Your patients are your business. But it’s not how many patients your acupuncture practice schedules that matters, rather it’s the profit that those patients generate that will be the difference between a successful practice and one that is closing its doors. So, to set an advertising budget, you need to understand the value of your patients and to do that you need to understand your Customer Lifetime Value (CLV).
At Holistic Billing Services (HBS), we focus mostly on billing insurance for acupuncture services allowing us to use our 2016 data to analyze the CLV specifically for an acupuncture insurance patient. However, we encourage you to go through the exercise for your other types of patients.
What Is Customer Lifetime Value?
Customer Lifetime Value is a prediction of the total worth of a patient to your practice. The CLV can be applied to any business, but it is particularly useful for healthcare and service sectors like your acupuncture practice.
What Is the Lifetime Value of An Acupuncture Insurance Patient?
No two practices are alike, thus lifetime value will vary depending on your location, the services you offer and how long your patients stay with you. We at Holistic Billing Services estimated the CLV for 2017 of an acupuncture insurance patient at $11,550! Here is how we calculate the CLV for your insurance patients:
Average Annual Value x Relationship Years + Patient Referral Value
= Customer Lifetime Value
Let’s look at the figures more closely. First, we determine how much the average patient generates per year. For this exercise, we used patient averages across our HBS 2016 claims database. For 2016 our clients saw their patients on average 11 times in the calendar year. The payment per visit averaged $175 for a total of $1,925 in revenue per patient. Then factor a 20% profit margin on that revenue. Therefore, the Average Annual Value of an insurance patient is $385.
Next, you will need to know the lifetime of an average acupuncture insurance patient. If you’re not sure, use the healthcare industry average of ten years. Then, plug the number into the first part of our formula to get a patient’s lifetime value of $3,850.
Average Annual Value ($385) x Relationship (10 Years) = $3,850
Now this is when it gets interesting. Let’s say the average client refers two new patients during their relationship with your practice. Each additional patient is worth $3,850. So, for two patients, your Patient Referral Value is $7,700. Now, let’s go back to the original formula:
Average Annual Value ($385) x Relationship (10 Years) +
Client Referral Value ($7,700) = Customer Lifetime Value ($11,550)
Why Does This Matter?
Once you understand the CLV for your practice you’ll be able to make better decisions about when, where and how much you should spend advertising to new patients. The rule of thumb is that you never want to spend more money acquiring a new patient than your calculated Customer Lifetime Value. Now that you are familiar with the CLV of insurance patients in acupuncture, apply the formula to your cash patients and clients using other services at your practice. You can then make more informed marketing decisions that will direct you to the right type of patients; ensuring your most successful practice yet.
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