No matter how you acquire new patient leads in the medical business, it costs you a certain amount of money, and that cost per new patient lead will go a long way toward determining how profitable your practice is.
You can of course, directly conduct a review of your financial statements to see if your practice is profitable – but what about the status of individual patients? By having an understanding of what your cost per new patient lead is, you’ll be able to make better financial decisions relative to conducting your practice, and you’ll also gain insights into whether or not it’s time to try different ways of acquiring new patients.
Perhaps the most tangible benefit of having a handle on just what it costs to acquire new patients is that you’ll have a better idea of how to manage your pricing for services. In situations where costs to gain specific types of new patients is not in line with other acquisitions, you’ll at least have the information upon which you can decide whether to curtail or drop such initiatives.
Reducing Acquisition Costs to a Formula
Healthcare providers set their medical marketing budgets by finding out how much money is available for marketing in any given period and taking an educated guess about how much of that to use for new patient lead acquisition. Basing marketing decisions on guesswork has never been a sound practice, and it is even less so in medical practice, mainly because it’s not particularly difficult to calculate the cost of new leads.
In fact, it’s not much more complicated than dividing total expenses for new patient acquisition by the total number of patients who are new to your practice during that same timeframe. That sounds simple enough, but there are a few preliminary steps necessary to come up with those numbers before the calculation can be performed. First, you have to track all expenses for advertising and marketing during the period you are measuring. Of course, this advertising and marketing campaign should be exclusively related to acquiring new patients and nothing else, if the numbers are to be accurate.
Make sure to include any payments to external personnel who devise and implement the campaign, as well as any materials or media time which you purchased to promote the campaign. Next, track all the new patients entering your practice or booking a specific medical procedure which you’ve been advertising. This is one of the more difficult figures to nail down, but it can still be accounted for, by having your reception personnel question new patients about how they heard of your practice, or about the procedure which you are promoting.
Now you can calculate by dividing the total number of new patients into the total cost of any marketing or advertising expenses you incurred during the relevant period. That number represents the actual cost per new patient, and if you’ve been conscientious about tracking down the numbers on both sides of that calculation, the result should be accurate. As a simple example, if you spent $1,000 on a marketing campaign to acquire new patients, and you had ten new patients sign up with you because they heard about via your medical marketing efforts, your cost per acquisition would be $100.
Is Your Cost of Acquiring a New Patient Lead Profitable?
It’s not enough to know what your cost per acquisition was in the example described above. It’s a good thing to know of course, but by itself, it doesn’t tell you whether or not that figure was profitable, and that’s what you want to know. If the cost of acquiring new patients doesn’t justify the money spent on marketing and advertising, then the whole equation needs to be changed somehow so you aren’t losing money or making minimal profits.
Now you need to know how much money new patients spent on any products or services you delivered to them after the acquisition. For instance, if you know that each patient you acquired during the first quarter of the year cost you $100 to obtain, but the total amount of any services that those new customers purchased from you only averaged out to $150, then you haven’t made much profit. If each of those new patients had instead bought $300 worth of services from your medical practice, you would have earned an average of $200 per new patient, which does fully justify the expense you went through for marketing advertising.
Refining the Calculation Model
You can make the cost per patient figure even more meaningful by applying the same tracking of costs and numbers of patients to specific segments of those patients if they routinely require the same services from you. This will tell you which portions of your medical practice are the most profitable, and it can help you make decisions about which procedures and treatments that you should emphasize, and which of them you should de-emphasize for the sake of higher profitability.
The most important concept to take away from all this is that business decisions for your medical practice should be based on sound calculations – anything else is guesswork.