Blackwell's Five-Minute Veterinary Practice Management Consult

Contents

Cover

Title Page

Copyright

Dedication

Editor-in-Chief and Consulting Editors

Contributors

Preface

About the companion website

Section 1: Marketplace

1.1 MODELS OF VETERINARY PRACTICE

1.2 CHALLENGES TO THE PROFESSION

1.3 TRENDS IN COMPANION ANIMAL VETERINARY PRACTICES

1.4 VETERINARY TRADE AREAS

1.5 TODAY'S PET OWNER

1.6 TODAY'S VETERINARIAN

1.7 VETERINARY STAFF

1.8 FUNCTIONING AS A HEALTHCARE TEAM

1.9 DIFFERING PERSPECTIVES OF PRACTICE TEAMMATES

1.10 GENERATIONAL DIFFERENCES

1.11 PERSONALITY PROFILING

1.12 VALUE DISCIPLINES

1.13 PRACTICE MANAGEMENT SUPPORT PROFESSIONALS

1.14 STAKEHOLDERS AND STRATEGIC PARTNERS

1.15 IMPORTANCE OF THE HUMAN–ANIMAL BOND

1.16 MERGERS AND ACQUISITIONS

1.17 SPECIALTY AND EMERGENCY CENTERS

1.18 EQUINE PRACTICE MANAGEMENT

1.19 NOT-FOR-PROFIT VETERINARY HOSPITALS

1.20 HOUSECALL AND MOBILE PRACTICES

1.21 HOSPICE CARE

Section 2: Client Relationship Management

2.1 THE BASICS OF CLIENT SERVICE

2.2 CLIENT SERVICE STRATEGIES

2.3 IT'S NOT YOUR JOB . . . IT'S YOUR RESPONSIBILITY

2.4 CREATING A CLIENT-CENTERED HOSPITAL

2.5 CREATING A FELINE-FRIENDLY HOSPITAL

2.6 ACCOUNTABILITY

2.7 HOSPITAL IMAGE

2.8 CLIENT PERCEPTION AND LEARNING

2.9 WHAT CLIENTS EXPECT FROM THEIR VETERINARIAN

2.10 LIFELONG EXCELLENCE IN HEALTHCARE

2.11 COMPLIANCE AND ADHERENCE

2.12 PERSONALIZED PET PROFILES

2.13 MEASURING CLIENT SATISFACTION

2.14 TELEPHONE SERVICE MANAGEMENT

2.15 CLIENT APPOINTMENT SCHEDULING

2.16 CLIENT REMINDER SYSTEMS

2.17 MAINTAINING REGULAR CLIENT CONTACT

2.18 CLIENT REWARDS PROGRAMS

2.19 CLIENT RETENTION

2.20 HIGH-TOUCH AND HIGH-TECH CUSTOMER SERVICE

2.21 THE EXTENDED HOSPITAL TEAM—MAKING REFERRALS WORK

Section 3: Communications

3.1 EFFECTIVE CLIENT COMMUNICATION

3.2 SPEAKING AS A PROFESSIONAL

3.3 MAKING CLEAR CLIENT RECOMMENDATIONS

3.4 TRANSLATING MEDICALESE: CLIENT-CENTERED COMMUNICATION

3.5 SHARED DECISION-MAKING

3.6 POSING CLIENT QUESTIONS EFFECTIVELY: OPEN-ENDED INQUIRY

3.7 REFLECTIVE LISTENING

3.8 NONVERBAL COMMUNICATION

3.9 EMPATHY

3.10 DISCUSSING LIFELONG CARE

3.11 DISCUSSING FINANCES

3.12 DISCUSSING BEHAVIOR

3.13 DISCUSSING DIET AND NUTRITION

3.14 DISCUSSING ORAL HEALTH

3.15 DISCUSSING PAIN MANAGEMENT

3.16 GIVING AND RECEIVING FEEDBACK

3.17 DELIVERING BAD NEWS

3.18 DEALING WITH ANGRY OR DIFFICULT CLIENTS

3.19 END OF LIFE CONSIDERATIONS

3.20 DEALING WITH A GRIEVING CLIENT

3.21 DEALING WITH A COMMUNICATIONS CRISIS

Section 4: Financial Management

4.1 TIME VALUE OF MONEY

4.2 FINANCIAL STATEMENTS

4.3 MEASURES OF LIQUIDITY, SOLVENCY, AND PROFITABILITY

4.4 GETTING THE MOST OUT OF YOUR ACCOUNTING PROFESSIONAL

4.5 ANALYZING CLIENT TRANSACTIONS

4.6 BENCHMARKING

4.7 DATA YOU SHOULD BE REVIEWING REGULARLY

4.8 MAKING VALID COMPARISONS BETWEEN PRACTICES AND SERVICES

4.9 UNDERSTANDING PRACTICE PROFITABILITY

4.10 PRICING STRATEGIES: MARKUP VERSUS MARGIN

4.11 BREAKEVEN ANALYSIS

4.12 ACTIVITY-BASED COSTING AND COST ALLOCATION

4.13 INTERNAL ACCOUNTING CONTROLS

4.14 RETURN ON INVESTMENT FROM PRACTICE OWNERSHIP

4.15 PERQUISITES (PERKS) OF PRACTICE OWNERSHIP

4.16 FORGOTTEN COSTS OF DOING BUSINESS IN A VETERINARY HOSPITAL

4.17 CAPITALIZATION AND DEPRECIATION

4.18 ACCOUNTING CLOSING PROCESS

4.19 TAX PLANNING

4.20 PRACTICE SALES: PLANNING, STRUCTURE, AND METHODS TO MINIMIZE TAXES

Section 5: Cash Management

5.1 REVENUE STREAMS IN VETERINARY PRACTICE

5.2 REVENUE BUDGETS AND FORECASTS

5.3 INCREASING THE TOP LINE IN PRACTICE

5.4 EXPENSES IN VETERINARY PRACTICE

5.5 MANAGING GENERAL AND ADMINISTRATIVE EXPENSES

5.6 IMPROVING THE BOTTOM LINE (PROFIT) IN PRACTICE

5.7 PAYROLL MANAGEMENT

5.8 ORDERING INVENTORY ECONOMICALLY

5.9 ACCOUNTS RECEIVABLE ISSUES IN COMPANION ANIMAL PRACTICE

5.10 GETTING PAID FOR SERVICES RENDERED

5.11 PET HEALTH INSURANCE

5.12 PAYMENT (WELLNESS) PLANS

5.13 CREDIT ALTERNATIVES: THIRD-PARTY PAYMENTS

5.14 CREDIT AND COLLECTIONS

5.15 DISCOUNTING

5.16 PRACTICE REINVESTMENT

5.17 BORROWING MONEY

5.18 BUYING VERSUS LEASING

5.19 CONTROLLING CASH FLOW: BUDGETING

5.20 THE EFT (ELECTRONIC FUNDS TRANSFER) PAYMENT PROCESS

5.21 CASH CONTROL: PREVENTING EMBEZZLEMENT

Section 6: Human Resources

6.1 COMPENSATION

6.2 BENEFITS

6.3 WAGE AND BENEFIT SUMMARIES: THE WHOLE PACKAGE

6.4 EMPLOYEE BONUS CRITERIA

6.5 EMPLOYEE-RELATED COSTS

6.6 EFFECTIVE STAFF RECRUITMENT

6.7 SCREENING POTENTIAL HIRES

6.8 STAFF ORIENTATION

6.9 STAFF TRAINING

6.10 STRUCTURED ON-THE-JOB TRAINING

6.11 STAFF DEVELOPMENT

6.12 MOTIVATING THE HEALTHCARE TEAM

6.13 ENGAGING STAFF

6.14 MAKING MEETINGS WORK

6.15 EFFECTIVE COACHING FOR THE EXAM ROOM

6.16 MENTORING

6.17 STAFF SCHEDULING OPTIONS

6.18 STAFF PERFORMANCE EVALUATIONS

6.19 STAFF TURNOVER AND RETENTION

6.20 MEASURING YOUR HUMAN RESOURCE (HR) PERFORMANCE

6.21 OFFICE POLITICS

6.22 CONFLICT RESOLUTION

6.23 TERMINATING STAFF

6.24 COMPASSION FATIGUE

Section 7: Marketing Management

7.1 THE BIG PICTURE: MARKETING, ADVERTISING, PROMOTION, AND PUBLIC RELATIONS

7.2 GIVING CLIENTS WHAT THEY WANT MOST

7.3 BETTER MEETING THE NEEDS OF EXISTING CLIENTS (INTERNAL MARKETING)

7.4 ATTRACTING NEW CLIENTS (EXTERNAL MARKETING)

7.5 MARKETING PLAN

7.6 BASIC TOOLS OF MARKETING

7.7 DEMOGRAPHIC ASSESSMENT

7.8 CLIENT AND PATIENT SEGMENTATION

7.9 TARGET MARKETING

7.10 PRACTICE POSITIONING

7.11 BRANDING

7.12 PRACTICE DIFFERENTIATION

7.13 PROFESSIONAL PROMOTION AND PUBLICITY

7.14 CLIENT EDUCATION TOOLS

7.15 PAID ADVERTISING

