It's not exactly a bold assertion to say that patient experience matters–we all know that is true. But it’s also such a broad topic that telling a primary care practice to improve their patient experience sounds a lot like telling a baseball player to improve his batting.
It's just not very helpful.
However, telling a right-handed batter to improve his approach against right-handed pitchers in 0-2 counts by focusing on laying off sliders low and away because it could improve their strikeout percentage by 10% is significantly more helpful...
The equivalent advice for primary care clinics is telling them to improve their patient payment experience by embracing technology because it can have a massive impact on each practice's patient retention rates and, in turn, their bottom line.
As non-procedure-focused healthcare providers, the revenue of primary care practices is heavily dependent on maintaining regular patient visitation. While a surgeon can see a patient once and add tens of thousands of dollars of revenue to their P&L, for primary care practices to collect equivalent value they must cultivate long-term relationships with their patients. This makes patient churn rate, or the annual rate at which patients cease to be patients, especially important for primary care clinics.
And for many practices, this reality is extremely harmful, as studies have revealed that average patient churn rates are between 20% and 48%! Even on the low end, if one in five patients leave your practice every year, that means you have to pay to replace the equivalent of your entire patient pool every five years! This leads us to the real problem with high patient churn rates: it decreases the lifetime value (LTV) of your patients and, in turn, your practice’s LTV/CAC ratio, an important indicator of the ROI of your marketing dollars!
The Lifetime Value of Patients
Because we know that primary care practices earn the bulk of their revenue from patients continuing to visit their clinic for non-procedural reasons, it's vital that patients remain patients for many years. As such, increasing the LTV of every patient should be a major goal for all primary care clinics.
But what even is the LTV of the average patient?
Research has estimated that the average patient visits their primary care provider about one and a half times per year. It’s also estimated that the average patient visit drives just north of $100 of revenue to the provider. This information allows us to determine the lifetime value of each patient by multiplying the average revenue per visit ($100) by the average number of visits per year (1.5) by the number of years retained as a patient. So...
If a patient sticks around for 10 years, their LTV is $1,500.
If a patient sticks around for 25 years, their LTV is $3,750.
If a patient sticks around for 50 years, their LTV is $7,500.
However, if they only stick around for three years, they don't even break the $500 mark!!
This matters because regardless of whether you keep a patient for 25 years or six months, it costs you the same amount of money to acquire them. So the CAC, or customer acquisition cost, in the LTV/CAC ratio stays constant, making it exceptionally important to ensure that the dollars you spend to acquire patients are "worth it" by retaining those patients for as long as possible.
For example, if you spend $100 to acquire a patient, it's in your best interest to keep that patient for 50 years and reap $7,500 of revenue, instead of $150 because they left your practice after one year. The $100 is spent either way, so it's up to you to make that patient happy and keep the ROI, or return on investment, of your marketing dollars high.
Essentially, if you want to ensure that every dollar you spend acquiring patients is spent efficiently, you need to make sure to maximize the LTV of each patient by ensuring high retention and low churn.
Patient Payment Experience: The LTV/CAC X-Factor
Once we accept that maximizing the LTV of every patient should be a focus for primary care providers, the question then becomes:
A quick dig into the data reveals the answer. As of 2020, 56% of patients reportedly would consider switching providers for a better payment experience, placing the onus on providers to ensure that their payment experience is up to snuff. Thus, clinics can choose between (1) allowing patients to leave for providers offering a better payment experience or (2) rising to the occasion and improving their own payment experience!
Research has also shown that younger generations, specifically Millennials and Gen Xers, are 28% more likely than Baby Boomers to consider switching providers based on payment experience. This isn’t surprising, but it does have profound implications. Simply by virtue of being younger, Millennials and Gen Xers have a much higher potential LTV than Baby Boomers. The reason why is apparent: 30-year-old Millennials have significantly more years to attend your practice than do 60-year-old Baby Boomers!
Lucky for you, these generations are not hiding the ball–they are telling you that a quality payment experience is important to them!
Now is the time for you to listen; it's time to start maximizing the ROI of those marketing dollars and keeping patients around for the long haul. (And not just for the sake of your clinic, but also for the sake of your patients, because you know that there are significant benefits to maintaining long-term patient-provider relationships!) It's time to start laying off sliders in the dirt and making your clinic’s payment experience a priority!
And just as baseball players have coaches and trainers to guide them in their pursuit of greatness, your clinic doesn’t have to wade into the abyss of payment process improvement alone, either. Peachy is here to help.
Schedule a demo with our team to learn more about how Peachy can help you implement a simple, easy, and effective payment experience. Or, subscribe to our email newsletter below to get monthly emails full of educational content to help your clinic improve its bottom line!