Sunday, April 15, 2012

What is your healthcare marketing ROI?


Healthcare marketing needs to keep up with the times and change as much as overall healthcare. It's time for healthcare marketing departments to step out of the show and tell marketing communications approach to tracking campaigns, making assumptions of its effects on revenue and produce real Return on Marketing Investment (ROMI) measures.

Work with your finance department.  With a high degree of collaboration and understanding between finance and 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.

Below is an example of an actual ROMI computation that I completed for a multi-hospital organization. After this all was presented, all marketing campaigns going forward were tracked though the Physician Referral Call Center.

The method can be adapted to any campaign and provides you with the data fields and logical analysis you need. This has been edited to hide the organization.

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 counted, 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
So, do you still think you can't prove Return on Marketing Investment?

Marketing is a revenue department and will be more than ever as healthcare change continues unabated. Time for a lot of healthcare marketing departments and organizations to grow up and start proving their value.

Michael Krivich is an internationally followed healthcare marketing blogger with over 4,000 monthly pages views in over 52 countries worldwide. He is founder of the michael J group, a healthcare marketing consultancy dedicated to creating value through strategic marketing for hospitals and health system regardless of payment mechanism, either fee-for-service or value-based to increase market-share, revenue , brand and demonstrate actual return on marketing investment. Michael is a Fellow, American College of Healthcare Executives and a Professional Certified Marketer, American Marketing Association.

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