This article is sponsored by Circle Social. This article is based on a discussion with Lance Folske, CEO at Pure Mixed Strategy, LLC, Nick Jaworski, CEO at Circle Social, and Peter Barbuto, VP of Business Development at Recovery Centers For America. The discussion took place on October 11, 2023 during the BHB INVEST Conference. The article below has been edited for length and clarity.
Behavioral Health Business: What’s the most important data to look at when considering entry into new markets?
Nick Jaworski: When you’re going into a new market, it’s very different from being an established provider. The biggest thing that you have to look at is cost because nobody knows who you are, you don’t have referral sources, you don’t have a reputation in that community, and so you’re investing a lot in your go-to-market strategy, which ends up being mainly digital.
You’re not going to run a Facebook campaign and suddenly get patients. You’re not going to run a TV campaign and suddenly get patients. You are reliant on bottom-of-funnel Google Ads for your immediate intake, and that’s expensive. If you’re in the commercial inpatient SUD space, you’re paying $4,500 in admission. It’s really expensive. If you’re in the Medicaid space, it’s under $200, so it’s a lot cheaper, but it’s just a high cost.
You have to fill those beds with high-dollar advertising until you build up a reputation, referral streams, alumni, and get some long-tail marketing in place. The most important metric for us is actually spend for our go-to-market strategy. Then obviously you want to know what your CPAs should be on those channels so that you’re not too high or too low, but that’s the first thing that we look at.
BHB: Peter, what do you look at on the provider’s side?
Peter Barbuto: Very similar to what Nick had mentioned. Reimbursement methodology is important. Medicaid, commercial, what that looks like, but certainly population density. Household income, county by county, zip code by zip code, and really understanding the pet competitive landscape. You have to understand and have the market intelligence as to where people are accessing services in that region.
Community-based organizations like who’s getting SAMHSA grants, and really doing the due diligence on the ground level to understand the behavior pattern of the patient population you’re trying to acquire, for sure. In the past, we looked into claims data. Understanding the payer landscape from that angle to have a little bit more insight into the behavior pattern of the patients through procedural codes, diagnostic codes on both sides, to really get a good idea of the behavior pattern, like I said.
BHB: Lance, I know it’s always challenging to be the last person to answer a question. Any thoughts that you’d like to add?
Lance Folske: I get to clean up what they all forgot, so it’s easy, actually. I would say I look at the competition, of course. Number one is always rate. You’re looking at the rates in a market. Rate, competition, labor costs. Within rate, I’m looking at claims data, like you said. I’m looking at all the analytics around network adequacy, who’s where and why, what do they do?
There’s a couple pearls I like to use. One is what I call legislative anomalies, and this is to do your due diligence and think about some of the A-TRIPS and the dishes and the DRGs. You can sometimes get a modifier, especially with a Medicaid geographic modifier, so that’s a pearl I call a legislative anomaly. Then actually, CMS requires that you post your shoppable services. 45 CFR part 180. CMS requires that you post your rates, actually, so you can search most hospitals or treatment centers billable rates, and you can get a concept of where they’re at to get a starting point.
That’s on the rate side, I like to use that to begin with. Then of course, the competition, who’s around, what are they good at, and then your labor costs. What’s Chick-fil-A paying? What’s Amazon paying? Because that’s who you’re going to be competing with.
Jaworski: One thing that we were talking about earlier, a mistake a lot of people make is the markets are pretty saturated. Whether you’re opening a psych hospital or an MAT clinic or an outpatient SUD provider, most communities have multiple providers already. My question to people going to market is always, what are you going to do that is different or better than the existing competition?
Because that’s going to create the entire dynamic. This is an investment conference. There are a lot of myths around the investment in the space. We often hear it’s a $35 billion industry. People are saying it’s going to be a $67 billion industry in a couple years. That’s not wholly accurate, especially if you’re looking at SUD. When you look at the SAMHSA data, only about 7% of people actually want services. That’s it. 7%.
Yes, there’s a whole ton of people out there that could qualify for services, but they don’t want them. You’re not going to push them in. It’s very hard to do so. There’s not all of these patients out there with all this unmet need, like a lot of investment theses come up with. There’s actually a much smaller volume. When you get into SUD commercial, residential, less than 1% of commercially insured patients use SUD for residential levels of care.