7.16 PERSONALIZED MARKETING THAT WORKS: MAKING THE TELEPHONE RING AND THE FRONT DOOR SWING

7.17 OUTBOUND TELEPHONE CALLS

7.18 MEASURING MARKETING PERFORMANCE

7.19 DEALING WITH THE MEDIA

Section 8: Operations Management

8.1 MEDICAL RECORDS AND PATIENT DOCUMENTATION

8.2 PATIENT AND PROCEDURE LOGS

8.3 STANDARDS OF CARE AND CARE PATHWAYS

8.4 CONTINUITY OF CARE

8.5 PROFIT CENTERS

8.6 VALUE-ADDED ANALYSIS

8.7 CONTINUOUS QUALITY IMPROVEMENT

8.8 DIGITAL IMAGING SYSTEMS IN PRACTICE

8.9 LABORATORY CONSIDERATIONS

8.10 MEDICAL EQUIPMENT AND FIXTURES

8.11 EFFECTIVE INVENTORY MANAGEMENT

8.12 INVENTORY MANAGEMENT: NUTRITIONAL PRODUCTS

8.13 MEDICATION DISPENSING, COMPOUNDING, AND PRESCRIBING PRACTICES

8.14 MEDICATION DISPENSING, COMPOUNDING, AND PRESCRIBING: LEGAL CONSIDERATIONS

8.15 PHARMACY MANAGEMENT AS A PROFIT CENTER

8.16 RETAIL SALES: THE ART AND THE SCIENCE

8.17 ADDING EMERGENCY SERVICES

8.18 KENNEL MANAGEMENT AS A PROFIT CENTER

8.19 WASTE MANAGEMENT

Section 9: Technology Management

9.1 INFORMATION TECHNOLOGY IN VETERINARY MEDICINE

9.2 SELECTING COMPUTER HARDWARE

9.3 SELECTING COMPUTER SOFTWARE

9.4 CLOUD-BASED COMPUTING OPTIONS

9.5 BACKING UP AND ARCHIVING YOUR SYSTEM

9.6 NETWORK SECURITY

9.7 ELECTRONIC COMMUNICATION: E-MAIL AND TEXTING

9.8 INTERNET MARKETING

9.9 WEBSITES AND SEARCH ENGINE OPTIMIZATION

9.10 SOCIAL MEDIA

9.11 MOBILE APPLICATIONS

9.12 PATIENT PORTALS

9.13 PROTECTING AND DEFENDING YOUR ONLINE REPUTATION

9.14 MEASURING THE PERFORMANCE OF DIGITAL MEDIA CAMPAIGNS

9.15 TECHNOLOGY: REDEFINING THE CLIENT VISIT

9.16 ONLINE RETAIL: MAKING IT WORK

9.17 VIRTUAL TEAM TRAINING CONSULT

9.18 PUTTING YOUR SMART DEVICE TO WORK FOR YOU

9.19 INTERNET USE POLICY

9.20 DIGITAL COMMUNICATION POLICIES FOR STAFF

Section 10: Administrative Management

10.1 WORKPLACE MANAGEMENT

10.2 ORGANIZATIONAL CHARTS

10.3 MANAGING PEOPLE

10.4 WORKING IN TEAMS

10.5 LEADERSHIP

10.6 IMPLEMENTATION: GETTING IT DONE

10.7 EMOTIONAL INTELLIGENCE

10.8 NEGOTIATING 101

10.9 WHEN TO HIRE AN OFFICE MANAGER/ADMINISTRATOR

10.10 STAFF PERFORMANCE PLANNING

10.11 STAFFING BUDGETS

10.12 EMPLOYEE MANUALS

10.13 PROCEDURE MANUALS

10.14 ENHANCING DOCTOR PRODUCTIVITY

10.15 ENHANCING TEAM PRODUCTIVITY

10.16 CHANGING ORGANIZATIONAL CULTURE

10.17 PERSONNEL RECORDS

10.18 PRACTICE INSURANCE NEEDS

10.19 EMPLOYEE BENEFIT PROGRAMS

10.20 CONTINUING EDUCATION BENEFITS

10.21 NOT-FOR-PROFIT FOUNDATIONS

Section 11: Practice Safety

11.1 BASICS OF MEETING PRACTICE SAFETY REQUIREMENTS

11.2 PRACTICE SAFETY NEEDS

11.3 CLIENT SAFETY

11.4 ANIMAL-RELATED INJURIES AT THE WORKPLACE

11.5 SECURITY ISSUES FOR HOSPITAL AND STAFF

11.6 IMPLEMENTING A SAFETY PLAN

11.7 HOSPITAL SAFETY MANUAL

11.8 RADIATION SAFETY

11.9 WORK-RELATED ACCIDENTS AND WORKERS' COMPENSATION

11.10 EMERGENCY PREPAREDNESS FOR VETERINARY PROFESSIONALS

11.11 EMERGENCY PLANS

11.12 CONTROLLED SUBSTANCES

11.13 ADVERSE DRUG EVENT REPORTING

Section 12: Legal Issues

12.1 VETERINARY PRACTICE LEGAL NEEDS AND DEALING WITH ATTORNEYS

12.2 INFORMED CONSENT

12.3 MALPRACTICE

12.4 UNPROFESSIONAL CONDUCT

12.5 PRIVACY POLICY AND CONFIDENTIALITY

12.6 IDENTITY THEFT PREVENTION PROGRAMS AT THE WORKPLACE

12.7 EMPLOYMENT CONTRACTS

12.8 PARTNERSHIP AGREEMENTS

12.9 BUY/SELL AGREEMENTS

12.10 EMPLOYEES VERSUS INDEPENDENT CONTRACTORS

12.11 NON-COMPETITION

12.12 LEGAL DUTY TO REFER

12.13 EXTRA-LABEL DRUG USE

12.14 DISABILITY LAW

12.15 WORKPLACE HARASSMENT

12.16 FAIR LABOR STANDARDS ACT

12.17 OWNERSHIP VERSUS GUARDIANSHIP OF ANIMALS

12.18 PET TRUSTS AND WILLS

12.19 ANIMAL ABANDONMENT

12.20 ANIMAL CRUELTY

Section 13: Planning and Decision Making

13.1 CAREER PLANNING

13.2 PROFESSIONAL DEVELOPMENT PLANS

13.3 RéSUMé AND COVER LETTER

13.4 CURRICULUM VITAE

13.5 STRATEGIC PLANNING AND IMPLEMENTATION

13.6 IDENTIFYING AND SOLVING PRACTICE PROBLEMS

13.7 MISSION AND VISION STATEMENTS

13.8 BUSINESS PLANS

13.9 BUSINESS ENTITY STRUCTURES

13.10 DETERMINING A PRACTICE'S WORTH

13.11 PURCHASING A PRACTICE

13.12 BUYING INTO A PRACTICE AS A PARTNER

13.13 FROM ASSOCIATE TO OWNER—BEYOND THE MONEY

13.14 RISK MANAGEMENT ISSUES

13.15 DEBT MANAGEMENT

13.16 BUSINESS CONTINGENCY PLANNING FOR VETERINARY PRACTICES

13.17 SUCCESSION PLANNING

13.18 PLANNING FOR THE SALE OF A PRACTICE

13.19 GIFTING PRACTICE OWNERSHIP

13.20 RETIREMENT PLANNING

13.21 YOUR NEXT CAREER (REINVENTING YOURSELF)

Section 14: Facility Management, Design, and Construction

14.1 CONTEMPLATING PRACTICE OWNERSHIP—GETTING STARTED

14.2 BUILDING, BUYING, OR LEASING?

14.3 ASSET OWNERSHIP

14.4 FINANCING BASICS

14.5 SELECTING A SITE

14.6 HOW LARGE SHOULD A CLINIC BE?

14.7 THE CONSTRUCTION PROCESS AND WORKING WITH ARCHITECTS

14.8 ZONING AND PERMITTING

14.9 MANAGING CONSTRUCTION COSTS

14.10 PRACTICE RENOVATIONS

14.11 LEASEHOLD IMPROVEMENTS

14.12 DESIGNING WITH THE PATIENT IN MIND

14.13 CLIENT/PATIENT FLOW

14.14 INTEGRATING TECHNOLOGY

14.15 NOISE AND ODOR CONTROL

14.16 HEATING, VENTILATION, AND AIR CONDITIONING

14.17 FLOORING

14.18 THE GREENING OF VETERINARY PRACTICE

14.19 REFERRAL AND EMERGENCY FACILITIES

14.20 PET BOARDING AND LUXURY ACCOMMODATIONS

Section 15: Appendices

15.1 APPENDIX A: FINDING MORE INFORMATION ON PRACTICE MANAGEMENT TOPICS

15.2 APPENDIX B: SAMPLE COVER LETTER AND RéSUMé

15.3 APPENDIX C: SAMPLE CURRICULUM VITAE

15.4 APPENDIX D: SAMPLE DEF VETERINARY CLINIC BUSINESS PLAN

15.5 APPENDIX E: SAMPLE MARKETING PLAN FOR ABC VETERINARY HOSPITAL

Abbreviations

Glossary

Index

