Lifetime Value: The Missing Link in Your Practice’s Growth Strategy
Customer LTV has been generating a lot of buzz as of late, and for good reason.
By Scott Hebert, PT, DPT
The term “lifetime value of a customer” (LTV) has been generating a lot of buzz in the rehab therapy industry as of late, and for good reason.
Of the handful of metrics providers should measure to gauge the health of their practice, LTV is among the most important, as it’s one of the most effective ways to understand where a practice excels and where it falters. Thus, it can help practice owners make informed decisions to propel their future growth.
Too many providers overlook LTV or they aren’t sure how to turn the numbers they collect into actionable business intelligence to help them maximize their bottom line.
The good news? This stuff is fairly easy to learn; it’s all about taking baseline measurements, making small improvements, and tracking progress.
UNDERSTANDING LIFETIME VALUE
Let’s begin by talking about how we calculate LTV:
LTV = Average revenue/visit x Average number of visits per episode of care x Average number of lifetime episodes of care
So, if your average patient completes 12 appointments for each course of care, is worth $100 per visit, and stays with your practice for an average of four courses of care, then your average patient LTV would be 12 x 100 x 4, or $4,800.
Compared to other health care disciplines, physical therapy is substantially more episodic. This is the biggest challenge to maximizing LTV. While getting patients to convert into new courses of care is crucial to growing a practice, if you ultimately can’t retain a patient throughout their full course of care or get them to come back to your practice the next time they need physical therapy, you will not see the full return on your marketing investment, and you will struggle to drive future growth. This is why LTV is so important when assessing the overall health of your practice.
Although therapy providers are usually limited in their ability to adjust the price variable, they do have significant control over a critical factor that directly relates to keeping LTV high: patient retention.
LTV AND RETENTION: TWO HALVES OF THE WHOLE
If a therapy provider is looking to impact LTV, the real question they need to think about is how they can increase patient retention. This remains the most effective strategy to increase revenue1 over time. In fact, research shows that improving customer retention rates by 5% increases profits by 25% to 95%.2 And yet, retention remains a pervasive problem that costs providers and practice owners in the United States around $6 billion every year.
According to WebPT, 20% of rehab therapy patients drop out during the first three visits—and 70% don’t make it to a formal discharge.3 As a result, practices lose an average of $150,000 a year from patient dropout alone, and this is before factoring in things like the precipitous 60% drop in patient volume that outpatient rehab therapy clinics saw between March and early April 2020.
On the bright side, the majority of patient dropout is preventable, as long as providers are willing to take ownership of this issue. In a survey conducted by the Altarum Institute, only 38% of patients surveyed cited moving residences or changing insurance plans as their reason for switching providers.4 However, 58% of patients named dissatisfaction with service or treatment as their reason for ditching their current provider.
Suffice it to say that if you aren’t focusing on retaining existing patients, then you’re leaving a lot of money on the table. So, to ensure your practice’s marketing dollars aren’t going to waste, make sure you’ve got a strategy to help you hang on to the patients you already have, and increase LTV in the long term.
START BY TRACKING PATIENT SATISFACTION AND LOYALTY
Patient satisfaction directly affects practice revenue. According to studies referenced in the International Journal of Marketing Studies, “Patients’ quality perceptions have been shown to account for 17-27% of variation in a hospital’s financial measures such as earnings, net revenue, and asset returns. Moreover, negative word of mouth can cost hospitals $6,000-$400,000 in lost revenues over one patient’s lifetime.”5
While satisfaction surveys give patients a platform for voicing their grievances, these tools are often fraught with bias. That’s why it’s imperative that providers make patient loyalty tracking a vital part of their patient engagement strategy by leveraging tools like Net Promoter Score® (NPS®) surveys. This score is derived from patients’ responses to one simple question: on a scale of 0 to 10, how likely are you to recommend this service to a friend or family member? NPS® surveys enable providers to take a more comprehensive look at the patient experience and correct course as needed in order to improve retention. Plus, providers can use these scores as benchmarks, comparing them over time to see how effective their improvement actions truly are.
Because NPS® is just one simple question, it’s easy to deploy multiple times over a single course of care. Based on my experience tracking NPS® at more than 7,000 clinics, I’ve found that this data point is most helpful when collected at some point within the first three visits, and then again immediately before discharge. This combination allows providers to identify patients who are at a high risk of dropping out of therapy early, thus allowing the opportunity to intervene. And the followup survey close to discharge allows you to benchmark improvement across a course of care.
