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Definition: Patient acquisition cost refers to your expenses associated with obtaining a new patient. It refers to the total cost to find, nurture, and convert a prospect into a patient of your healthcare practice.

If you want to grow your healthcare practice by acquiring new patients, you need to examine how much you are spending to convert a prospect into a paying customer. Are your dollars spent bringing in potential leads that will convert and become paying patients? Or are they reaching people who are not availing of your medical services at all?

The metric you need to look at when you want to answer these questions is patient acquisition cost. Scroll further to read through these topics:

Want to get help to improve your medical practice’s marketing campaigns? Contact us online or call 888-601-5359 to speak with a strategist!

What is patient acquisition cost?

Patient acquisition cost refers to your expenses associated with obtaining a new patient. It refers to the total cost to find, nurture, and convert a prospect into a patient of your healthcare practice. Outside the medical practice field, it is known as customer acquisition cost.

Aside from your marketing or ad budget, patient acquisition cost also factors in other spending like the following:

  • Marketing collaterals
  • Market research before you started your campaigns
  • Third-party partnerships like a marketing agency
  • Wages and taxes of your staff
  • Rent
  • Patients’ treatment and materials used

Ideally, your average patient acquisition cost should be lower than your patient’s lifetime value (LTV) or the amount of money that patients will spend at your clinic or medical practice.

You’re probably familiar with another metric called cost per acquisition or cost per action (CPA). CPA is a metric that refers to acquiring a non-paying patient. Metrics like cost per lead, cost per sign-up, and cost per registration fall under CPA.

Why is patient acquisition cost important?

While retaining existing patients is important for medical practices likes yours, obtaining new ones is as significant, too. After all, not all your patients will visit the clinic every day.

Patient acquisition cost can help you understand how much you need to spend to bring in new patients. It also helps you identify your breakeven point. In addition, patient acquisition cost lets you do the following things.

Find out if you’re overspending or underspending to get new patients

It’s nice to welcome new customers to your medical practice, but you want to make sure that you’re not overspending to bring them in.

Your patient’s LTV metric predicts how much a patient is worth based on how long they receive your services or products. Looking at the ratio of your patient’s LTV with your patient acquisition cost tells you if you’re getting a positive return on investment (ROI) on your spending to acquire a patient.

The benchmark for a healthy ratio of patient LTV to patient acquisition cost is 3:1. If yours is below 1:1, you are spending more than what you’re earning as a profit.

Optimize your ROI from paid or ad investments

Knowing your patient acquisition cost helps you optimize your ROI from your paid or ad investments. By reducing your spending to convert new patients, you’ll have a higher profit margin.

Identify which marketing channels are getting the best ROI

Your average patient acquisition cost per channel helps you determine which channels are giving you the best ROI and which ones are not. This helps you guide your budget planning and allocation and lets you reach more customers for a fixed budget.

Allocate more of your budget into marketing channels with lower patient acquisition cost, and you’ll enjoy more profit for the same amount of spending. In addition, you can eliminate channels that are not cost-effective.

How do you calculate patient acquisition cost?

Calculating your patient acquisition cost is important so you know if you’re overspending or underspending to get new paying customers. The formula for patient acquisition cost is:

Patient Acquisition Cost = Cost Spent on Marketing and Sales to Acquire New Patients / Number of Patients Obtained

For example, let’s say you spent the following to acquire new leads and win customers in the first six months of the year:

Wages and taxes: $80,000

Operating costs: $60,000

Marketing budget: $45,000

Your total spending is $185,000. In six months, you gained 1000 patients. Your patient acquisition cost is $185.

How to use patient acquisition cost

Do you want to make the most of your marketing budget? Use your patient acquisition cost to help you allocate your budget for a more cost-effective marketing plan that delivers better ROI.

Calculate your average patient acquisition cost per channel. Compare the patient acquisition cost per marketing channel. Which ones delivered lower patient acquisition cost? Rethink your marketing strategy by allocating more budget to channels that deliver lower patient acquisition cost.

In our earlier example, your overall average patient acquisition cost is $185. Let’s say your email marketing efforts returned a patient acquisition cost per channel of $50, while your paid social media campaigns gave you an acquisition cost per channel of $200.

Your email marketing campaign is more cost-effective. In fact, it delivered a patient acquisition cost that’s lower than your overall average, so it makes sense to allocate more budget to this channel in the future.

Another way you use patient acquisition cost is to maximize your profits. Increase the margin between your patient LTV and your patient acquisition cost, with the latter being smaller. The bigger their difference, the higher your ROI.

How do you widen their gap, though? You can either decrease your patient acquisition cost by spending less on marketing or increase your patient LTV by reducing your patient’s churn rate.

4 strategies to lower your patient acquisition cost

Want to decrease your patient acquisition cost? Here are four strategies that can help you:

1. Segment your buyer personas

When running your marketing campaigns, it’s best to focus on your target audience. If your medical practice appeals to a wide range of customers, though, your patient acquisition cost may increase as your budget tries to reach everyone — from families with young children to young, dynamic individuals.

The fix? Segment your buyer personas and run marketing campaigns suited for each segment. This way, your campaigns can target your audience more efficiently.

2. Invest in conversion rate optimization (CRO) for your medical practice

Make it easy for your prospects to become patients. To earn conversions, optimize your website and your landing pages for conversion (a practice called conversion rate optimization, or CRO). Make sure your site pages are mobile-friendly, too!

If your medical practice doesn’t have the resources to optimize and test your site pages for conversion, consider tapping a digital marketing company like WebFX for CRO services.

3. Retain your existing patients

Did you know that on average acquiring new customers is five times more costly than retaining existing ones? Make sure you address your patients’ needs and pain points so they’re always satisfied with your service.

As a result, they’ll turn to you each time they need your medical practice’s expertise. Their patient LTV will increase, and so will your revenue.

4. Use marketing automation

To lower your spending, look at ways you can operate more cost-effectively. Marketing automation is one of the ways you can reduce costs.

Marketing automation tools like a customer relationship management (CRM) software can automate lead generation and campaign report generation. An affordable and easy-to-use CRM like Nutshell can help automate some of your employees’ tasks and streamline your processes.

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Calculate your patient acquisition cost and grow your medical practice with WebFX

Determining your patient acquisition cost and comparing it with your patient LTV is important for every medical practice. It helps you make better strategic decisions for your medical practice or clinic, so you can maximize your investments and run more cost-effective marketing campaigns.

If you need help with your medical practice’s digital marketing strategy, WebFX can help. We are a full-service digital marketing agency with 25+ years of experience serving 200+ industries, including healthcare. We’ll be glad to help your medical practice execute digital marketing campaigns that bring revenue and increase your ROI.

Contact us online or call us at 888-601-5359 to speak with a strategist and get started with your digital marketing strategies!

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