Most people are going to go into outpatient treatment. They’re going to find a private therapist, they want some outpatient programming. They don’t want to and they don’t need higher levels of care. Our actual total addressable market is a lot smaller than what people often see in investment decks. For that reason, your competitive advantage and what you do well is of critical importance. You have to do something better than the players that are already there because it’s not going to fill itself.
BHB: What’s a good example of a way that a provider could differentiate itself or show that they’re better than their peers in that market already?
Jaworski: There’s a couple of pieces. Obviously, quality of care is one in terms of the delivery, but you have to define that. Often if I’m talking to providers, I say, well what does quality care look like? They’re like, “Well we do evidence-based treatment.” Great. What is evidence-based treatment? “Oh, it’s CBT.” Tell me what good CBT looks like. Nobody knows.
If you can’t define what your quality care is, then you can’t define how it’s better than someone else. That’s number one for me, is actually looking at the care delivery. Patient engagement is a tremendous metric that most people struggle with. They’re not engaging patients, especially in groups. They spend most of their time in groups and in higher levels of care. Most patients are just sitting around in a circle waiting for their turn to talk.
You have a lot of AMAs, you have poor patient engagement, you have poor clinical results because of it. Lots of opportunity on the clinical side. Then I’ll let Lance speak to it, but your speed of getting someone from the hospital, a referral partner into your facility is critical.
Folske: You have to decide who you are. You have to pick a profile. If you don’t decide who you are, the market will decide for you. If you chase a census, for example, your milieu will pay for it. In order to target a specific audience, if you want to target a certain demographic or a specialty or a certain pathology, you have to be visiting those referral sources, you have to be creating separate clinical programs. Their experience has got to be separate and distinct. If you just chase a census, your milieu will pay for it.
BHB: Peter, I saw you shaking your head yes a couple of times. How does Recovery Centers of America differentiate itself in its markets?
Barbuto: Yes, I think the evolution of the message for providers like ours in the marketplace. Understanding the quality metrics in place and how you communicate that to the marketplace. Understanding that quality will rule the roost at the end of the day.
BHB: Peter, sticking with you for a second, whether it’s an existing market or a new market that Recovery Centers of America is looking to expand into, how do you weigh your marketing strategy differently? Do you?
Barbuto: We do, obviously, in partnering with our folks on the marketing side. A significant investment certainly from a name recognition and a brand awareness standpoint. It’s really rooted in the relationships that we’re going to develop in the customer acquisition or the relationships we’re going to develop on the ground level. For us, it’d probably be more of a significant investment on the marketing side and I know Nick is going to speak specifically to that and go into new markets for sure.
Jaworski: Yes, it’s the same as I said before there, I guess. You have to invest more capital in the front end because you don’t have a brand, you don’t have a community, you don’t have referral partners, you don’t have an alumni base. It just really comes down to a cost. Then for the SUD space, because so many people are focused on the bottom of the funnel, which is mainly Google Ads and business development, investing in other channels is of critical importance.
You want to be on your Facebook, you want to get LinkedIn going, you want to get your TV campaigns if you’re a larger provider. You need that long tail because only about 20% of patients come from crisis calls, which is what the Google Ads calls are most of the time. The other 80% of your patients are coming from other places where they’re not just searching in a moment of crisis.
They’re making a conscious decision, they’re evaluating different providers. Usually, we see them evaluate about five to eight providers, then they narrow that list down and they’ll call somewhere between three and five, and then from that call, they’ll make a decision of where they want to go. Those individuals have to be nurtured over the long term from these outbound channels, not just reliant on people getting to a crisis point and calling. Then that’s a different call center model as well. It’s very easy, unfortunately, if my child I find overdosed with a needle in their arm, I’m just going to call and get him in the first place that takes him because I’m freaking out. If I have my son here who’s been struggling with alcoholism for five years, this has been going on for a while, I want to send him to the right place, and so I’m going to evaluate different providers, I’m going to call different providers, I’m going to make the right choice that I think is the best fit for him. That’s a different communication on the phone, it’s a different marketing message up front as well.
Folske: There are more and less sophisticated marketing strategies, of course. Chasing volume, you’re a new hospital system, 60% of your volume is going to come from the EDs. That’s the front door in any community. With that comes a certain payer dynamic. To be more diversified, you either have to, again, hold the line, but depending on if there’s an exit strategy or what your time horizon is, you might not have time to create that longer vision on what your clinical milieu is, and so I think depending on who you want to be, you either hold the line at the beginning because it’s hard to unring a bell.
