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Veterinary Forum January 2008 (Vol 25, No 1)

Business Skills: Help associates with bottom line

by Thomas E. Catanzaro, DVM, MHA, FACHE, Michael Andress, DVM

    Editor's Note: One of the key challenges to adding an associate can be assisting him or her in becoming both a medically and financially productive member of your team. Dr. Catanzaro explains how practice owners can create a standards of care policy for preventive medicine, particularly wellness care measures, without sacrificing productivity and efficiency or facing disgruntled team members. — Stephen Fisher, DVM, Column Editor

    Helping new veterinary graduates become acclimated to a practice starts with developing their primary care awareness. In multi-doctor hospitals, adopting a standards of care policy for wellness programs is essential (see box). If veterinarians in a practice follow different standards, clients can become confused and staff can become frustrated. The result can be high staff and client turnovers, which are expensive for the bottom line.

    The AVMA well-care initiative is directed toward clients and compliance, yet many companion animal practices do not request the free training kits offered each year. The AAHA Compliance Study conducted in 2003 reflected a loss of more than $600,000 in potential annual income per full-time doctor because of a lack of wellness care programs. When my consulting firm has initiated wellness programs that are developed on the concept of team-based health care delivery, practice incomes increase 16% to 68% during the first quarter. By embracing the AVMA wellness care initiative, practice owners can help new associates learn how to productively focus on the bottom line.

    Some practice owners try to follow the average client transaction (ACT) model. However, in practices with an active team-based health care delivery program for wellness services, the ACT is depressed while the average income value of the animal increases substantially each year. In team-based health care delivery systems, sales-per-doctor may dip on a monthly basis, but sales-per-staff member — nursing staff, front desk team and doctors — greatly increases by the end of the quarter.

    When the AVMA initiative was launched in 2004, practices with two-doctor life cycle consults per year for life were averaging 1.9 visits per pet per year. In 2007, practices that my firm worked with averaged 3.2 visits per pet per year, which means that by promoting the twice-yearly doctor consults for life, doctors are actually doing five to six visits per pet per year for the practice.

    If associates want to assess how they are doing, they could use the diagnostic ratio, which is the ratio of diagnostic (e.g., lab, x-ray) sales to pharmacy sales. In most quality practices, outpatient doctors average a 1:1 ratio. In an exotics/avian medicine practice, the ratio may be 2:1. In an ambulatory practice, the ratio may be 1:4. When associates know what will be measured in their work load, they can monitor those elements. Some software systems track reminders, deferrals and waivers. Not booking needed care for services is a form of ignoring the bottom line.

    Another assessment tool referred to as the pocketbook method is often effective when school debt is being called in by the lender(s). Most new graduates want a guaranteed base salary. For example, a base salary of $60,000 means the associate needs to personally produce in excess of $300,000 during the first year. This is possible, but not from day one. New associates must be given the opportunity to shadow staff and build confidence in their health care delivery.

    When following the pocketbook method, a designated mentor needs to clearly differentiate for the associate the distinction between staff duties (nursing care and facility operations) and doctor duties (diagnose, prescribe and perform surgery). New associates also need to realize that their next year's base salary is structured around their personal production during the past 6 months of the current year, then doubled and divided by 5 to be split across 24 pay periods.

    The best pocketbook method, delivered in two tiers, is base salary and production override. An example is $2,500 mid-month and $2,500 at EOM; that is, production pay is monthly (personal production × 0.2) for a $2,500 mid-month base.

    If there is a positive balance, the associate earns production pay. If no money is left, the associate only receives the base pay.

    Delivering the message

    The mentor or practice owner should deliver the EOM check, along with a clear message of the associate's progress. If the associate's paycheck only reflects the base pay, the associate needs to understand that he or she is also decreasing the paycheck amount for the next year. The associate also needs to reach production pay levels to help the team earn the " dinner bell chart " reward each month. If the associate's EOM check is higher than the base pay amount, that not only means the associate is helping to increase his or her pay for the next year but also helping the team to earn the "dinner bell chart" reward.

    Expense control is another pocketbook concern. Zones are to be respected. Staff members have assigned duties in specific zones to maintain practice effectiveness and control staff expenses. If a doctor pulls a staff member away from a zone, it can have a negative impact on expenses and efficiency.

    Pharmacy costs can be controlled by the computer pricing/markup systems. A "no line item" change policy can help prevent attempts to discount any hidden line item.

    Reduction of home remedies is a standards of care issue, and the choice of drugs should be part of the clinical freedom to manage cases appropriately. The diagnostic ratio awareness, as discussed above, should limit empiric treatment habits.

    This discussion has gone from standards of care to diagnostic ratios, to production pay, to the dinner bell chart to expense control — all without saying "balance sheet," "income statement," "profit and loss" or even offering an ACT target. Some may ask, "Why the backdoor route to economic awareness?"

    Most practices do not follow written wellness standards of care or a program-based budget. People enter veterinary medicine for many reasons, but almost all of the reasons are linked to caring about animals. They want a living wage, but the dollars-and-cents approach can drive them away from the core values of "client-centered patient advocacy" simply because they do not understand the business of veterinary practice operations. What has been outlined here is a developmental track for practice owners and associates.

    Unfortunately, in most practices, time is not set aside for in-service training. The lack of dedicated training time always seems to be a capacity argument, yet few practices are at capacity. But good medicine is good business, so the bottom line is to maintain cutting-edge skills and knowledge at all levels of the practice and to use team-based, health care delivery at appropriate prices based on your own practice setting and the community you support.

    NEXT: Doctor to Doctor: Fuss-free visits


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