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3 Strategies to Calculate ROAS in Digital Healthcare Advertising

A large, multi-location healthcare organization came to us with a challenge: with a 6-figure digital ad spend, they had no idea what their ROAS (Return on Ad Spend) was. To put it another way, they didn’t know if their digital ad campaign was a money pit or a valuable resource. It’s a challenge we’ve seen plenty of times in the healthcare advertising we’ve done, and we were happy to help. We dove into their campaign and worked with some of their internal resources to develop a detailed ROAS measurement and tracking strategy.

The results? We found that some of their campaigns were incredibly profitable, while others cost more than they brought in. With this data, we were able to retarget and optimize their campaigns to make sure their digital ad spend really was helping to meet their goals.

In the end, we were able to measure their campaign’s ROAS and then increase it significantly by leveraging that data. As an added benefit, this cold, hard ROAS data turned the organization’s leadership team from digital marketing skeptics into some of the campaign’s biggest supporters.

Digital Healthcare Advertising Challenges and Opportunities

Calculating a Return on Ad Spend (ROAS) from any kind of advertising can be complex. Doing it for healthcare marketing – where volume is unpredictable, patient-privacy is essential, and revenue-cycles can stretch into months – can seem downright impossible. 

The good news is that while calculating a ROAS from digital healthcare advertising can be complex, it’s entirely achievable.

Protecting Patient Privacy

This isn’t just the right thing to do – it’s the law. In the United States, that law is called the Health Insurance Portability and Accountability Act (HIPAA), and it can be quite intricate.

Millions of pages have been written about maintaining HIPAA compliance, and we’re not going to come close to covering everything you need to know about HIPAA compliance and marketing in this post. That’d be a whole-different post. Or possibly a book.

But, the core, critical HIPAA principles your agency or organization needs to adhere to in tracking your digital healthcare advertising are:

      • Minimize or eliminate any contact between your marketing team and any personally identifiable patient information.
      • Anyone who does come into contact with personally identifiable patient information needs to be properly trained and adhere to the same HIPAA standards as a doctor, nurse, or any other healthcare provider.
      • If you’re going to use any protected health information for the purposes of marketing, your patients need to clearly consent to that use.

Setting the Groundwork – Tracking Inbound Leads

The goal of most digital healthcare advertising is going to be getting someone to make contact with the healthcare organization and schedule an appointment. Usually, this is going to happen through either a form submission or a phone call.

Leaving aside the fact that the forms themselves will likely need to be HIPAA-compliant, tracking form submissions isn’t too difficult. The important differentiation is that they’re tracked with a tool that doesn’t connect an individual submission to a unique individual. 

Google Analytics is a great tool here. It’s built around the idea of providing useful data without tying that data to an individual user. There are plenty of ways to track form submissions in Analytics, but events are Google’s (sensible) recommendation

Tracking phone calls is a bit more of a challenge. While some healthcare organizations may get the majority of their appointment requests via online forms, our experience shows that, for many, phone calls are still the primary way patients make appointments. Luckily, there are several good tools that allow you to track website-generated calls, some of which are even HIPAA-compliantCallRail in particular will allow you to send anonymized data back to Analytics, so you can view website-generated phone calls as (anonymous) events in that platform.

ROAS Tracking Method #1 – Averages

This is the simplest, most straightforward method of tracking the ROAS of your digital healthcare ad campaigns.  It minimizes the complications of patient-privacy by relying entirely on anonymous data.

Essentially, you figure out what your average organization-wide per-lead value is, and then multiply that by the number of inbound leads your digital advertising generates.

In order to calculate a ROAS with this method, you need to know:

    • Your average per-patient revenue
    • The average percentage of inbound leads that turn into visits
    • The cost of your healthcare advertising efforts
    • The quantity and type of leads generated by those advertising efforts

Here’s an example of what that might look like in the real world:

Bob’s hypothetical dental practice hired an agency that spent $5,000 on a digital Pay Per Click (PPC) campaign. That campaign generated 100 leads: 70 phone calls and 30 online appointment requests.

Bob knows that on average, he makes $350 per visit. He was also able to calculate that about 80% of his online appointment requests turn into office visits, while 70% of calls do. 

So, Bob’s agency can plug all that data into this formula:

(70 Phone Calls * 70%) + (30 Online Appointment Requests * 80%) = 73 Estimated Appointments Generated
73 Estimated Appointments * $350 Revenue = $25,550 in Campaign-Generated Revenue

The formula to calculate ROAS of a campaign is:

ROAS = (Campaign Revenue)/ Campaign Costs
So, here that turns into: ($25,550)/ $5,000 = 5.11 – more commonly expressed as 511%.

