Annual revenue per patient is a great number to have at your fingertips. It’s one of the numbers we use most commonly when trying to decide on new expenditures, particularly marketing spends.

To calculate a useful dollar-per-patient-per-year figure, you’ll need to know two things:

• Your active patients in the past year
• Your revenue over the same one year period

From there, it’s a simple one-step: divide the revenue by the number of active patients. If, for example, you billed $60,000 last year, and you had 250 patients visit your practice (counting each patient only once), then your average annual revenue per active patient is $240.

How to Use It
This is another of our favorite decision-making tools, and it’s particularly useful when it comes to making choices around advertising.

Right now, for example, we’re making a decision between two different locations for the new clinic (we’ve outgrown the current space). One space has no real street visibility, the other has a large awning facing a busy street.

The high-vis location is considerably more expensive. Is it worth it? One of the tools we use to help make that decision is annual revenue per patient. Knowing our annual revenue per patient, we can then ask ourselves, “Well, we need to get three new patients a month just from that big sign to justify the expense. Will the exposure generate that?” That question seems easier to answer than, “Should we spend an extra $20,000 a year on this space because it has more exposure?”

Why One Year?
You may be wondering why we don’t use lifetime patient revenue, instead of just one year – after all, lifetime revenue is almost certainly higher. I use a year because:

• It’s more accurate. After one year, the numbers start to vary. Some patients disappear, some stick around.
• I like to get my money back in a year from an investment whenever possible. If we spend $1000 on something, I want to know how many new patients it takes to get that money back in the first 12 months, maximum. Revenue per patient after that becomes bonus return.
• A year provides a more conservative estimate. Lifetime revenue per patient certainly is higher, but I work off a single year, and that provides a good margin of safety.

Using the annual revenue figure allows you to put financial decisions in a language you can more easily understand and work with. Give it a try. It works wonders for marketing decisions, and once you figure out the annual revenue per patient, you don’t have to recalculate it every time – just once a year, to keep the number fresh.