CPL x 100 = ROI

($3,100 – $125) ÷ $125 x 100 = 2,380

The return on investment is 2,300 percent.

It’s important to keep in mind that a successful marketing strategy will include more than an online ad campaign, but this clearly emphasizes why you need to consider a patient LTV when determining the return on the investment.

Regardless of lead costs and ROIs, the foundation for strong patient retention begins with you and your staff. Are you offering patients convenience and relevant information? Are you responding to their feedback and delivering an exceptional patient experience? If you answered yes, your patients will appreciate your outreach, and you’ll be on your way to building your patient retention and, in turn, each patient’s lifetime value.

Are you unknowingly affecting your practice’s patient retention? Check out the blog post “4 reasons your patient retention is declining — and how to fix it” to find out.

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