This edition first published 2014 © 2014 by John Wiley & Sons, Inc.

First edition © 2007 Blackwell Publishing

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Library of Congress Cataloging-in-Publication Data

Blackwell’s five-minute veterinary practice management consult / [edited by] Lowell Ackerman. – 2nd ed.

p. ; cm. – (Blackwell’s five-minute veterinary consult)

Five-minute veterinary practice management consult

Veterinary practice management consult

Includes bibliographical references and index.

ISBN 978-1-118-52924-9 (hardback : alk. paper) – ISBN 978-1-118-66203-8 (mobi) – ISBN 978-1-118-66218-2 (pdf) – ISBN 978-1-118-66235-9 (pub)

I. Ackerman, Lowell J. II. Title: Five-minute veterinary practice management consult. III. Title: Veterinary practice management consult. IV. Series: Five minute veterinary consult.

[DNLM: 1. Veterinary Medicine–economics–Handbooks. 2. Veterinary Medicine–organization & administration–Handbooks. 3. Practice Management–Handbooks. SF 756.4]

636.089′6–dc23

2013007457

A catalogue record for this book is available from the British Library.

Wiley also publishes its books in a variety of electronic formats. Some content that appears in print may not be available in electronic books.

Cover design by Nicole Teut

DEDICATION

On a personal note, I’d like to dedicate this book to my incredible family—to my wonderful wife, Susan; to my phenomenal children, Nadia, Rebecca, and David; and to our much-loved canine family member, Marilyn.

On a professional note, I’d like to dedicate this edition to my colleagues who participated in this book—to the authors who gave generously of their time and talents to help produce this phenomenal resource for the veterinary profession.

Lowell Ackerman, DVM, DACVD, MBA, MPA

EDITOR-IN-CHIEF AND CONSULTING EDITORS

EDITOR-IN-CHIEF

Lowell Ackerman, DVM, DACVD, MBA, MPA

Dr. Lowell Ackerman is a board-certified veterinary specialist, an award-winning author, an international lecturer, and a renowned expert in veterinary practice management. He is a graduate of the Ontario Veterinary College and a Diplomate of the American College of Veterinary Dermatology. In addition to his veterinary credentials, he also has a Masters in Business Administration from the University of Phoenix, a Masters in Public Administration from Harvard University, and a Certificate in Veterinary Practice Administration from Purdue University/American Animal Hospital Association. Throughout his career, Dr. Ackerman has been engaged in specialty practice, primary-care practice, academia, consulting, industry, and teaching. Dr. Ackerman is the author or co-author of several books, including Business Basics for Veterinarians, The Effective Veterinary Practice, and The Genetic Connection, and he lectures extensively on a global basis on both medicine and management topics.

CONSULTING EDITORS

KAREN E. FELSTED, CPA, MS, DVM, CVPM

PantheraT Veterinary Business Consulting

Dallas, TX

214-862-3802

www.PantheraT.com

ERIC D. GARCIA

Simply Done Tech Solutions

Veterinary Exclusive IT and Web Marketing Consultant

Tampa, Florida USA

www.simplydonetechsolutions.com

KARYN GAVZER, MBA, CVPM

Veterinary Management Consultant

www.karyngavzer.com

MARK J. McGAUNN, CPA/PFS, CFP®

McGaunn & Schwadron, CPA's, LLC

Veterinary Practice Management Consultants

Needham Heights, MA

www.mcgaunnschwadron.com

KURT A. OSTER, MS, SPHR

Pieper Memorial Veterinary Center

Oster Business Solutions

Sterling, CT

www.kurtoster.com/

KARL SALZSIEDER, DVM, JD, AVA (Accredited Valuation Analyst)

Salzsieder Consulting and Legal Services and

Total Practice Solutions Group, Practice Brokerage

Longview, WA

www.TPSGsales.com

CONTRIBUTORS

GARY L. ACKERMAN, DVM

Investment Advisor, Morse Capital Partners

Tax Efficient Investments and Business Transition Planning

Glen Allen, VA

[email protected]

Lowell Ackerman, DVM, DACVD, MBA, MPA

Editor-in-Chief, Five-Minute Veterinary Practice Management Consult

VALARIE ADAMS, CVT

Healing Heart Foundation, Inc.

Healing Heart Pet Hospice

[email protected]

www.hhfipethospice.org

ANGELA AISBET-SCHNEIDER, CVT, CVPM

MWI Veterinary Supply

AAHA MarketLink

Las Vegas, NV

www.mwivet.com

DENA D. BAKER, DVM

Velocity Veterinary Consulting

www.velocityvet.com

Innovative Veterinary Products

www.innovativeveterinaryproducts.com

American Association of Mobile Veterinary Practitioners

www.aamvp.org

DAVID D. BARBEE, DVM, MS

Command Applied Technology, Inc.

Professional High Technology

Pullman, WA

[email protected]

ELIZABETH BELLAVANCE, DVM, MBA, CEPA

Certified Exit Planning Advisor

Camlachie, Ontario, Canada

www.simmonsinc.com

ELIZABETH BODNER, DVM

Director, Technical Product Services and Pharmacovigilance

Novartis Animal Health US, Inc.

www.ah.novartis.com

KATHLEEN A. BONVICINI, MPH, EdD

CEO, Institute for Healthcare Communication

171 Orange Street, 2R

New Haven, CT 06510

[email protected]

healthcarecomm.org

NAN BOSS, DVM

Best Friends Veterinary Center

2082 Cheyenne Court

Grafton, WI 53024

[email protected]

ROBIN BROGDON, MA

President, BluePrints Veterinary Marketing Group, Inc.

1760 Kaiser Avenue

Irvine, CA 92614

www.blueprintsvmg.com

JANE BRUNT, DVM

Cat Hospital At Towson

Baltimore, MD

[email protected]

www.catdoc.com

CATalyst Council, Inc.

Annapolis, MD

www.catalystcouncil.org

BRIAN CASSELL, DVM

Dynamic Veterinary Concepts, LLC

Denver, CO

410-991-1020 

[email protected]

STEPHEN W. CAVANAUGH, JD

Cavanaugh & Lemon, P.A.

