Acquisition, attrition and retention. Those three words might not seem of utmost importance in the financial realm of the healthcare industry compared to terms such as “key performance indicators” or “payer mix.” When physician practices focus on these areas, though, they’re typically able to sustain an elevated level of incoming revenue and achieve higher patient satisfaction.
Acquiring New Patients
Let’s start with patient acquisition. It might be helpful first to understand the idea cost of acquiring customer (CAC), which in the business world is the total amount spent by companies to onboard a new customer. CAC is calculated by dividing all the costs spent on acquiring more customers (i.e., advertising, marketing, overheads, staff salaries, tools) by the number of new customers gained over a fixed period of time.
In healthcare, this idea is referred to as patient acquisition cost (PAC) or cost of patient acquisition (CPA). Basically, it’s the overall marketing expenditures required to acquire and “sell” to each patient. Acquiring new patients can be an expensive proposition because it can cost a physician practice an average of five-to-eight times more to attract a new patient than to keep an existing one.
The Effect of Patient Attrition on a Medical Practice
Next is patient attrition, which can be calculated by subtracting the total patients in a year who have been lost (those who have reached 18 months without an appointment) from the total new patients in a year and then dividing this number by the total active patients. The average patient attrition rate in the United States is 17 percent.
- Poor experience with a healthcare provider and staff
- Slow or no response to questions or concerns
- Poor communication, long waits in phone queues
- Delayed access to next available appointment
Another key reason some patients fail to return to see a provider is dissatisfaction with the amount of time spent in the exam room. Research shows that primary care physicians only spend one minute on other patient concerns after the chief complaint is addressed, even though patient education leads to more successful adherence.
Not surprisingly, patient no-shows markedly affect a practice’s attrition rate, with almost 32 percent of patients with one or more no-shows not returning to the same practice within 18 months. Having even one no-show appointment increases attrition by almost 70 percent.
Understanding Patient Retention
The most important of these three concepts is retention. Retention rate measures a practice’s ability to retain patients over a specific period and is computed by:
- Setting a fixed time frame
- Figuring how many clients the practice gained during that time period
- Calculating the total number of patients at the end of the period minus new customers acquired during the period and dividing the total number of customers at the start of the period
By increasing patient retention by just five percent, a practice has the capability to increase the value of an average patient in lifetime profits by 25-100 percent. That’s a lot of revenue, considering the average lifetime value of a patient is between $12,000 and $15,000.
In addition to increasing revenue, patient retention can boost a practice’s reputation. Satisfied customers tell an average of nine people about their positive experience, while dissatisfied ones are likely to tell 22 people about their negative experience. Therefore, a lack of patient retention can lead to damaged customer relationships and fewer word-of-mouth referrals.
Research has shown the value of maintaining a strong customer base, but only 16 percent of businesses focus on retention. Practices that engage in retention strategies are more likely to benefit from patient loyalty, resulting in improved adherence to medical advice and treatment plans. Also, patients who are more satisfied with their healthcare positively affect the satisfaction of physicians and staff, resulting in increased productivity and reduced turnover.
Utilizing Digital Technology to Bolster Patient Retention
Calculating patient acquisition, attrition and retention rates might seem like a cumbersome task, but doing so is an essential part of a financially — and often operationally — successful physician practice. It can be achieved in multiple ways, from employing patient engagement strategies and promoting a cost-effective payment experience to staying on schedule to decrease wait times.
Healthcare providers also can mitigate patient attrition by utilizing technology, such as solutions that automate administrative tasks and streamline patient outreach and communication. Some research contends that medical practices lose approximately two-thirds of their first-time patients due to lack of follow-up and loss of communication.
For example, utilizing a solution that enables patients to schedule appointments online provides convenience for both them and healthcare practices. Similarly, automated communication tools that offer HIPAA-compliant, two-way text messaging help remind patients of their appointments, thereby reducing no-shows, which cost the healthcare industry $150 billion annually.
Providertech’s CareX platform enables HIPAA-compliant SMS text messaging for healthcare providers to proactively keep in touch with their patients before and after encounters — without overextending already constrained staff and budgets. This effective communication helps keep patients engaged while helping practices’ retention rates. Learn more about CareX Complete Engagement here.