How to leverage past surgery patients to help you grow your business
HEALTHCARE BUSINESS & MARKETING STRATEGY
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CUSTOMER LIFETIME VALUE IS THE METRIC WE COUNT WHEN EXISTING AND PAST PATIENTS BUY MORE FROM YOU AND REFER THEIR FRIENDS
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DIG FIRST ON YOUR OWN PROPERTY WHEN SEEKING TREASURE
Most established hospitals, clinics and ASCs and most established surgeons and dentists have a rich diamond mine in the form of patients who already know, trust and love your brand.
How many admissions did you have last year? And the year before? And the year before that?
How often did you reach out and remind them you exist since their last encounter with your brand?
How many referrals did each one send you that drive revenue to your door?
How did you thank them?
How many patients did your existing contracted health plans deliver to you in the past 3 years?
What margins did you realize from those cases?
How did you reward them?
How much did you spend on marketing, advertising, contracting, technology, and other business enhancements last year? Divide that by the number of new patients you realized in that same period of time. That’s your base cost of customer acquisition.
One widely quoted statistic that rings as true in healthcare as in any other sector is that a person is 21 times more likely to buy from your hospital, practice, clinic or ASC if they’ve been treated by you in the past compared to a stranger they don’t know and haven’t done business with in the past.
That’s why with many medical tourism clients, I recommend a strategy that involves attracting patients through a low cost, convenient, all-in-one- day comprehensive wellness or health checkup. This low risk, non-threatening service is something that, if you have a human body, you need it.
And with 25% of patient revenues coming from out-of-pocket financial responsibility for non-covered services, cost shares and deductibles, you can leverage all-in-one-day convenience over having to wait weeks or months to get an appointment to get your checkup diagnostics scheduled and then set the time to review the results and establish a go-forward plan with your doctor.
Healthcare providers with established patients are at a huge competitive advantage if they can figure out how to sell more to existing and past customers and their friends, families and colleagues and thereby increasing customer lifetime value.
Five ways to boost Customer Lifetime Value
- Price increases + grandfathering alternative
- Frequency of interaction
Were you aware that past customers are far less price sensitive than you might imagine. This is especially true if you position yourself appropriately, deliver great customer service and offer consistent value.
Will they balk if you increase your prices by 10-20%? One of my clients charges less than $15,000 for a total or partial knee replacement. Competing hospitals charge at least $28,000 for the same procedure and sometimes as much as $50,000 all in after surgeon, anesthesia, prosthetic, or hardware gets billed. Who will complain if they paid $15,000 for one knee and $18,000 for the second knee some months or a few years later compared with the hospital up the street where they would spend $56,000 to as much as $100,000 for the same service at a hospital – just because it is a hospital?
Think about this for a moment: If you hold prices constant for too long, in real terms you effectively lower them because inflation makes the same amount of money less valuable over time. To make price increases palatable, tell your story and explain the increases. Explain new technologies, services, staffing, and quality or the increased input costs that you’ve included. Explain the benefits they’ve already received and how they’ll now benefit even more from your new innovations and additions.
A customer won on price will be lost on price as well.
When implemented correctly, the increase in profit gained by raising prices to established patients and those they refer will outweigh lost revenue from price sensitive churners.
Grandfathering is a way to approach price increases by applying the old price to established customers within a certain time frame.
“Had your new knee replaced three years ago? Get scheduled before XYZ date and we’ll honor the old price to do your other knee.”
This approach can endear you to your existing customers and gives you an opportunity to tell a story to your existing customers about the great deal they are getting and boost loyalty as you make them feel special and exclusively entitled.
For those who ask me about having a single “price” and how this doesn’t risk compliance issues the answer is simple: You have one price. The new price. This is an alternative price that is discounted for a special class of customer who must meet certain threshold requirements before they are eligible for the alternative price.
Upselling is the bundling of add ons with the primary product or service being sold. In ophthalmology it could be a Toric lens upgrade. In orthopedics if could be an upgraded prosthetic that lasts 30 years. In plastic and cosmetic surgery, it can be an additional complementary procedure using the same surgical appointment and anesthesia.
This means that an upselling strategy can even work with insured and government health programs. While those payers allow the basic model, the credit for the basic, standard model can be allowed and the upgrade offered at an increased self-pay price.