2942A S.W. Wanamaker Drive

Topeka, KS 66614

www.cavlem.com

BETSY CHODER, Esq.

VetCounsel, LLC

1200 Abernathy Road, Suite 1700

Atlanta, GA 30328

www.vetcounsel.net

TONY L. COCHRANE, AIA

Animal Arts

Boulder, CO

www.animalarts.biz

MARK R. CROOTOF, DVM

Practice Management Consultant, Hospital Startup Specialist

San Diego, CA

www.crootofconsulting.com

WALTER DEEGE, LUTCF

Financial Advisor, Lifetime Member MDRT

Deege Insurance and Financial Services, LLC

Longview, WA

[email protected]

SEAN J. DELANEY, DVM, MS, DACVN

Co-inventor Balance IT®/Founder DVM Consulting, Inc.

Davis, CA

GREGORY M. DENNIS, JD, MSc, BSc

Leongatha Law, LLC, Veterinary Law Center

Independence, MO 64055-4776

Legal Representation of Veterinarians

www.leongathalaw.com

JON C. DITTRICH, BSIM, MBA

Profit Profile Corporation

Knoxville, TN

www.vetcenter.com

KATHERINE DOBBS, RVT, CVPM, PHR

interFace Veterinary HR Systems, LLC

Appleton, WI

www.katherinedobbs.com

[email protected]

AMANDA L. DONNELLY, DVM, MBA

ALD Veterinary Consulting, LLC

Valrico, FL

www.aldvet.com

[email protected]

LOUISE S. DUNN

Snowgoose Veterinary Management Consulting

Pfafftown, NC

www.snowgoosevet.com

GREGG A. DuPONT, DVM, Fellow AVD, Diplomate AVDC

Shoreline Veterinary Dental Clinic

Seattle, WA

www.ShorelineVeterinaryDentalClinic.com

CHERYL L. EIA, JD, DVM, MPH

Coordinator of Emergency Preparedness and Response

Assistant Director, Scientific Activities Division

American Veterinary Medical Association

1931 N. Meacham Road, Suite 100

Schaumburg, IL 60173

P: 847-285-6633 M: 224-520-4757

[email protected]

www.avma.org

VALERIE EWELL, DVM, CFP®

Wheeler Frost Associates

7319 Vista Del Mar Avenue

La Jolla, CA 92037

www.wheelerfrost.com

KAREN E. FELSTED, CPA, MS, DVM, CVPM

PantheraT Veterinary Business Consulting

Dallas, TX

214-862-3802

www.PantheraT.com

DUANE FLEMMING, DVM, JD, DACVO

ERIC D. GARCIA

Simply Done Tech Solutions

Veterinary Exclusive IT and Web Marketing Consultant

Tampa, FL

www.simplydonetechsolutions.com

KARYN GAVZER, MBA, CVPM

Veterinary Management Consultant

www.karyngavzer.com

DIEDERIK GELDERMAN, BVSc, MVS, MT-NLP, TAE Cert IV

Turbo Charge Your Practice

P.O. Box 3312

Exeter 2579, NSW, Australia

www.turbochargeyourpractice.com

JOEL GENDELMAN, Ed.D

Future Technologies

Pfafftown, NC

www.fttraining.com

ROBERT D. GRIBBLE, DVM, CVPM

Hallsville Veterinary Hospital

Hallsville, TX

JAMES E. GUENTHER, DVM, MBA, MHA, CVPM, AVA, CEPA

Strategic Veterinary Consulting, Inc.

Asheville, NC 28815

www.strategicveterinaryconsulting.com

RANDY HALL

4th Gear Consulting

704-380-0440

www.4thgearconsulting.com/vetlead

REBECCA HART, APR

Hart & Partners

Atlantic Beach, FL

www.hartandpartners.com

MARSHA L. HEINKE, DVM, EA, CPA, CVPM

Marsha L. Heinke, CPA, Inc.

Veterinary Practice and Industry Consulting, Valuation, Accounting and Tax

Grafton, OH 44044

www.VPMP.net

PHILIP HOMSEY, Esq.

Creative Equity Financing/Marketing

[email protected]

www.philhomsey.com

JAMES P. HUMPHRIES, DVM, CVJ

Founder, Veterinary News Network

Founder, American Society of Veterinary Journalists

Adjunct Professor of Media and Communications

Texas A&M University, College of Veterinary Medicine

ADAM P. KARP, MS, JD

Animal Law Offices of Adam P. Karp

Licensed in Washington, Oregon, and Idaho

www.animal-lawyer.com

BRYAN M. KING, AIA

Animal Arts

Boulder, CO

www.animalarts.biz

LESLIE R. KING, JD

Nyhart HR

Practicing in Employee & Labor Relations

Indianapolis, IN

502-500-2012

[email protected]

RYAN KING, DVM

Diplomate American College of Veterinary Radiology

Tufts Cummings School of Veterinary Medicine, North Grafton, MA

Tufts Veterinary Emergency Treatment and Specialties, Walpole, MA

www.tufts.edu/vet

www.tuftsvets.org

ROBERT E. KUDERER, JD, SA

ELISE M. LACHER, CPA

Strategic Veterinary Consulting, Inc.

727-420-0016

[email protected]

GARY LANDSBERG, DVM, MRCVS, DACVB, DECAWBM

North Toronto Veterinary Behaviour Specialty Clinic

99 Henderson Ave.

Thornhill, Ontario, Canada L3T 2K9

905-881-2752

[email protected]

HEATHER E. LEWIS, AIA, NCARB

Animal Arts

Boulder, CO

www.animalarts.biz

JACQUI LEY, BVSc (Hons), MANZCVS (Veterinary Behaviour), PhD, DECAWBM

Veterinary Behaviourist, Animal Behaviour Consultations

Australia

Drjacquiley.com.au

LORRAINE MONHEISER LIST, CPA, CVA

Summit Veterinary Advisors, LLC

Littleton, CO

www.summitveterinaryadvisors.com

ANDREA LOONEY, DVM, DACVA, CCRP, CVA

Upstate Veterinary Specialties

Latham, NY

Cornell University Hospital for Animals

Ithaca, NY

STEVEN L. MAY, CVJ

Main Street Publishing Group, Inc.

dba Creative Vision House (Veterinary Division)

Los Angeles, CA

DAVID F. McCORMICK, MS

Veterinary Practice Appraiser

Simmons Mid-Atlantic & Great Lakes

[email protected]

www.SimmonsInc.com

LARRY F. McCORMICK, DVM, MBA, CBA

Veterinary Practice Appraiser

Simmons Mid-Atlantic & Great Lakes

www.SimmonsInc.com

MARK J. McGAUNN, CPA/PFS, CFP®

McGaunn & Schwadron, CPA's, LLC

Veterinary Practice Management Consultants

Needham Heights, MA

www.mcgaunnschwadron.com

DALLAS McMILLAN, BVSc, BSc (Vet)

Cairns Veterinary Clinic

Cairns, QLD, Australia

www.cairnsvet.com.au

Influential Branding + Social Business

www.influential.com.au

SHAWN G. McVEY, MA, MSW

Owner, McVey Management Solutions

Owner and Founder, Veterinary Specialists in Private Practice Conference

Chicago, IL

[email protected]

CHRISTINE MERLE, DVM, MBA, CVPM

Elanco Animal Health

Greenfield, IN

www.elanco.com

JAN MILLER

Veterinary Best Practice, LLC

Hillsboro, OR

www.veterinarybestpractice.com

S. A. NILSEN, JD

KURT A. OSTER, MS, SPHR

Pieper Memorial Veterinary Center

Oster Business Solutions

Sterling, CT

www.kurtoster.com/

VICKI J. POLLARD, AIA, NCARB, CVT

Animal Arts

Boulder, CO

www.animalarts.biz

DOUGLAS REECE, DVM

Medical Director, Technical Product Services and Pharmacovigilance

Novartis Animal Health US, Inc.

www.ah.novartis.com

KERRY M. RICHARD, Esq.

