For years, SaaS has defined how growth companies think about lifetime value. Recurring revenue. Clean churn math. Predictable margins. Elegant dashboards.
It’s tempting for telehealth operators to borrow that playbook wholesale. After all, both models often rely on subscription billing. Both talk about recurring revenue and retention curves.
But treating subscription healthcare like pure SaaS is a structural mistake.
The math may look similar on the surface. The economics beneath it are not.
Understanding those differences is essential before applying a standard SaaS LTV calculation to a healthcare model that behaves very differently under pressure.
Standard SaaS LTV Methodology
In SaaS, lifetime value is often calculated using a relatively streamlined formula:
LTV = Average Revenue Per Account (ARPA) × Gross Margin ÷ Churn Rate
Or, alternatively:
LTV = ARPA × Average Customer Lifespan
The inputs are usually clean.
Revenue is recurring and digital. Delivery costs are largely fixed. Margins are high and stable once the infrastructure is in place. Churn can be modeled predictably based on contract structures or usage behavior.
Because the cost to serve an incremental customer is typically low, SaaS businesses often focus heavily on revenue retention and churn sensitivity, with little to no change in fulfillment costs.
This creates a financial environment in which LTV appears mathematically smooth.
Healthcare, even when subscription-based, does not operate under those same assumptions.
Monthly Recurring Revenue Model
At first glance, subscription telehealth appears to mirror SaaS's monthly recurring revenue model.
Patients enroll. They are billed on a recurring schedule. Revenue flows predictably.
That visual similarity leads many founders to adopt SaaS-style frameworks when thinking about growth.
However, monthly recurring revenue in SaaS represents access to software infrastructure. The incremental cost of delivering another license is minimal once the system is operating.
In telehealth, monthly recurring revenue usually represents:
- Medication
- Clinical review
- Fulfillment
- Support
- Compliance workflows
Each billing cycle typically includes real-world variable costs.
This means recurring revenue does not translate into recurring margin in the same way. In healthcare, MRR is operationally heavier. The monthly contribution must cover production, handling, and patient support.
This single structural difference changes how LTV should be interpreted.
Churn Sensitivity
SaaS LTV models are highly sensitive to churn because it shortens the duration of predictable revenue. Since margins are typically stable and high, a small improvement in churn meaningfully increases lifetime value.
Healthcare retention behaves differently.
Patients may churn for reasons unrelated to dissatisfaction, such as treatment completion, goal achievement, regulatory constraints, insurance changes, or personal medical outcomes. Some churn reflects success rather than failure.
Additionally, churn in telehealth affects revenue duration. It affects inventory cycles, supplier agreements, clinician allocation, and support forecasting.
Therefore, churn sensitivity in healthcare has a dual impact:
- It compresses revenue lifespan.
- It disrupts operational efficiency.
Applying SaaS-style churn modeling without adjusting for care-specific behavior risks misunderstanding the underlying economics.
Healthcare churn must be segmented more carefully—distinguishing among outcome-based churn, operational churn, and dissatisfaction-driven churn.
Each influences LTV differently.
How Telehealth Differs from Pure SaaS
The most fundamental difference between SaaS and telehealth lies in the delivery structure.
SaaS is digitally distributed. Once product infrastructure is in place, scale primarily increases revenue without proportionally increasing per-unit cost.
Telehealth scales volume through real-world service layers. Increased acquisition leads to:
- Increased clinician workload
- Increased fulfillment complexity
- Increased support volume
- Increased refund and processing exposure
In SaaS, gross margins might exceed 70–80%. In telehealth, margins can compress under scale if operational systems are strained.
This means lifetime value is not insulated from growth.
In pure SaaS, LTV models often assume a stable gross margin across the customer lifespan.
In telehealth, the per-patient margin can fluctuate based on adherence, fulfillment efficiency, product pricing, and operational reliability.
That volatility must be built into LTV modeling.
Margin and Fulfillment Distortions
One of the most overlooked differences between SaaS LTV and healthcare LTV is the sensitivity to fulfillment.
Software licenses do not get delayed in transit. Prescriptions do.
Software access does not generate shipping errors. Medication delivery can.
Digital platforms rarely generate chargebacks due to shipping failures. Physical fulfillment can.
These distortions matter because contribution-based LTV must account for variable costs over time.
A SaaS company may model lifetime value using high-margin recurring revenue with modest service costs.
A telehealth platform must subtract:
- Product acquisition costs
- Shipping volatility
- Payment processing
- Support intensity
- Occasional refund exposure
Even small shifts in these variables change the contribution margin per month and, therefore, LTV meaningfully.
Using a SaaS LTV calculation model without accounting for fulfillment distortion can lead to inflated expectations.
Subscription billing similarity does not guarantee structural similarity.
Strategic Implications
The takeaway isn’t that SaaS methodology is wrong.
It’s that it must be adapted.
Telehealth growth leaders should:
SaaS-style modeling works when incremental costs are minimal and digital. Healthcare modeling must account for incremental service costs.
Ignoring that difference produces growth curves that look sustainable until operational compression exposes the gap.
Actionable Takeaway
If you are using a SaaS LTV calculation framework to guide telehealth scaling decisions, adjust it before relying on it.
Start by isolating the per-patient, per-month contribution margin after real variable costs. Then model LTV against realistic retention cohorts under scaling conditions. Finally, stress-test how the margin behaves as fulfillment cost or support load increases.
In SaaS, LTV growth often depends primarily on retention improvements.
In telehealth, LTV durability depends on retention, margin discipline, and operational stability working together.
Superficially, both models bill monthly.
Structurally, they are very different businesses.
Your LTV model must reflect that difference if growth is to last.
References
- Hayes, A. (n.d.). Churn rate: Definition, formula, and why it matters. Investopedia. https://www.investopedia.com/terms/c/churnrate.asp
- Tiwari, A., Gupta, A., & Kumar, S. (2022). Customer churn prediction in subscription-based businesses: A systematic literature review. Journal of Data Science and Analytics, 13(2), 85–101. https://pmc.ncbi.nlm.nih.gov/articles/PMC9006135/