Once you are chasing that acute volume in a market, it’s hard to turn it off. You have to be very deliberate with who you see and why.
Barbuto: I would add on that real quick, especially if you’re looking at specialty programming, a lot of people just build a veteran’s program or LGT program from a chasing volume standpoint. Hey, we want more patients in the door, let’s take couples, let’s take pets, let’s do LGBTQ. You have special needs. If I’m a veteran, I’m going to be much more likely to have PTSD, for example.
Your clinical program should be built for PTSD. Your clinicians should be trained on the concerns that veterans have. If you do that right, then you become known for it, and you’re going to create this virtuous cycle of patients coming in because you’re known for quality care and specialized care. If you’re just building a program just so you have the name, so you can say you can accept those patients, that’s when it doesn’t work.
BHB: Can you please address the challenges posed by having to navigate advertising parameters around health-related issues at the bottom funnel.
Jaworski: In general, there’s a lot of regulations around healthcare marketing, so you can’t do retargeting, Facebook, Google won’t allow retargeting. There’s compliance issues even around saving data. What we say, good marketing is good marketing. It’s the right message at the right time to the right people. That’s all that matters.
People get really obsessive about the data, and they say, okay, well, I want to be able to track everything, and I want to understand each click-through rate of each single campaign. If you’re reaching the right people with the right message at the right time, it will work. That’s the bottom line. Most people make decisions over longer windows. They need 7 to 12 touch points. It’s a minimum of two weeks for them to decide, okay, I need to get a loved one to treatment. I’m going to choose the right place for them.
You’re not going to have visibility into that entire patient journey. I tell people not to obsess over it. If you’ve got data, use it. Data is super important. It’s super valuable. At the end of the day, if I know I’m reaching the right people and I’m doing it right, they’re going to come in the door. I should be less concerned about tracking every little granular piece of data as I am with our patients coming in. Great. It’s working. We’ve got long-term. We’ve got short-term marketing in play. We’ve got a full census. That’s the bottom line.
BHB: I’m going to go back to some of the questions that we had planned going into this conversation. Peter, we talked a little bit about KPIs already. What are some of the KPIs that you consider when evaluating success of a marketing initiative? I’m also curious, are there any KPIs that are overblown or that providers sometimes overweigh?
Barbuto: Some of the KPIs, certainly like call volume, conversion ratio, qualified referrals, qualified cases. Those are pretty standard KPIs. I think some of the KPIs that are unique that I always look at are releases of information. I want to know because the patient’s ecosystem is an important way for us to provide customer service and for an ability for us to compound our customer base.
Dovetailing a little bit on Nick’s previous comment, good marketing for sure, but a good product even more so. Providing that level of care and comfort, not only to the patient but the ecosystem around that patient, allows us an ability to compound our customer base because all of our patients have families, employers, therapists, lawyers, probation officers. When we have those patients in our care, it’s an opportunity for us to create an impression from an operational standpoint.
Releases of information, engagement with the patient ecosystem, for us, its activity and touch points at emergency departments that Lance had mentioned, employers, and whatnot. Calls, qualified referrals, for sure.
BHB: When I asked that second part of the question of KPIs that people may be way too heavily or focus on too much compared to others that might be more important, I saw you both shake your head.
Folske: Yes. I mean, ADC is probably the most misaligned or mistargeted because not all census is created equal. I like to look at two metrics specifically that tell me a little bit about the financials and the operations. I like to look at average length of stay and I know there’s a lot around that, but to me as a therapist, it’s a clinical metric and it’s a financial metric.
It tells me a lot about who we’re seeing and how engaged a patient is. The other one I like to use is net revenue per equivalent patient day. This tells me, this is like through the yield of not when they get in, what’s the yield of what we’re actually getting with co-pays and deductibles. When you’re going to rank your targeting of your referral sources, it’s not just volume, but who’s within that volume.
Net revenue per equivalent patient day and average length of stay are two metrics that I like to use that tell me both the clinical and financial picture. ADC to me is a little, census cures everything unless it doesn’t.