When a customer buys your primary offer first, the suggested add-ons feel comparatively less expensive. When you have a patient that already knows and trusts you, and they’ve come back for additional care or surgery, they were not specifically shopping for your suggested add-on, so they are less likely to be price sensitive to the procedure or service being upsold as an attachment. And often, the margin on the supplemental sale is greater than the primary procedure or service.
To frame an upsell, you may tell a story such as “most customers who had a knee replacement with our new NAVIO◊ robotic-assisted system opted for the 30-year prosthetic. Who does this? Amazon, for one. You see these pairings every time you buy a product on Amazon. By telling people what the norms are, they agree due to a deep-seated psychographic – the desire to fit in.
Ascension is the process of moving existing customers to your higher priced, higher margin products, experiences and services. Car dealers do this all the time. Healthcare is not anything like car sales, right? WRONG! While you cannot ethically bump up a product or service that a patient does not “need” by medical necessity, can you upgrade and ascend them to a VIP suite? A private room? Or some other experiential enhancement?
Consider a strategy to offer a standard and a premium option in every category to increase net profit per case. If it is a consultation only, your upgrade could be rapid access. You’ll keep your staff overtime, or get the doors open earlier, on a weekend, for a premium fee. Just be careful that your premium surcharge covers the cost to supply the upgrade. For this approach, you MUST know your costs per hour in regular and overtime. But if it is just you and your cognitive abilities and you don’t need staff to take x-rays or draw blood or perform diagnostic services, the surcharge drops straight to bottom line.
While frequency may not be something your established and past patients buy from you, referrals count too! But even my ASC clients can leverage this strategy. Think other procedures and conditions! Does the patient know you offer services and surgeries in specialties other than the ones for which they already know you?
Send reminders and make excuses for additional “touches”. Send reminders by mail, SMS (texts) or email newsletters and private emails to keep you top of mind. And for those who are worried that you are going to annoy them – change your perspective! You are doing them a disservice when you let them go to the hospital for a procedure that could cost them a whopping 60% more, on average!
Invite past patients in for a follow up checkup on the surgery they had “at no additional charge”. For that matter, add the freemium into your price of your procedure and stage it for a year later. If your competitor doesn’t offer this, you win! And if they never redeem, that’s on them. Meanwhile, your price bundle now has a windfall built in.
The last item on the list is reactivation. This is where, for whatever reason, your past customer bought the next service from someone else. How can you win them back?
My concierge medical practice clients do this all the time with this tactical maneuver. To do this, they start by making a list of patients they know they lost, ones who haven’t been seen in awhile, and those you actually want back – if you get my drift. They create a strong offer that they “know” their ideal customer wants or needs. They then reach out and ask why it’s been so long. If it was something that offended the former patient, apologize and describe your story about what you did to improve. If they take the offer, make them feel very special.
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What Gets Measured Gets Managed
Marketing, and in particular, Customer Lifetime Value is a strategy where you must commit to constantly measure, manage and improve. Otherwise, this approach can quickly evade your grasp and you spend lots of money, time and effort attempting to grow a new batch of customers each year.
Small hinges swing big doors
Each customer you had this year, last year and the year before can be considered “leads”. What if you only grew your customer lifetime value by one half of one percent? How much was your average transaction value? How much revenue did those patients or contracted payers generate? How much was gross margin? How much cash does that represent in total net profit with just a 0.05% bump?
What if those medical tourism patients who come for a $1500 checkup return for a bigger problem that needs treatment? Build a recurring element into every patient encounter for a surgery or a specialty consultation or minor service. Figure out what you spend on average to attract and close a new customer. Customer acquisition cost is an important metric that can help shareholders, physicians and employees understand how important it is to nurture your existing loyal base. Customer Lifetime Value is your money shot! Thirty-five years ago I worked for an amazing orthopedic “entrepreneur” who whiteboarded all these numbers on a monthly and weekly basis. I learned this CLV system by standing on the shoulder of this now departed giant. Now there are software solutions on the market that can pull in real time data from a variety of sources.
Measuring, managing and improving customer lifetime value with regular periodicity is key to building your healthcare business into a high-growth hospital, ASC or medical or dental or veterinary practice.
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