time of all of the sales to him.
At our mythical sporting goods store, the first sale to the average
Billy Bob might be only a $19 t-shirt resulting in $9 of gross profit.
But, measured over the years of the normal customer relationship,
the balls and bikes and boxing gloves purchased by our avatar
Billy Bob result in $3,567 of sales and $2,193 of gross profit. That
new Billy Bob over in aisle 7 isn't worth $9, he's worth $2,193, and
the smart store owner treats, and entreats, each customer in that
light. And that's before we even take into account how many addi-
tional "Billy Bobs" the original Billy Bob refers.
Your many customers
The exact same thinking tool and metrics apply in health care. Let's
start with a simple analogy to the sporting goods store's Billy Bob:
Instead of looking at a transaction, say the value of a medical proce-
dure performed on Suzie Smith, as $1,200 in profit to the facility, look
at it in terms of the relationship with the average "Suzie Smith." If
that's 2 procedures and 3 referrals over the lifetime of the relation-
ship with the average Suzie, returning, for example, $6,700 in profit,
then that's the lifetime value of your customer. And, then, of course,
each of the referred "Suzies" continues the trend, on and on, geomet-
rically.
But that's not where the use of the lifetime value tool ends. In fact,
it's just the beginning. The next step is to ask yourself how much you
can spend (in money, time, effort and so on) to bring in a $6,700-in-
profit customer and to ask yourself how you should treat a $6,700-in-
profit customer.
But wait, there's more. As it's often said, there are many "cus-
tomers" in health care: the patient, the referral source and, depend-
ing on a physician's medical specialty, the facility. I suggest that it's
J U L Y 2 0 1 9 • O U T PA T I E N T S U R G E R Y. N E T • 3 7