Jaworski: Yes, I would add to that. If you look at ADC, for example, well, why is it down? Oftentimes, the mistake that’s made is everyone’s just focused on the number of admissions in the door. How many admissions are we getting in? If we’re not retaining patients, if we’re having a high AMA rate, then there’s a disconnect there. You’ve got three core metrics to a functional behavioral health provider.
You have your average reimbursement rate, you’ve got your cost per admission to get patients connected to care, and you’ve got your average length of stay. Those three define what works in behavioral health, but they’re different pieces. Average length of stay is really owned by the clinical team. Reimbursement rate is owned by the billing and the contracting team. Then the cost per admission is owned both by marketing and the call center.
A mistake people make is looking at cost per admission as a function of just marketing or just the business development team. It absolutely drives me nuts when people KPI their business development team on the number of admissions. Your business development team is not responsible for admissions. Your business development team should be responsible for qualified referrals.
It is the admissions center’s job to convert those patients. They should convert it at a rate of 50% for a qualified business development referral. If they’re not converting at that rate, that’s a call center problem, it’s not a business development problem. Same thing on the marketing side. I need to be delivering quality, qualified referrals. That’s my job as a marketing company.
It’s your call center’s job to convert those patients to care, so you should be tracking your conversion rates in your call center. If admissions are going down, then you need to look at both. Am I not getting enough qualified referrals or is my call center not converting right?
BHB: What linkages are important across departments to ensure not just marketing, but patient acquisition success?
Jaworski: Just reiterating that, it’s all across the board. I need the marketing with the business development team, with the call center. A big miss in addition to what you see where people are expecting the BD team or the marketing team to be responsible for the admission, is a disconnect between marketing and business development. 70% of most admissions, most of your admissions are coming from community referrals or the alumni community.
Your marketing team should be supporting your business development team in their marketing campaigns, not just worried about direct patient acquisition through a marketing channel because that’s the minority of your patient volume for most providers. Why are you not investing in the easier, cheaper channels by building TV campaigns, by building LinkedIn campaigns, by building high-level quality content that’s going to support your BD team to do their jobs better, or to connect with an alumni community that’s already a high source of referrals?
Folske: I’ll go two ways here. I’m going to say, front door obviously, front door, back door. Front door intake. I’m going to give another pearl here and say if the same people that are taking the calls are supposed to convert those calls to assessments, and then they’re that same department that’s supposed to complete the assessments, the more calls they convert to assessments is the busier their shift is, and so you have to think about the psychology of a person in the intake department that wants to make their shift, but so busy.
Front door, its conversion rates, and again, think about separating calls from assessments. Then I’m going to go back door. Whoever’s in charge of discharge planning, this is where I like to leverage reciprocity. Think of not just, who’s discharging, but who are you discharging to and why? The same thing of who you’re visiting in the market and why, who are you discharging to and why? Leverage that discharge volume also to create reciprocity with referral sources in the community. Intake and whoever owns discharge planning.
BHB: Peter, what linkages are important across departments in your view?
Barbuto: Yes, I could make a case for all of them, but certainly, on top of what I was just saying, customer experience is incredibly important. I think in healthcare, we have a hard time understanding that we deliver clinical service, but we’re still a business that has to understand we have customers and we need to support those customers and provide an experience for those customers.
Admissions department, because the director of first impression for sure and understanding, like I said, what the patient ecosystem looks like, care coordination or case management because we want to encourage them to constantly be in communication with those community partners we talked about that I listed before. That’s how you compound your customer base. That’s how you build your brand and your strong connections like the intimate connection between your brand and the community and the community partners is you got to be in touch with them and you got to identify them and you got to build relationships with them.
It’s organic. It’s one at a time. I think care coordination and admissions is incredibly important, for the success of building your customer base.
BHB: Nick, shifting gears a little bit with this question, in what ways are you seeing providers integrate technology into their marketing and admissions processes?
Jaworski: A lot of it’s on the call center side. Obviously, you got your tracking components which are important. Are you doing your call tracking? Is that integrated with your CRM or Salesforce or whatever you’re using? A lot of people are starting to use more AI, again, in the call center. You have intelligent call routing. Rather than saying, press one for admissions, press two for billing, you always say, you can tell us what you’re calling for, the AI will recognize that, and route it to the right person.
You can also tier your call center reps. If you see that your Google Ads channel is a high-quality channel for you, it’s not true, but let’s say it is, I can then route that to my best call reps and they’re going to convert at a higher rate. I can look at pages on my website and say, okay, these pages are great pages, so any calls that come off this page, I want to go to my best reps.
