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Veterinary Forum April 2009 (Vol 26, No 4)

Business Skills — Capturing lost income

by Thomas E. Catanzaro, DVM, MHA, FACHE

    Editor's Note: To help us through these challenging times, Dr. Catanzaro, a founding member of the Forum consulting team, offers advice on how to identify lost revenue and tap into opportunities that can improve the medical care of our patients and the economic health of our practices. — Stephen Fisher, DVM, Column Editor

    Many practice owners tell me they want to be innovative leaders and entrepreneurs, but when I make a suggestion they say, "Show me 10 practices doing it, and then maybe I will try it." But today the majority of a practice's caseload already has moved from hit-by-car and acute care cases to preventive medicine and wellness issues. The dog has moved from the barn to the bed and is now considered a family member, and the cat has foregone mouse control and moved to owner control.

    Recent surveys by the AVMA and AAHA show that 85% to 87% of pet owners consider their four-footed furry friends a family member, and one-third of those consider their pets as children. This bond awareness was elevated about 30 years ago by Leo Bustad, DVM, PhD, and promoted by the Delta Society and later by the American Association of Human"Animal Bond Veterinarians, but the concept can be tracked back to the Egyptians.

    The challenge is that many practices have not altered their health care delivery modalities, which might be hurting them, especially with clients tightening their discretionary spending. For example, many practitioners continue to use the term "annual visit," even after changing their annual vaccination protocol. I suggest referring to the "next visit" instead of "annual visit."

    Many practitioners also use the word "recommend," which actually is a throwback to when mixed-practice veterinarians discussed options with producers on a farm. Farmers know a good deal about wellness and herd health and weigh their decisions against the economics of livestock production.

    In contrast, pet owners generally do not know much about their pet's wellness and generally do not have the same knowledge or experience as farmers do about animal health. The 2003 AAHA Compliance Study showed that clients are not aware of the urgent need for preventive and wellness care that veterinarians thought they had expressed during wellness visits. AAHA estimated that $639,000 per doctor per year in potential income is lost because veterinarians did not use the word "need" instead of "recommend" when discussing with clients the health care needs of their dog or cat.

    Most consultants use a $5 to $7 per minute fee schedule for doctor"patient time — this can be up to 50% higher in southern California and some areas of the Northeast — and some even charge $1 per minute for staff time. Most consultants can look at practice expenses and line-item costs and give a good "average expense" expectation. Some have formulas for markup and dispensing fees, even though it has been shown that dispensing fees typically cannot be relied on to generate sufficient net income. Rather, net income success lies in delivering services — and appropriate fees — to clients who return multiple times each year.

    Financial options for owners

    Pet insurance and low- to no-interest financing options for clients are widely available and can be included in fee discussions with clients. These plans can be invaluable tools that can help clients pay for expensive but necessary medical treatments for their pets. By increasing client awareness of these payment options and including literature from one or many of the companies in the field, practices can increase compliance, strengthen the client"practice bond and charge adequate fees without worrying whether clients can or will pay for pet care.

    Although practice management consultants have taken practices to a new level of fee structuring, it is not always the answer for long-term success. Like expense control, fee increases that are greater than inflation rates have a finite life as a valuable management function. A savvy practice leader knows he or she must assess programs and how they are delivered by considering expectations of the standards of care.


    For more information:

    Catanzaro TE. Team-based veterinary healthcare delivery. Available at www.vin.com.

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