How to Calculate Your Patient Acquisition Cost

A clinician calculates their practice’s patient acquisition cost

Do you know the patient acquisition cost for your healthcare practice?

The patient acquisition cost metric is a powerful tool in understanding how your marketing budget is working and where opportunities to increase your return on investment exist. On average, marketers spend $2.62 per click on healthcare advertising in Google searches, but your total patient acquisition cost takes more into account than direct marketing spend. Understanding how to calculate your patient acquisition cost can help you most effectively direct your marketing budget  and continue to grow your practice.

Key Takeaways

  • Patient Acquisition Cost is the total cost of finding and acquiring each new patient. 
  • Calculating your Patient Acquisition Cost will help you understand where to direct your marketing spend.
  • Patient Acquisition Cost = Sales and Marketing Costs ÷ Number of New Patients
  • Patient Lifetime Value=Overall revenue you expect to receive from a patient
  • You should aim to grow the margin of difference between Patient Acquisition Cost and Patient Lifetime Value.

What is Patient Acquisition Cost?

Patient acquisition cost (PAC) is the total cost of finding and acquiring a new patient. It is the amount of money required to reach someone and persuade them to become a patient of your practice. In other industries, it is referred to as Customer Acquisition Cost (CAC).

Your patient acquisition cost includes marketing expenses, such as leaflets, flyers, television and radio ads, email campaigns, and online ads. It also takes into account the cost of overhead, staff wages, taxes, tools, and any other expenses you incur during a given period. This is the total cost to bring in a new patient, not just the cost of the first consultation or sale.

Calculating your patient acquisition cost is a great way to understand how much you’re investing in growing your practice. This can help you identify strategies that are working and those that aren’t. It’s a simple concept but an important one, because understanding your acquisition cost can help you better understand the drivers of your business.

Why is Patient Acquisition Cost Important?

Understanding your patient acquisition cost is important not only to help you determine your breakeven point but also to help you understand how much it will cost to bring in new patients.

Without a solid understanding of the cost of bringing in each new patient via different channels, it can be difficult to know when and where to invest your time and money. That’s where your patient acquisition cost comes in. It’s a number that represents all the costs associated with bringing new patients into your practice and can help direct your marketing spend.

How Do You Calculate the Cost of Patient Acquisition?

A patient acquisition cost is the sum of all the costs associated with bringing in a single new patient. You can calculate your patient acquisition cost using the following formula:

Patient Acquisition Cost = Sales and Marketing Costs ÷ Number of New Patients

An illustration of the PAC or CAC formula
Source: https://kpi-max.com/customer-acquisition-cost-cac/

To get your Sales and Marketing Costs, add up:

  • Staff salaries and taxes
  • Overhead costs including materials used in treatment
  • Tools
  • Marketing budget

An Example Patient Acquisition Cost Calculation

Here’s an example using real numbers to calculate your patient acquisition cost.

Say in the first quarter of the year, you:

  • Pay $50,000 in staff wages and taxes
  • Pay $50,000 in overhead costs
  • Spend $25,000 on your marketing budget
  • Acquire 500 new patients

PAC for Q1 = ($50,000 + $50,000 + $25,000) ÷ 500 = $250

So, it cost you $250 to acquire each new patient during this quarter. You can then compare this with the amount of revenue you earned per patient during the quarter and determine how effective your marketing has been. By further exploring which customers were brought in by each different marketing avenue you invest in, you can determine the most effective use of your budget.

How to Use Patient Acquisition Cost

Knowing your patient acquisition cost can help you allocate your limited marketing funds more effectively.

For example, if you know that it costs $50 to acquire a new patient through email marketing, you can decide whether to invest that same $50 in email marketing or in other marketing channels (such as social media). If the return on your investment is the same, but you can reach more patients through social media, it may be worthwhile to allocate your marketing budget there. On the other hand, if the return on your investment is better through email marketing, you can continue to focus your marketing efforts there.

Patient acquisition cost is also a valuable metric to use in conjunction with patient lifetime value to assess your return on investment over time.

What is Patient Lifetime Value?

Patient lifetime value (also known as lifetime value, or LTV) is a metric that measures the return on investment of a patient throughout his or her lifetime. In other words, it’s the amount of money that a patient is likely to spend in your practice over time.

Understanding your patient lifetime value is important because it provides a framework for understanding the return on your patient acquisition investment. LTV helps you understand how the costs of patient acquisition translate into long-term gains.

How Do You Compare Patient Acquisition Cost to Patient Lifetime Value?

When considering how to maximize profits, your ultimate goal should be to increase the margin between your patient acquisition cost and the lifetime value of that patient. The larger the margin of difference, the bigger your return on investment (ROI).

You can widen the margin in two ways:

  • Reduce your patient acquisition cost, for example by spending less on marketing.
  • Increasing your patient lifetime value, for example by retaining patients for longer.
A comparison between a successful model, where LTV is bigger than PAC/CAC, and an unsuccessful model, where LVT is smaller
Source: https://www.productplan.com/glossary/customer-acquisition-cost/

Know Your Patient Acquisition Cost to Grow Your Practice

As you can see, calculating your patient acquisition cost isn’t as difficult as it may seem. In fact, understanding your patient acquisition cost and comparing it to your patient lifetime value is one of the most important steps in optimizing your profits. It will allow you to identify where you can make the greatest return on your investments, and where you should focus your efforts. In the end, it’s all about making strategic decisions that will lead to the highest possible return on your practice’s investment.

If your patient acquisition isn’t as effective as it could be, Wellbe can help. Our patient enablement platform provides an easy, cost-effective way to find new patients and turn them into loyal, long-term customers.

Talk to a Solutions Specialist today about how Wellbe can help lower your patient acquisition cost.

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