AI-based routing is really good. Then you can build chatbots for your chat responses and take some pressure off your call team. Same thing with even SMS, so we’re seeing a lot of AI becoming more effective in this space.
BHB: Peter, any ways that you could share that Recovery Centers of America is using technology?
Barbuto: Sure. Outcomes trackers, Owl Health, Track9, incredibly important and influential, especially as you’re trying to ensure that you’re allowing your patients the best patient experience through the therapist and understanding the strengths and weaknesses of our therapist through some of the tracking software that we have. We use Owl, but I know Track9 is awesome.
How are we following our patients post-discharge and ensuring they are, in fact, being successful on the recovery path that they’re on. That’s incredibly important, especially in our conversations with our payers, 30, 60, 90 day readmissions, seven day follow-ups, 14-day follow-ups. Utilizing technology to ensure that those are, in fact, happening.
Folske: Obviously the digital channels, like you recommended, and then a couple other things I like to see is, some of the virtual platforms, just the ways in which you can get dispositions can often expedite the decision or to get to a yes and these fastest-to-click models when you’re competing with other hospitals to get that ED referral in 15 minutes and you have to get a disposition.
We do telehealth assessments or to try to get a disposition quicker, leveraging telehealth can be good. CRM, the point about tracking data is not that you have it, but how you use it. It’s not just having the data, it really means nothing if you don’t do anything with it. I would say that the CRM, and telehealth are a couple of angles that I like to see technology being leveraged.
BHB: We only have a little under three minutes left, so we’re going to start wrapping up. Lance, we’ll start with you this time. How important is messaging as it relates to audience targeting in your marketing campaigns? Then any other tidbits you’d like to leave the audience with now would also be a good time to maybe share those.
Folske: If you’re chasing acute volume, if you go to jails, you’re going to get folks from jails in their squad cars. If you go to country clubs, you’re going to get folks from country clubs in their golf carts. Again, deciding who you are is the funnel between who’s going to call, assess, admit, your reputation, your revenue, it’s a sequence. You’ve got to do it right at the front. Seeing the right people, seeing who you want to have in your facilities determines who your facilities are. I think probably in summary here, there’s a lot of levers in this whole thing.
Some of the variables are fixed, like rates. A lot of them are not, like operational efficiencies. That’s where you’ve got to have folks that know what they’re doing, to make sure that they identify the levers and pull them in the right way.
Jaworski: Messaging is everything. It’s interesting. I’m very data-driven, and we’re a performance-based company. We’re very focused on our CPAs and our results. What I’ve learned over time is that the messaging actually drives the most successful results every single time. I can take an ad, and let’s say that it’s converting at 0.5%, well, even if I optimize that ad, it’s only going to convert at maybe 0.6%.
If I make a good ad that converts at 3%, now I’m getting multiples on the conversion rates by having a better ad. The message, the message on your landing pages, the message in those campaigns is critical. Then to Lance’s point, it’s got to be a message that hits home with your target patient audience. It can’t be this general, squishy message of like, hey, you guys have an addiction? We have treatment.
It drives me nuts. It’s like trying to sell a hamburger and say, are you hungry? We sell hamburgers. Nobody cares. You’ve got to have a message that resonates with me looking for services. I’m a veteran. Do you guys do younger patients? Do you guys treat underlying mental health disorders where others don’t? How do you do it? That’s different? That messaging is critical to get across because then patients will choose you and it resonates with them. They’re going to call based on that message.
Barbuto: Yes, to summarize what these guys just said, especially Lance, understanding what your vision is, who you are, especially from a clinical standpoint. What differentiates you clinically? How are you going to measure against it? Then how are you going to take that data and communicate it to the masses. Some ways it’s demographic information. I know we’re doing a lot of work in regards to this. 65% of our patient population reports alcohol as a primary substance of choice.
I think Joe Public understands that or thinks it’s the opioid crisis and no doubt there’s certainly an opioid crisis going on, but alcohol is still ruling the roost. Our average age and population right now on the inpatient side is 38 years old. Middle-aged alcohol is what we’re seeing predominantly right now. I think just understanding who you are, like Lance said, understanding what you’re good at clinically, especially how to measure it, but more importantly, how to communicate that to the masses is most important right now.
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