The Intake

Insights for those starting, managing, and growing independent healthcare practices

How to calculate patient lifetime value — and why it matters

parent and children illustrating patient lifetime value

At a Glance

Patient acquisition is key for any medical practice looking to grow. Attracting new patients in 2023 means practices must rank at the top of local search results, offer flexible appointment availability, engage prospective patients with the right online content, and communicate digitally, like via text message.

Practices should also automate requests for patient feedback to ensure online reviews are numerous and recent. Tebra’s 2023 Patient Perspectives survey found that 43% of people say that the most important factor in online reviews is how recently they were posted. 

Unfortunately, too many healthcare practices short-change their business with incomplete marketing strategies. 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 (LTV), and assesses the potential revenue of all visits for a patient throughout their time as a customer of the practice.

Optimizing patient lifetime value

Optimizing patient LTV requires earning those repeat visits. In terms of general tactics, that means sending follow-up communication to each patient to inspire or encourage them to return to 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 optimizing for LTV might send text messages reminding patients to book their 6-month checkups. Dermatologists can send emails with skin protection tips for the summer. Med spas might inform regular patients about new aesthetic-focused services — and even offer a discount.

How to calculate your 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 pregnant person'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 estimate 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. Once you calculate the total revenue number, that number is your estimated patient LTV.

How do I calculate patient lifetime value?

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. According to the Medical Expenditure Panel Survey (MEPS) as reported by Consumer Health Ratings, the average cost for a primary care visit in 2022 was $218. For simplicity’s sake, we’ll estimate that each visit is worth $200.

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.

Sample Patient lifetime formula

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

$200 x 3.1 x 10 = 6,200

The patient LTV for this patient is $6,200.

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

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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

($6,200 – $125) ÷ $125 x 100 = 4,860

The return on investment is 4,600 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 lifetime value 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 LTV.

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Catherine Tansey, business writer and reporter

Catherine Tansey is a business and healthcare writer and reporter. She has close to a decade of experience writing and reporting on small business best practices, emerging technology, market trends, and more. Catherine has several family members who own private practices in mental health services, dentistry, and chiropractics, and she’s seen firsthand the pride and privilege practice owners feel to be able to support their communities.

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