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  • Zak Bartley

Patient Lifetime Value (LTV) and How To Use It

Data and financials can be overwhelming. Balance sheets, overhead, profit, collections it is a lot to keep track of. However, data can be empowering to any practice and it can make all the difference in boosting profits. There are simple Key Performance Indicators (KPIs) that every practice should track in order to make informed and data-driven decisions. Among the most important is the “patient lifetime value” or LTV.

The LTV can impact many decisions that are made at a healthcare practice. How much should we budget for marketing? What kinds of promotions can we run? Can we forecast growth or revenue? These decisions can only be made if we know how much revenue those patients will bring to our practice. Unfortunately, many healthcare practices are still missing this key metric when evaluating their business. Here is a breakdown of patient LTV and how to use it.

What is Patient Lifetime Value?

Patient Lifetime Value (LTV) is the amount a patient will spend over their entire time with your practice. With a focus on acquiring new patients, it’s easy to only think of the transaction at hand. Yet for many practices the greater value is in the recurring visits of that patient. To understand lifetime value we have to look past the initial visit.

Lifetime Value is best described as how much is that patient worth over time. In total, how much revenue will that patient bring to our practice in future visits?

Calculating Patient Lifetime Value

There are a few numbers you’ll need in order to determine LTV. Some of these might need to be estimated by using a smaller sample size. You’ll need to know or estimate the following:

  1. Average revenue per visit

  2. Average visits per year

  3. Average Time (years) as a patient

Here’s an example using a primary care practice. (These calculations can get pretty complicated, so for everyone’s sanity we are going to keep these examples rather simple.)

A 2016 Health Care Cost Institute report states that a visit to a primary care office will cost $106.

Next, the number of visits per year. For our example, the Center for Disease Control said that people visit their physician’s office 3.1 times per year.

Let’s say that patients are likely to stay at this practice for 10 years.

Avg revenue per visit x Avg visits per year x Average Time (years) as a patient = Patient LTV

$106 x 3.1 x 10 = $3,286

How to use Patient Lifetime Value

In all honesty, there are endless ways to use this magic number, but here are a few examples.

Considering a marketing or SEO consultant? How do you know its worth it? Well, let’s say that a consultant guarantees a cost per lead (CPL) of $125 or less. On average about 50% of leads will become a patient. That means your marketing cost to acquire that new patient is $250.

But in the example above a patient only pays $106 per appointment, I’m not so sure about this… Not so fast! That patient, on average will come three appointments that year. That third visit will make the investment profitable. But what is the total return on that marketing investment (ROI)? For that, we will use LTV!

(LTV – Acquisition Cost) ÷ Acquisition Cost x 100 = ROI

(($3,286 – $250) ÷ $250 ) x 100 = 1,214% ROI!

This means over time that patient will make more than a 1,000% return on what it cost to acquire them!

Having trouble with phone shoppers? Keep getting call-ins that won’t schedule because they are shopping price? Do you know what will stop them in their tracks? Have you tried offering a free visit? I know, crazy, but hear us out. Say you get a call-in inquiring about price or accepted insurance. Try telling them their first visit is free. Granted not all of those patients will come back for a second visit/treatment, but let’s say one in three actually do. What does that look like?

Okay, we gave away 3 appointments worth $106 each for free. Using our first example that means our cost to acquire one customer was $318 ($106*3 = $318).

(LTV – Acquisition Cost) ÷ Acquisition Cost x 100 = ROI

(($3,286 – $318) ÷ $318 ) x 100 = 933% ROI

A 900% return might have you thinking differently about those shopper calls.

See Similar Articles: Practice Call Scripts

Benchmarking. It’s often difficult to compare one practice to another. Different sizes, clientele, service area, referring physicians, policies, etc. But using information like LTV we can get an unbiased look at how we compare to other practices in our area.

While these values will differ among specialties, we can still gain insight or tips on what those practices do well or not so well. Benchmarking against our peers can help us develop strategic goals to increase profits. Once we hone in on the metrics that need attention we can easily optimize our LTV

Read Part 2: Optimizing Patient LTV