Crack the code on cutting your patient acquisition costs (PAC)

• 
  Doctometer
• 2024
• 8 min read

How to Calculate and Reduce Your Clinic PAC?

 

Attracting new patients is essential for any healthcare service provider, particularly for specialists. While healthcare services can meet everyone's needs, how to reach potential patients is the biggest challenge. The healthcare industry has the advantage of always having a high search volume. In response to the changing market, innovative approaches are necessary to attract and retain patients effectively.

Specialists typically treat patients for episodic needs. After their issue is resolved, patients do not return regularly, and the office only generates revenue from appointments or procedures. Thus, new patients are crucial for specialists to maintain a thriving practice.

For specialist practices to prosper, new patient visits should account for about 20-40% of their business, depending on the medical field. Therefore, the key question is how to establish a steady flow of new patients to ensure the organization's profitability. Especially, then research shows that only 30% of patients consider a hospital's brand when selecting a provider.

Which channels bring in new patients? Which are less successful? And what is your patient acquisition cost?

Answering these questions is crucial for any healthcare provider looking to grow their practice. Let’s dive in together to get those answers:

A) Ever wondered where most new patients come from?

Healthcare service providers typically rely on two main channels for new patient acquisition:

Referrals

Most healthcare organizations rely on referrals as their primary source of new patients. Referrals can come from a variety of sources, depending on your specialty. The most common referral channels are family members, friends, primary care physicians, social media influencers, and associated institutions such as schools or sports facilities. To minimize referral leakage and make it easy for others to refer patients to your organization, it's important to have an effective referral management process in place.

Online Research

In today's world, patients don't always require a referral to seek out a medical specialist. Patients are now looking for providers with transparent and up-to-date information. In this case, they conduct their own research to find suitable healthcare provider. One of the most important factors they consider is the provider's online reputation and reviews, in addition to their qualifications.

While the importance of channels is clear, there are other factors to consider, such as the cost and value of acquisition. One of the most pressing questions is:

B) What is patient acquisition cost?

So, you want to know how much the hunt for new patients costs? Let's break it down: If patients are flocking to you via word-of-mouth and online searches, then your new patient acquisition cost is the bundle you spend on both of those sweet deals. Here's what the bill might include:

• Exploring the Expenses of Referral Marketing

Hiring a marketing professional can be beneficial for healthcare organizations to establish, cultivate, and reinforce referral relationships. These individuals are responsible for connecting with potential referral sources, fostering partnerships, and organizing events such as lunch meetings or learning sessions. Additionally, they may provide marketing materials and useful information to each source regarding the reasons, timing, and procedures for referring patients to your facility. However, it's important to keep in mind that any initiative of this nature comes at a cost.

• The Costs of Referral Management

If you've received a referral, the next step is to convert it into an appointment. To achieve this, consider enlisting the help of your scheduling staff or a referral management team to oversee the process and ensure that referrals materialize into actual appointments. Be sure to factor in the salaries of these employees, or at least a portion of their salaries, into your overall patient acquisition cost.

• Improving Your Business with Online Reputation/Reviews Management

Occasionally, patients may leave reviews without any prompting, but it requires intentionality and strategy to actively build your practice's online reputation. You may give each new patient a business card with a QR code that directs them to where they can leave a review online. Alternatively, you can join the Doctometer network to manage your reviews, listings and online reputation in one place. Here, we can request reviews from existing patients to ensure they have a great experience without your interactions. It's important to consider it when calculating your patient acquisition costs.

• Improving Your Online Presence

In the contemporary digital era, establishing a robust online presence is imperative. Patients should effortlessly find and acquaint themselves with your practice, access valuable information, and seamlessly schedule consultations. Beyond having a dedicated website, it's advisable to extend your presence to healthcare market platforms like Doctometer. However, bear in mind that the costs associated with creating and maintaining these digital resources should be factored into the calculation of patient acquisition expenses.

Cost of Advertising

If you're investing in radio, internet, social media, or print advertising, or paying for a marketing agency, you'll want to factor these costs into your patient acquisition expenses. Keep in mind that these marketing strategies are all geared towards attracting new patients, so it's important to include them in your plan. Don't forget to consider expenses for creating blogs, newsletters, emails, brochures, or other marketing content as well.