JEFF ROTHSTEIN, DVM, MBA

President, Progressive Pet Animal Hospitals and Management Group

2205 Stone Valley Drive

Ann Arbor, MI 48103

mymichiganvet.com

PATRICIA RUTHERFORD, RVT, CVPM, PHR

KARL SALZSIEDER, DVM, JD, AVA

Salzsieder Consulting and Legal Services and

Total Practice Solutions Group, Practice Brokerage

Longview, WA

www.TPSGsales.com

MARK D. SAMSON, MS, DVM, JD

Keller Rohrback P.L.C.

[email protected]

www.kellerrohrback.com

JOHN F. SCOTT, DVM, JD

Scott Veterinary Services

Amarillo, TX

[email protected]

PHILIP J. SEIBERT, Jr., CVT

Safety & Regulatory Compliance Consultant, SafetyVet

Calhoun, TN

www.safetyvet.com

SARAH TAYLOR, DVM, MBA

Senior Professional Services Veterinarian

Novartis Animal Health US, Inc.

www.ah.novartis.com

JOHN W. THOMAS, JD

LANGE, THOMAS & McMULLEN, LLP

6849 Old Dominion Drive, Suite 225

McLean, VA 22101

703-506-1260

MARY ANN VANDE LINDE, DVM

Vande Linde & Associates

Consultant

Transforming the Veterinary Experience with Exam Room Excellence

Team Development, Client Focused Communication

[email protected]

www.drmavl.com

LINDA WASCHE, MBA, MA

LW Marketworks, Inc.

Sylvan Lake, MI 48320

248-253-0300

[email protected]

www.LWmarketworks.com

PETER A. WEINSTEIN, DVM, MBA

PAW Consulting

Irvine, CA

[email protected]

JAMES F. WILSON, DVM, JD

President, Priority Press, Ltd.

President, Priority Veterinary Management Consultants

Owner, Pet Health Center, LLC

Philadelphia, PA

www.pvmc.net

HENRY K. YOO, DVM, MSc, MBA

Executive Consultant, Infinity Medical Consulting

Santa Monica, CA 90404

310-399-0704

[email protected]

PREFACE

This book was designed to help provide a valuable resource for veterinarians on all things management related, from understanding the marketplace in which we practice, to appreciating where money flows into a practice and where it flows out. It is an appropriate source of information for practice owners, administrators, associates, and staff. Whether you want to know how to price a service, how to market it, how to prevent embezzlement, or the meaning of the term shrinkage as it applies to inventory, you'll find it within the pages of this book.

The veterinary marketplace has changed dramatically from only a few decades ago. Pets are considered as family members, more so than at any time in the past. The gender distribution within the profession has also changed dramatically, which has in turn altered the demographics not only of veterinary school classes, but also of the profession in general. Specialization within the profession has become more commonplace and the creation of specialty and referral hospitals has been robust across the country. Corporate practices are starting to come into their own, and some are even spreading outside the confines of American borders. Benchmarks are available, so practices can now compare their own financial statistics with those of other practices in their region.

Yes, things are changing, and change is often difficult to assimilate, especially within the veterinary profession. Veterinary practice often stood as an anachronism, an attempt to hold back the escalation in healthcare costs as they pertain to animals. There was a belief that these costs needed to be kept artificially low, because pet owners would be unwilling to pay the costs for the sake of an animal. Yet, study after study has shown that this is not the case, and owners do understand the high cost of healthcare and are often prepared to shoulder those costs…as long as they see the value in those expenditures. The success of specialty practices and advanced modalities such as magnetic resonance imaging (MRI) that are now routinely used on animals is a testament to this reality. There is the realization that pet owners, like all consumers, are value shoppers—it is not the price tag that is an impediment to spending; pet owners simply want appropriate value for their dollars spent.

The profession is indeed changing, clients have changed, and the services available for pets have changed, but primary-care veterinary practices are still very much as they were in the past and face many challenges ahead. It is the goal of this book to provide veterinary practices with the factual information necessary to compete effectively in the marketplace and to demystify the business side of veterinary practice.

Compiling all this information in one volume was an immense task, and I am eternally grateful to my gifted colleagues who helped contribute to this incredible resource. It wasn't that long ago that practice management in veterinary medicine was a self-taught discipline with few factual reference sources. That has changed, and I am very proud to be involved, alongside the many authors of this book, in a project that helps deliver this much-needed resource to the veterinary profession.

Lowell Ackerman, DVM, DACVD, MBA, MPA

ABOUT THE COMPANION WEBSITE

This book is accompanied by a companion website:

www.wiley.com/go/ackerman/practicemanagement

The website includes:

A list of further resources

A sample resume

A sample curriculum vitae

A sample business plan

A sample marketing plan

A list of abbreviations

The glossary in editable format

SECTION 1

MARKETPLACE

1.1 MODELS OF VETERINARY PRACTICE

BASICS

OVERVIEW

Veterinary practices, in general, have changed very little over the past few decades. Although there are a number of corporate players in the field, the vast majority of veterinary practices in the country are owned as sole proprietorships, closely held corporations, or partnerships. The retail environment, on the other hand, has changed dramatically over the same period. Major retailers have entered bankruptcy protection, whereas online retailers and discount chains have evolved to better serve the perceived needs of the public.

Pet owners today want choices in the services they can request: 24-hour access to health-related information, the ability to price-shop for items they consider commodities, opportunity to participate as equal partners in health decisions, and the ability to interact on their own schedules. Today's consumer also wants choice, variety, value, and time-saving options. This is often hard to accommodate in current veterinary practice models.

Terms Defined

Commodity: An item that is considered interchangeable, and whose price is a reflection of supply and demand. For example, one 500mg capsule of cephalexin is much like any other to a client, regardless of brand name and whether they get it at a veterinary hospital, at their local drug store, or through an online pharmacy.

Economy of Scale: The reduction in cost per unit that results when operational efficiencies allow increased production. Thus, there are savings, because as production increases, the cost of producing each additional unit decreases.

Full-time Equivalent: A method of comparing practices based on a full-time schedule of 40 hours a week. If a practice has two veterinarians, one working 50 hours a week and one working 20 hours a week, that practice has 1.75 full-time equivalent veterinary positions [i.e., (50 + 20)/40].

Mom-and-Pop: A colloquial term for a small, closely held company in which the principals owning the business are also the principals working in the business.

ISSUES AND OPTIONS

THE CURRENT SITUATION

The veterinary small-animal market in the United States is a highly fragmented environment comprised of approximately 25,000 primary-care practices. The majority of practices employ fewer than three full-time equivalent veterinarians.¹

The small number of veterinarians per practice does not bode well for the continued success of the current veterinary model. Operating a veterinary hospital is an expensive undertaking, and there are few economies of scale to be derived from such small business ventures. Other small retail units, such as mom-and-pop drug stores or hardware stores, have largely been replaced by entities that have revolutionized those industries to better meet customer needs.

Most veterinary practices in a community are remarkably similar, with little to differentiate one from another in the minds of consumers. They are often competing against one another for the same small market share, with new veterinary practices opening in local markets that can barely support the practices already in existence.

The result is that communities often have many small veterinary practices with proportionately high overheads, because these practices tend to offer all veterinary services (e.g., surgery, hospitalization, radiography, etc.) and must be staffed accordingly. The competition puts downward pressure on prices while keeping hospital costs high. This leaves these small practices chasing the same resources that become harder and harder to attract: clients, trained staff, and associate veterinarians.

The current model—in which clients who have pets with health problems schedule appointments with their primary–care veterinarians, receive treatment, and/or are referred to specialists and then are expected to follow special instructions—is a system fraught with inefficiencies. It is one that has never worked particularly well, either in human medicine or veterinary medicine. Current studies of compliance in the veterinary industry, in which veterinary estimates of client compliance are far more optimistic than the facts suggest, attest to this. Actually, few veterinary practices track compliance, increasing the likelihood that clients are not being adequately served by the practice or that they are receiving some of the needed services elsewhere (including non-veterinary outlets).

Today's veterinary graduates also confound the picture for current practice models. Many of today's veterinary graduates are seeking lifestyle benefits that are harder to come by in small practices: a shorter workweek, on-the-job mentoring, continuing education, and the potential for piecemeal equity ownership. These smaller practices can also be difficult to market when the owner wishes to sell. Corporate practices have their own criteria for practice acquisition that often does not include small practices, and valuations for these small practices no longer mirror past standards wherein the seller could expect to be paid based on a certain percentage of gross revenues.