To put it another way, Bob earned $4.11 for every $1 he invested in this campaign. With numbers like those, Bob’s marketing agency is going to have no trouble convincing him to continue his advertising.

Advantages and Limitations

The advantage of this method is that it’s fairly simple, and it can be calculated entirely without accessing any protected patient health information. 

The limitation is that it doesn’t account for the type of services being rendered in any way. 

That might be fine in a small or focused practice where there’s not much variation in per-patient revenue. It’s not going to work so well in a larger institution with a wide range of services. Imagine trying to apply this method in a hospital where a simple office visit could bring in $300 in revenue, but a total joint procedure could bring in $30,000. 

At best, this method would give a very broad view of a campaign’s ROAS – so broad that it might be worth exploring more precise methods of calculating ROAS.

ROAS Tracking Method #2 – Service-Type Averages

This method is similar to #1, but it takes into account the type of appointment each patient requests.

You need the same data as our previous method, with the addition of:

      • Average revenue per visit-type
      • Ad costs per visit-type

Imagine Bob’s same dental practice, but this time, Bob has a bit more data.

He asked his agency to target 3 services, and he knows the average per-patient revenue for each service:

      • Annual cleanings – $150
      • Teeth whitening – $650
      • Invisible braces – $4,000

Now, Bob’s agency sets up unique campaigns for each service and tracks conversions unique to that campaign. 

We’re getting past the simple-formula phase, so instead, here’s an example of a report that Bob’s agency might give him, using this tracking method:

With this data, Dr. Bob and his agency can make a more informed decision about ways to optimize their future campaign, like the fact that for Dr. Bob, getting more annual cleanings in the door could have a fantastic ROI.

Advantages and Limitations

Like method #1, this ROI calculation method can be executed without accessing any protected patient information. The downside is that it still relies on averages. That might be fine for a dental practice like our hypothetical Bob, where the revenue from one teeth-whitening appointment to another will be pretty consistent. 

But what about healthcare facilities where revenue can be widely variable for patients booking the same appointment-type? Or just facilities who want the most accurate data possible?

Those facilities might want to explore the most accurate way possible of calculating ROAS.

ROAS Tracking Method #3 – Ultimate Precision

Let’s be clear from the start. This method requires the involvement of someone qualified and able to handle protected patient information covered by HIPAA. You’ll also need to make sure your patients have consented to letting you use their protected data in this way.

Building and maintaining patient trust is critical to the success of any healthcare organization, so you’ll want to make that consent as clear and understandable as possible.

While the only protected data being accessed will be phone numbers and revenue, that’s still very much protected data under HIPAA regulations.

With that out of the way, here’s how the process works:

      • When a lead (a phone call or form submission) comes in, that lead is associated with a source (medium and campaign), inside the HIPAA-compliant environment where it’s stored.
      • After the organization’s revenue cycle is completed, a HIPAA-trained and qualified individual uses a unique identifier from that lead, such as a phone number, to associate it with the revenue from that encounter. 
      • That individual tabulates that data, and feeds it back – now totally absent any protected health information – to the marketing team.

The marketing team will get a report that contains the precise revenue for a time period, broken down by:

      • Service type
      • Appointment source

With that data in hand, they can create a ROI chart very much like Dr. Bob’s in method #2, but with sometimes significantly higher accuracy.

It’s also possible to automate much of this process, but with the wide variety of software tools in use by healthcare organizations, it’s likely that this will require a customized development effort. 

Advantages and Limitations

The advantage of this method is that it gives you the most accurate ROAS possible for any digital healthcare campaign. Its downside is that it requires accessing data covered by HIPAA privacy regulations, and obtaining patient consent to do so.

For large or complex healthcare organizations, it might be worth going through that trouble to obtain valuable insight into their marketing operations. For others, a more simple method might be more appropriate.

Which Method is Right For You?

You really only need to answer three questions to figure out which ROAS tracking method is appropriate for your organization:

      1. How variable is your revenue per appointment?
      2. How variable is your revenue within a specific appointment-type?
      3. Do you have consent from your patients to use their data for specific marketing purposes?
      4. Do you have someone who can regularly safely handle HIPAA-protected information, and provide the necessary reports, or the capacity to automate that reporting? 

Our advice?  Keep it simple when you can, but don’t be afraid to put in the effort to get more accurate data when it will provide valuable insight.

Whatever method you chose, calculating ROI is a critical step in assessing the success of any digital ad campaign, and being in the healthcare industry offers no exception to this rule. 

If you’d like more information or more thorough explanation about the return on ad spend for your healthcare advertising please feel free to contact us!