Ok, so this is the time to go through details…

How to Compute the Cost of Luring Patients to Your Doorstep?

At first glance, determining the cost of acquiring a new patient may seem ambiguous. However, there are simple steps you can take to calculate this cost.

Follow these steps to determine your patient acquisition cost.

1. Add your expenses

To determine the total expenses spent on patient acquisition, add up all the costs associated with the items listed below:

- Staff Salaries for referral management staff, scheduling staff, and marketing employee(s);

- Budget for marketing materials (e.g. flyers) and events for patients and referral sources;

- Software expenses for managing website, online reviews or referrals;

- Cost of Treatment which includes any material used for patient’s appointment (e.g. medications);

- Advertising expenses for online advertising and content marketing.

Let's break down the financials in a structured manner. Consider an odontology expert allocating monthly funds as follows:

- Staff: $4,000

- Marketing materials: $1,000

- Software: $1,500

- Monthly advertising expenses: $750

Now, let's calculate the total monthly cost: $4,000 + $1,000 + $1,500 + $750 = $6,300

This clinic, therefore, dedicates $6,300 every month to acquire new patients. It's essential to bear in mind that treatment costs can vary significantly based on factors such as the type of treatment, the specific medical practice, and the unique needs of individual patients.

2. Calculate patient lifetime value (Patient LTV)

 

Moving on to the next crucial step involves determining the Patient Lifetime Value (LTV). This value serves as an estimate of the revenue anticipated from the ongoing relationship with each patient, providing valuable insights into potential earnings for a dentist or clinic specialist.

 

Consider this scenario:

30% of new patients opt for dental surgery, incurring a cost of approximately $3,500, along with three office visits priced at $150 each.

The remaining 70% require two office visits at $150 each.

 

To calculate the Patient LTV for this specialist, the following formula is applied: 

((30 x $3,500) + (30 x 4 x $150) + (70 x 2 x $150)) / 100 = $1, 440.

This calculation reveals that the average revenue generated by each new patient throughout their association with this odontology clinic is $1,440.

3. Calculate your monthly revenue with patient lifetime value

For example, if a dental practice earns $1,440 from each new patient and welcomes 25 new patients in a month, the monthly revenue can be determined by multiplying: 25×$1,440=$36,00025×$1,440=$36,000. Thus, the total revenue from new patients in one month is $36,000.

 

4. Determine your PAC through calculation

Once you've figured out how much you spend to acquire patients and the number of new patients, you can find the cost for each patient. For instance, using the formula $6,300 divided by 25, the cost per new patient is $252. This is a positive result, especially when comparing it to the average Patient Lifetime Value (LTV) of $1,440. For every new patient, there's a profit of $1,188. To maintain a good profit margin, the patient acquisition cost should be less than the Patient LTV. In this case, not only is the cost lower, but significantly so.

5. Find your return on investment (ROI)

Deduct the total cost of acquiring new patients from your revenue, then divide it by your expenses. In this instance, the calculation is ($36,000 – $6,300) / $6,300, yielding a value of 4.71.

Now, here's the exciting revelation: Multiply this number by 100%, and you'll uncover a remarkable 471% ROI for patient acquisition! This outstanding return on investment is certainly cause for celebration in your practice.

C) How to Reduce Patient Acquisition Cost?

"Show me the money!" - Jerry Maguire

But what if your spending on attracting patients surpasses their contributions? It's time to strategically cut patient acquisition costs for increased profits.

Reducing these costs and enhancing ROI is vital for overall success. Leveraging e-Health platforms like Doctometer is an effective strategy. Staffing, a significant expense in patient acquisition, covering marketing, referral management, and scheduling, can be optimized through Doctometer. This allows staff to focus on other tasks, work fewer hours, and potentially require fewer hands.

Intrigued? Explore the doctometer.com marketplace to broaden your reach, connect with individuals actively seeking care services, and maximize your practice's impact! Contact us for unparalleled visibility and benefits.