Monday, February 8, 2010

Calculating Return on Marketing Investment for Healthcare Organizations

Much has been made of the need for calculating a Return on Marketing Investment (ROMI) for healthcare organizations. Most often regulated to producing brochures and other items of interest, healthcare marketing departments need to exercise a leadership position and talk the financial language of senior management.

Below is an example of an actual ROMI computation for a multi-hospital organization. This of course assumes that you can identify and pull down the information that you need across many platforms of the organization to produce such a result. If you can great, if you can’t then you need to broaden your technological capability and move towards a higher level of computerization and system integration that you already experience.

Work with your finance department. They are a great source of information. With a high degree of collaboration and understanding their viewpoints and perspectives regarding marketing you can lead and make a difference. By answering questions, concerns and opinions with solid data, you can move the discussion form marketing does “stuff’ to marketing is a financial contributor to the organization.

The method can be adapted to any campaign and provides you with the data fields and logical analysis you need. This has been heavily edited to hide the organization. The full report was quite large and contained an entire programmatic evaluation of the Physician Referral Call Center with recommendations for improvement to increase scope and capabilities. This portion is most applicable for today’s conversation.

How to complete a ROMI Analysis

PRCC ROI

An analysis was undertaken to look at the ROMI of the Physician Referral Call Center. The analysis matched a database of call center name records for the period to financial records which had already been downloaded. The analysis produced the following results:

9,102 call records were matched with utilization and financial data.

9,102 calls resulted in a total of 9,121 encounters in the ER, Inpatient and Outpatient categories of service.

751 encounters were ER
177 returning encounters
573 first time encounters

1,105 encounters were Inpatient
530 returning encounters
699 first time encounters

7,267 were Outpatient
2,014 returning encounters
5,253 first time encounters

Total charges for all encounters equaled $22,522,649

Charges for new encounters all services totaled $16,085,198 or 71 percent of the total charges

Average charge per ER encounter $1,304

Average charge per Inpatient encounter $13,581

Average charge per Outpatient encounter $903

Gallup measures loyalty at 68 percent (would return for service) which means that for every 100 patients 32 would not return for care- therefore:
ED- 57 returning encounters captured that would not have returned
Inpatient – 170 returning encounters captured that would not have returned
Outpatient- 645 returning encounters captured that would not have returned

Incremental charges counted returning encounters not loyal
ER - $74,337
Inpatient- $2,308,851
Outpatient- $582,505
Subtotal charges counted: $2,965,693

Overall market share in primary and secondary service area is 14.53 percent. The number of first time encounters have utilized us above market presence is therefore:
ER 573 first time encounters, 83 not countered, 490 counted –
Inpatient – 699 first time encounters, 101 not counted, 598 counted
Outpatient – 5,253 first time encounters, 763 encounters not counted, 4,490 counted

Based on an overall market share of 14.5 percent the incremental charges counted for new encounters not because of market presence:
ER - $638,960
Inpatient – $8,121,438
Outpatient – $4,054,470

Total Charges counted: $12,814,868

Discount from gross charges for Medicare, Medicaid, Managed Care, Bad Debt and Charity Care @ 65% is $8,326,644

Net Revenue: $4,488,224

PRCC program costs: $233,410

Net contribution: $4,254,814

ROI 18.22:1

You can reach me at themichaeljgroup@aol.com or by calling 815-293-1471 for strategic marketing consulting services.

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