Veterinary graduates these days also tend to concentrate in clinical practice, although needs assessments suggest that there are no shortages of veterinarians in practice; rather, need and opportunities exist in research, industry, and public health.²

THE MARKETPLACE

Today's pet owner is also a savvy consumer, familiar with elite business practices such as those used by Wal-Mart, e-Bay, Disney, amazon.com, Internet pharmacies, and out-of-country pharmacies that offer lower rates.

In the American family of yesteryear, there was a male head of the household, a female stay-at-home spouse, and two-plus children. With a stay-at-home mom, it was relatively easy to schedule a veterinary appointment during the workday. But things have changed—there is no typical American family anymore; most adults, both male and female, are working during normal business hours; and consumer debt is rising.

As can be seen in other industries, consumers want selection, choice, value, and time-saving options, and they want it on their own schedules.

POTENTIAL FOR NEW MODELS

Human physicians learned long ago that they could not be all things to all patients. These days, general practitioners rarely deliver babies, perform surgery, or do their own radiography. In many instances, offices of general practitioners do not even collect samples to send to the laboratory; instead, the patient typically goes to the laboratory to have the sample drawn.

For a similar system to work and be convenient for veterinary clients, there needs to be considerable consolidation in the industry, which is only now starting to take place in earnest. For most small veterinary practices, the examination rooms are the profit centers that drive the practice. Performing other duties in the clinic, even such things as radiography and surgery, are often only marginally profitable, and sometimes are actually money-losing ventures when a true profit-center analysis is done.

Currently, less than 10% of practices in the United States are corporate and without compelling evidence that they are leveraging hospital numbers to attain true economies of scale and scope. Whether this will change as more and more hospitals are added or assimilated has yet to be determined.

Efficient models of veterinary practice have veterinarians performing the duties for which they are best suited and working in a collaborative fashion with other professionals to deliver more comprehensive care. Even in a two-doctor model, it will always be more efficient if one doctor is performing surgeries all day while the other is seeing clinical cases all day, rather than each doctor alternating between clinical and surgical duties. It is even more efficient if separate services are run as distinct profit centers. This would allow veterinarians to charge on the basis of their costs and not spread the costs of all hospital operations across the total client base. In too many veterinary hospitals, certain services (e.g., surgery) are subsidized by other services (e.g., pharmacy or laboratory), such that neither is appropriately priced to the consumer (one is unfairly high and the other is unfairly low). This, in turn, invites competition for the service that is priced unfairly high. Similarly, with enough general veterinary practitioners in a given hospital setting, there are economies of scale to permit the functioning of separate profit centers at fair prices to consumers and fair remuneration for practicing veterinarians.

Creating profit centers in large collaborative practices is not enough to fully meet the needs of pet-owning clients. A truly client-centered practice should also emphasize the following:

Access to specialists: Clients are very aware of specialists in human medicine, but are not necessarily aware that the same kinds of services are available for animals. Clients should realize that specialists are an extension of their primary-care veterinary hospital and that the specialists and primary-care veterinarians will work together with them as a healthcare team.

Access to reliable medical information: Veterinary practitioners traditionally have not done a very good job of educating their clients on the entire spectrum of healthcare alternatives available. With websites and databases, it is now possible for veterinarians collectively to create an evidence-based database in which clients can research the most effective drugs, treatments, and tests to address the patient's individual needs. If clients don't get this kind of support from the veterinary profession they will seek it out elsewhere, so it is best that this access be viewed as part of the solution rather than part of the problem.

Access to health educators: There is a much-needed role in client education that is currently unmet in the profession. Clients need help with understanding care pathways and treatment plans, having someone check on them periodically to see if they have questions or need a veterinary visit, and helping them navigate the veterinary healthcare arena. This kind of client advocate could be a veterinary technician or specially trained assistant, or could even be a network affiliate of a larger veterinary healthcare system. If veterinarians are concerned with compliance and client loyalty, this is an important consideration.

Access to clients with similar concerns: Social media is very popular, and many people are comfortable hearing accounts from other individuals who share the same concerns. Sometimes, just hearing from another individual who has been through the process is enough to put clients at ease regarding procedures being contemplated. Having such a discussion moderated by a veterinarian or trained technician is even more valuable and helps stop medically inaccurate information from being disseminated.

Access to training and behavior consultants: Surveys have shown that many pet owners do not initiate discussions with veterinarians about behavior problems, and the converse is also true. Behavior problems are the main cause of pets being relinquished, however, so training is a critical component of pet ownership that must not be ignored.

These are important changes, but they are not necessarily the only changes that need to be made to veterinary practice models in order to create a more effective healthcare delivery service.

EXAMPLES

A client who owns a Doberman pinscher pup searches a veterinary medical database linked to the primary-care veterinarian's website and learns that the breed is susceptible to von Willebrand disease. The client sees that there is both a DNA test and a von Willebrand factor assay available, and initiates a discussion with the health educator assigned by the practice. They schedule an appointment for the tests to be run. It turns out that the dog does, in fact, have von Willebrand disease. The client joins a veterinary-supervised discussion group for the disorder and makes arrangements with the veterinary hospital to be appropriately prepared for upcoming neutering surgery. The veterinary hospital provides a higher level of care at higher revenue, and averts a potential emergency—all initiated by the client. The alternative may have been that the diagnosis was made following complications of the surgery, proving costly for both practice and client.

CAUTIONS

It is hard to make firm conclusions about models of veterinary practice that currently do not exist. Also, developments in human medicine may take decades to filter down to the veterinary profession, and not all may be appropriate.

MISCELLANEOUS

ABBREVIATIONS

N/A

References

1. Economic Report on Veterinarians and Veterinary Practices. American Veterinary Medical Association (AVMA), Schaumburg, IL, 2003

2. Workforce Needs in Veterinary Medicine. National Academies Press, Washington, DC, 2012

Recommended Reading

Ackerman, L.J. Management Basics for Veterinarians. ASJA Press, New York, NY, 2003

Ackerman, L.J. Business Basics for Veterinarians. ASJA Press, New York, NY, 2002

Stowe, J.D., Ackerman, L.J. The Effective Veterinary Practice. Lifelearn, Inc., Guelph, Ont., Canada, 2004

AUTHOR

Lowell Ackerman, DVM, DACVD, MBA, MPA. Editor-in-Chief, Blackwell's Five-Minute Veterinary Practice Management Consult.

1.2 CHALLENGES TO THE PROFESSION

BASICS

OVERVIEW

By definition, a challenge is a call to battle. In reviewing the Internet and in conversations with colleagues, the battles that the veterinary profession is currently waging include:

The battering of the respect, credibility, and trust of veterinarians by the media and the Internet

Balancing the value of a pet to a family and the value of a pet when it comes to the legal system, and the possibility of the recovery of non-economic damages

A conflict between veterinary schools and the profession over the proliferation of veterinary school graduates

A business model that provides a livable wage to hospital owners but in some cases does not provide a reasonable long-term ROI

The failure to more generally apply business principles used by truly successful non-veterinary businesses

An assault on the veterinary drug dispensary as a profit center

Escalating cost of education, ultimate escalating student debt load, and the future of the profession

A confrontation over the cost of care and the ability for the average consumer to be able to afford it

A disconnect between the perceived value of the services and products sold by a veterinarian and the cost as determined in the mind of the consumer

The challenge as to whether increasing acceptance of pet insurance could open the door to managed care

The move to a part-time job versus a full-time career

Corporate consolidators challenging the long-standing business model

The challenge of being a sole practitioner

Animal rights as headline news

TERMS DEFINED

N/A

ISSUES AND OPTIONS

RESPECT AND TRUST

For the longest time, the veterinary profession was considered to be one of the most highly respected professions. It appears from recent media sources that credibility, respect, and trust of veterinarians may have experienced some erosion.

