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Reference Desk April 2012

Veterinary Hospital Managers Association Releases 2011 Practice Survey Results

    ALACHUA, Florida, April 30, 2012—Managing a veterinary practice can be demanding and rewarding, but it is not often easy. The Veterinary Hospital Managers Association (VHMA) regularly publishes Benchmark Reports, containing useful and unique management statistics, which provide a roadmap for management success. The recently released 2011 Practice Diagnostic Report focuses on key areas of practice management, including client statistics, human resources, expenses, and fees. As practice managers struggle to operate in a challenging economic climate, the report offers insights into management decisions that may save or sink a practice. Thinking of lowering fees…don’t! Thinking of implementing a client retention policy…do! The report provides comprehensive and detailed information on issues that are at the core of practice management.

    An Overview of Findings
    The 2011 Practice Diagnostic Report highlights industry developments that reflect condition of the U.S. economy. The country’s lackluster economic performance is mirrored in the flat growth in revenues and clients experienced by companion animal hospitals. Fees were the exception, moving slightly upwards and downwards. In general, hospitals realized savings in 2011 by reducing non-DVM staff, a move necessitated by a drop in clients. Emergency hospitals realized better results than specialty emergency hospitals in 2011 because of fee increases that led to increases in revenues.

    The Relationship Between Clients and Revenues
    In 2011, the overarching concern of hospital administrators and practice managers focused on implementing strategies to effectively address the drop in clients and revenues. Some hospitals responded by increasing fees and adding more services, anticipating that existing clients would continue to spend more and use more services. This strategy proved somewhat successful in improving revenues. Other hospitals experimented with fee reductions in hopes of attracting more clients, a strategy that did little to spur demand or improve revenues.

    The 2011 VHMA Practice Diagnostic Report revealed that practices continue to struggle with a drop in clients. Efforts to decrease shoppable fees (vaccines and elective surgery), which account for roughly half of the revenues in a companion animal practice, did not have the intended effect. Lowering costs to lure new clients resulted in a 1% drop in revenues. The 2011 survey suggests that hospitals that maintained or grew their revenues in 2011 accomplished this by improving their client retention policies, not lowering fees.
     
    Why Lowering Prices Does Not Necessarily Increase Demand
    Theoretically, lower prices result in increased demand. However, for revenues to increase, the reaction to the decreased fee has to be stronger than the fee decrease. For example, lowering fees by 10% requires more than a 10% increase in fees to break even. The decrease in fees experienced in 2011 was met with a marginal increase in clients but the net effect was a slight drop in revenue. Fee decreases did not work. The evidence demonstrates that fee increases have a more favorable impact on revenues during economically challenging times.

    The Impact of Clients on Staffing Decisions
    In 2011, non-DVM staff expenses were the only expenses that were measurably lower, down 2% as a percentage of gross revenue. The savings occurred because hospitals employed fewer staff—non-DVM wages went down in response to decreased demand for services, which required fewer employees. In 2010, the average companion animal hospital employed 4.4 staff per DVM, and in 2011, that figure dropped to 4.2.

    Putting the Results to Work
    The information contained in the report is some of the most current in the field and can be used to better manage clientele to ensure the right mix of clients for the facility and staff; set appropriate staffing levels; help control costs and set budget targets; decrease expenses; and set appropriate fees.

    The 2011 Practice Diagnostic Report can help practices determine which areas of management are successful and which areas need attention. The report is free to the first 400 VHMA members to respond. After the first 400, the cost to members is $200.  The cost for non-members is $400. Reports are available at VHMA.org.

    About VHMA
    The Veterinary Hospital Managers Association, Inc. (VHMA) was formed in 1981 to provide individuals actively involved in Veterinary Practice Management a means of effective communication and interaction. Our membership is comprised of hospital administrators, practice managers, office managers, veterinarians, consultants, and others interested in veterinary management. The mission of VHMA is to enhance and serve professionals in veterinary management through superior education, certification, and networking. For more information, visit www.vhma.

    Source: Veterinary Hospital Managers Association, Inc.

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