Some patient relationship management (PRM) tools have built-in NPS® tracking functionality, enabling providers to automate the entire process, saving valuable time in the long run. However, it is also simple to execute manually or via email survey.
ENGAGE PATIENTS THROUGHOUT THEIR ENTIRE TREATMENT EPISODE
Patients who are more satisfied and engaged with their care are more likely to adhere to their prescribed care plans, and thus, achieve their health goals. This is why it’s important for providers to openly and steadily communicate with their patients at all stages of the care process.
In addition to distributing loyalty surveys, providers can send automated emails and other touch points to the right patient and at the right time. This not only helps providers remain connected with their patients,which has been mission-critical during the pandemic and ensuing lockdowns, but also increases the likelihood that past patients will come back to their practice should those patients require physical therapy services in the future. The key to these messages is contextual relevance. By looking at the unique patient journey for every person you treat, you can craft specific messaging based on things like the patient’s age, diagnosis, and interests. When done correctly, this can have a significant impact on patient experience and retention.
KEEP THEM COMING BACK
Every year, 1 in 2 American adults will develop a musculoskeletal injury, making it by far the most prevalent health condition in the United States.6 Because of this, there is a huge opportunity to increase lifetime value. This is where PTs can take a note from other industries such as dentistry. Patient recall is a main focus for dental practices, and it should be no different for us. The key to patient retention is simple: reach out to patients post-discharge and check in to see how they’re doing. My experience implementing thousands of reactivation campaigns has shown that messaging patients anywhere between 45 days and 6 months post-discharge yields the best results, with reactivation rates increasing the closer you are to that 45-day mark. Additionally, be conscious of who is sending the message. Messages that come from the patient’s therapist produce better reactivation rates than more generic messages coming from the clinic.
IDENTIFY OPPORTUNITIES TO DIVERSIFY SERVICES
Over the past few years, this last one in particular, I’ve seen more and more practices expand the number of services they provide. Not only does this diversify their revenue streams, thus protecting them from future financial fallouts, but it also enhances their ability to service patients throughout their entire care journey, in turn increasing LTV. Popular services clinics have begun to offer include telehealth, home care, wellness services, group therapy classes, and massage therapy; however, there are countless others to consider. The key is knowing which services your patients stand to gain the most from. As long as providers are regularly communicating with their patients and listening to patient feedback, this shouldn’t be a difficult task.
Adding service lines can help your LTV equation in two areas: increasing the value of an average course of care or increasing the total number of courses of care. Both have a significant impact on your practice’s bottom line (provided that you keep costs under control).
Many practices put a lot of effort and money into attracting new patients. It’s disheartening, not to mention costly, to invest so much into bringing in new patients only to lose them after a few visits. That’s why establishing a comprehensive marketing plan that prioritizes retaining current patients, and increasing the lifetime value of each, is critical to your practice’s long-term financial health. And leveraging the right technology or strategies to help you track, measure, and identify opportunities to maximize these metrics will enable you to continue improving your patients’ health and wellbeing for many years to come.
References:
1Patel N. Fastest Way to Lose Customers. NP Digital. https://neilpatel.com/blog/retaining-customers/. Accessed May 7, 2021.
2Reichheld R. Prescription for cutting costs. Bain & Company. https://media.bain.com/Images/BB_Prescription_cutting_costs.pdf. Published September 2001.
3McDermott E. They’re Just Not that Into You: Why Patients Churn (and How to Stop Them). WebPT. https://www.webpt.com/blog/they-re-just-not-that-into-you-why-patients-churn-and-how-to-stop-them/. Published July 28, 2017.
4Altarum Institute. Physicans Underestimate Consumer Likelihood to Switch Doctors. https://altarum.org/sites/default/files/uploaded-related-files/CCCHCResults03_LikelihoodSwitch_0.pdf. Accessed May 7, 2021.
5Alrubaiee L, Alkaa’ida F. The mediatin effect of patient satisfaction in the patients’ perceptions of healthcare quality – patient trust relationship. Int J Marketing Studies. 2011;3(1):103-127.
6United States Bone and Joint Initiative. The Burden of Musculoskeletal Diseases in the United States (BMUS) (3rd ed). Rosemont, IL: USBJI; 2014.
Scott Hebert, PT, DPT, is the Director of Product Management at WebPT and the co-founder of Strive Labs, Inc. Scott graduated with his doctorate in physical therapy from Quinnipiac University, where his research in patient engagement—specifically in relation to home exercise instruction—and patient satisfaction ultimately led to the founding of Strive Labs.