The Internet, sometimes referred to as Dr. Google when diagnosis and treatment are concerned, allows consumers to query everything at any time, and for free. There are many websites challenging the need for the level of care that is being provided by many veterinary practices. Specific questions include: Is there a need for blood testing, whether pre-anesthetic or baseline? Is there a tendency to overtreat in terminally ill cases? Is the more expensive and new surgical option that much better than what was used in the past? Even the level of well care that might be needed is under scrutiny.

Such myriad opinions can indirectly call the level of care and the type of care provided by veterinarians into question, which in turn can erode the level of trust that pet owners have for their veterinarian.

NON-ECONOMIC RECOVERY

At this moment in time, a pet is considered property (chattel) when it comes to evaluating its value in a legal case. And in most cases, case law calls for no more than replacement cost when a defendant, including veterinarians, is found guilty of damaging a pet owner by injuring or killing their pet.

From a veterinarian's standpoint, the higher the value of the pet in the eyes of its owner, the more that owner is likely committed to the care of that pet. However, with a higher value for the pet, the owner may seek a greater return in the case of malpractice, negligence, or other injury. This is a tough balancing act for the profession.

For the most part, outside of replacement costs, findings for non-economic recovery have rarely been included in settlements for animal-related lawsuits. Non-economic recovery is an additional payment for the loss of a pet above and beyond its replacement value, and the payment amount reflects the emotional damage or distress felt by the owner as a result of the injury or death to their pet. A non-economic recovery on a lawsuit will immediately increase the potential value for a suit, and with it, the value of the pet in the eyes of the legal system. This, in turn, will encourage more and more attorneys to look to veterinarians as a future profit center.

But, can veterinarians have it both ways? Pets treated as four-legged family members will likely receive recommended levels of care, but this preferred ranking as a family member (versus property) may mean they also have a greater value in the courtroom. Will veterinarians be the next target for the law students being taught animal law at over 100 law schools in the country?

THE VETERINARY SCHOOL MODEL

Currently (2013), there are 28 accredited veterinary schools in the United States, with at least five new veterinary schools having been proposed. Additionally, many of the existing veterinary schools have increased their graduating class size to address economic pressures.

While the number of veterinary school graduates projects to increase, in many areas of the country veterinarians are unemployed or underemployed.

Veterinary colleges are challenged to be economically viable. They are reacting to this by increasing admission class sizes and increasing the cost of education for these newly admitted as well as already enrolled students.

There are definitely some underserved areas and professional focuses when it comes to veterinary care.¹ However, identifying candidates for these locations or areas of interest is not being addressed by increasing class size. So, more veterinarians are graduating with the same general concentration (clinical practice) and are not necessarily addressing the greater needs.

As the cost of education is going up, so is the student debt for graduates of veterinary schools. With debt hovering around $150,000 upon completion of veterinary school² and fewer jobs, which are paying lower salaries, a vicious cycle is impending for the 3,000 or so veterinary school graduates and the profession as a whole.

With regard to veterinary schools, another question is whether the entire process from start to finish is based upon selecting the best candidates to complete the veterinary education or the best candidates for the consumer (veterinarians or industry or school). In other words, does the admission process and educational process meet the needs for the end user at this point in time?

Taking this issue into another global veterinary issue: Is the current veterinary student gender-ation (gender and generation) adversely selected when it comes to business ownership or entrepreneurship? Is the student debt and the nature of those selected a barrier for entry to small business ownership? Taking this even further, if the current or recent gender-ation of graduates doesn't want to purchase veterinary businesses, who will?

THE VETERINARY BUSINESS MODEL

In the original so-called Mega-Study,³ 19 standard business practices were noted as being associated with well-managed veterinary hospitals. It was also noted that almost 80% of practices use fewer than ten of those standard practices. Subsequent studies do not indicate much improvement in this area, even though it was statistically significant that those who used more standard practices were more profitable. For the most part, the veterinary business model remains entrenched in its 60-year-old approach to delivering veterinary care.

Profitability may not be directly correlated to happiness and career satisfaction, but it is definitely influential in these areas. The veterinary business model may not provide sufficient return on investment to meet the long-term needs of most veterinarian business owners, especially when it is time to sell their business. The current net profit margin for most practices does not provide return on investment commensurate with the risks involved.

The veterinary delivery model is more labor intensive than virtually any other healthcare model. Veterinarians require more staff per doctor than medical physicians or dentists. This would be fine, if the staff were delegated tasks that would make the practice more effective, efficient, and profitable. Although a registered dental hygienist can generate hundreds of thousands of dollars per year in practice revenue, a veterinary staff member is rarely allowed to fully utilize the skills they have. Veterinary hospitals that have fully leveraged staffs are the most profitable and report the highest level of staff satisfaction. Unfortunately, this model is not universally applied. Thus, as a rule, veterinary practices are people heavy, and because payroll is the highest expense for the hospital, profitability wanes.

Another drain on profitability is the failure to make efficient use of the physical plant. Rent or mortgage is paid on 100% of the square footage. However, at any one point in time, only a small percentage of the area is being fully used. Although the exam rooms are in use for billable income, the surgery suite may sit unused. When the surgery suite is in use, often times the exam rooms are unused. Additionally, many veterinary practices actually close their doors and are not available for periods of time during the day. The rent doesn't stop when business is not being transacted. A business model that finds greater use of the various areas such as imaging, laboratory, exam rooms, surgery, treatment, and so on, at all times of the day (and night), will have a greater return on the physical plant investment. And because the physical plant is also a large expense, this increased efficiency should improve profitability.

After payroll costs, the highest expense for most veterinary practices is the inventory of drugs and supplies. With the current markups in use by most hospitals, the sales of drugs and supplies by practices may not provide a positive net profit for the practice. Past issues in the pharmacy were the result of too much inventory sitting unsold, the physical space required for storage, overlapping product lines, and shrinkage, among other factors. In recent years, a new challenge to pharmacy profitability has arisen and provides a huge challenge to practice profits.

The veterinary pharmacy today faces many challenges from the growth of online pharmacies, human pharmacies, and retailers. The in-practice dispensing of prescription drugs, flea control, heartworm control, and other products is being seriously challenged by outside competition (see 8.13: Medication Dispensing, Compounding, and Prescribing Practices). How veterinarians respond to this challenge will determine how well the current veterinary business model survives in this hyper-competitive landscape.

Another challenge to success is that many veterinary hospitals are operated with only a small number of veterinarians. The inefficiencies previously noted are exacerbated in these small practices where the physical plant is underutilized, as is the staff. Affordability makes these practices most attractive for young veterinarians seeking to buy a practice. On the other hand, profitability in these small practices makes the cash-flow method for determining purchase price lead to practices that are frequently undervalued (in the owner's eyes) or overvalued (in the buyer's eyes).

With over 40% of new and recent graduates going on to post-graduate internships and/or residencies, the proliferation of veterinary specialists has also rocked the delivery model. Whereas in the pre-specialist era veterinarians did everything in their own practice (and still do in many rural practices), in urban settings the immediate availability of specialists in surgery, ophthalmology, dermatology, internal medicine, emergency/critical care, and so on, has started to push the general practitioner into the role of preventative care and triage physician, with everything else referred to the appropriate specialist. Specialty veterinary medicine is offering new options for pet owners when it comes to the treatment of many conditions. For those pet owners who can afford it, specialists provide the best care possible. For generalists, specialists have become the go-to doctors for much of what was done in general practice not that long ago.

Non-traditional sources of veterinary care are also becoming available with more prominence. With pets being spayed or neutered at shelters before placement, the spay-neuter income has been diluted. Add to that private, public, and non-for-profit spay and neuter clinics, and the revenue potential gets sliced even thinner. Of course, vaccination clinics have been around for a while, offering a direct challenge to practice income at pet stores, feed stores, parking lots, and so on.

The overall foundation of the veterinary practice is being rocked by all of this and calls into question the presence of a model that will provide for all stakeholders in a practice setting.

COST OF CARE

Over the last 50 years or so, as the small animal practitioner plied his trade, improved his skills, and offered higher levels of care, the cost of care escalated but was still long considered a healthcare bargain, when compared with the services offered by our human health counterparts. However, veterinary costs have certainly come under more scrutiny lately.

Over the last ten to fifteen years, veterinarians increased prices on a regular and continual basis. When prices were increased, the income for veterinarians also increased. These price increases usually encompassed all fees, albeit some of the more competitive services were raised at lower rates to remain in line with other practices.

Unfortunately, in many cases, the fee increases were not accompanied by a commensurate value increase to the pet owner. Thus higher fees were often charged with no change in service, care, compassion, understanding, or education. The consumer has started to push back on care, and client visits to veterinary hospitals has dropped. Fewer veterinary visits, lower compliance, lower adherence, and more resistance to healthcare plans (estimates) will not bode well for the profession.

The cost of care question, which never seemed to be an issue previously, is now a real issue and further validates that the veterinary profession is not recession proof. It also will challenge the communication skills of many practices who were used to discussing a pet's needs without question and now will be facing questions from the client or even more second opinions before care is provided. It has also led to pet owners delaying care for conditions, and thus only increasing the cost of care because pets are coming in for care later than they should.

Reconciling the disconnection between the cost of care and the value of care is a challenge at all levels of veterinary medicine. It will require a combination of organized veterinary medicine and industry support to attack this issue.

PET INSURANCE

Although many countries have large numbers of their pets insured, the United States continues to wallow around approximately 5% of all pets being insured (see 5.11: Pet Health Insurance). The challenge of getting pet insurance accepted by both veterinarians and consumers is not helped by websites that suggest it is not a good return on investment. As long as pets remain property, and as long as insurance for pets remains property insurance, the issues associated with human healthcare insurance are really not applicable.

Having owners buy pet insurance will help address the challenge of cost of care and could help increase veterinary visits and the amount spent, thereby making practices more profitable and pets healthier.

CORPORATE-OWNED PRACTICES AND CORPORATE CONSOLIDATION

The presence of veterinary practices that are owned and operated by large financial backers may be considered a challenge or a benefit, depending on to whom you speak. Those veterinarians that have sold their practices and benefited from the deep pockets of a corporation may offer one opinion. Those veterinarians that have practices impacted by the presence of a corporate practice in their community may have another opinion.

Over the last twenty years, the increasing presence of corporate practices has concerned many practitioners. The concerns include: unfair competitive edge; loss of identity of the veterinary profession similar to other franchised businesses; diminishing standards of care; lower prices; higher salaries and challenges to meet the available benefits; and other factors. Even with these concerns, the number of corporate-owned practices is still less than the 15% of all practices that was once projected. It is still undetermined what role corporate veterinary practices will play in the future of veterinary medicine, but most of the fears regarding corporate practices remain unsubstantiated.

THE SOLO PRACTITIONER

One might wonder why this is a challenge, just as one would question whether corporations are a challenge. The single-doctor practice model has existed for decades. It is a model that human physicians followed for decades until various challenges they faced caused them to change.

A single doctor has the challenges of balancing business and clinical care; leadership and doctoring; day-to-day operation and long-term vision. And they do this without having other professionals around to support them. The opportunities for survival, let alone growth, all depend upon the doctor coming to work each day, every day, until the business can support a second doctor. The good news is there is no reason to share the profits. The bad news is that the profits are limited to the abilities of the doctor in charge.

With the gender-ational changes, the need to balance life and income has taken a front seat to many other priorities. In a single-doctor practice, the ability to balance life is challenged by the need to be profitable. The time needed to run a single-doctor practice comes from the time that would be spent at home or taking care of oneself. This business model has become less attractive because of the time challenges and the somewhat constrained profitability, based upon how much work one doctor can do.

EXAMPLES

To get a feeling for the public perception of the veterinary profession, all you have to do is listen. Whether it is online, at the bank or the grocery store, while walking the dog, or visiting a pet store, consumers are offering unsolicited comments about their veterinary experiences.

Complaints to veterinary associations about pet owners' experiences seem to have increased. Concurrently, the number of calls from pet owners seeking more affordable care, discounted vaccinations, discounted spay-neuter procedures, and even free care has grown. Most calls do not involve actual malpractice. Pet owners may complain about overtreating, poor communication, failure to provide full disclosure, overcharging for products available cheaper elsewhere, and so on.

On the veterinary side, job listings are decreasing even as qualified applicants are increasing, at least in some markets. Many veterinary graduates in the United States can be assured of their student debt, but not necessarily assured that they will have gainful employment to service that debt.

CAUTIONS

These challenges noted represent challenges that have been identified by the veterinary profession. Addressing these challenges and finding solutions will require an overarching effort from practitioners, organized veterinary medicine, industry supporters, and universities.

MISCELLANEOUS

These challenges do not mean that the veterinary profession is not thriving. They are just indicators of the maturation process and the need for evolution within the profession. Additionally, the number and variety of challenges indicate that the world in which veterinary medicine survives is also changing very rapidly. The long-term question examines what is needed for veterinary medicine to overcome the challenges, re-configure or transform itself, and continue to flourish.

ABBREVIATIONS

ROI: Return on Investment

References

1. National Academy of Sciences. Workforce Needs in Veterinary Medicine. The National Academies Press, 2012

2. Shepherd, A.J., Pikel, L. Employment, starting salaries, and educational indebtedness of year-2012 graduates of US veterinary medical colleges. J Am Vet Med Assoc, 2012; 241(7): 890–894

3. Brown, John, Silverman, Jon. The Current and Future Market for Veterinarians and Veterinary Medial Services in the United States. JAVMA 215:2, 161–183, July 15, 1999

Recommended Reading

Cron, W., Slocum, Jr., J., Goodnight, D., Volk, J. Impact of Management Practices and Business Behaviors on Small Animal Veterinarians' Incomes. JAVMA 217: 332–338, 1999

Volk, J., Felsted, K., Thomas, J., Siren, C. Executive Summary of the Bayer Veterinary Usage Study. AVMA 238: 10, 1275–1282. May 15, 2011

AUTHOR

Peter Weinstein, DVM, MBA. PAW Consulting, Irvine, CA. [email protected].

1.3 TRENDS IN COMPANION ANIMAL VETERINARY PRACTICES

BASICS

OVERVIEW

The number and type of practice models for the ownership and management of veterinary practices have proliferated in recent years. These diverse practice models will continue as will increased hybridization of models. No single model is likely to dominate, and in the aggregate these trends will lead to a decreased proportion of practices owned and operated as conventional small-companion-animal practices. Although it's not possible to predict all the future changes, it seems certain that certain trends will continue, including:

Proliferation of larger practices;

Continued consolidation in general practice and referral practice at national, regional, and local levels;

More specialists working in general practices and in smaller markets;

More innovation of models or combinations of models intending to solve new or emerging business challenges, or targeting increasingly specific sectors of the care-delivery spectrum.

TERMS DEFINED

Competition: The process of two or more businesses vying for the same group or a fixed pool of customers.

Consolidation: The mergers or acquisitions of smaller companies into a single, larger company.

Differentiation: A manner of creating competitive advantage through offering products or services that stand out from rival businesses through the quality, service level, or cost of the services. Offering a unique combination of services or a uniquely focused set of services are other means of differentiation.

Diversification: A manner of attempting to gain increased sales through offering new products or services or by selling products or services into new markets.

Economies of Scale: The cost advantages an organization gains through expansion, or more simply doing things efficiently. Common economies of scale involve purchasing, managerial knowledge, and finance.

Market Maturation: As a growth market for services or products begins to transition into a more stable market, this often marks a time when customer needs or demand are not evolving or growing rapidly. As a market shifts from growth to maturation, businesses need to adopt different strategies due to the nature of competition and the demands of the customer. Signs of mature markets often include competition, differentiation, and diversification.

Practice Models: The array of various aspects of ownership and management of veterinary practices including the practice size, and the scope and breadth of services or markets served.

ISSUES AND OPTIONS

Key Factors: A larger and more diverse selection of practice models exists today than ever before. Practice models evolve in responses to economic forces. Some of the forces contributing to the proliferation of practice models include generational preferences, market forces, and the supply of veterinarians.

Generational Preferences: Recent graduates have had a reduced interest in practice ownership perhaps reflecting both their generational tendencies and an awareness of the challenges of business ownership (see 1.10: Generational Differences). Real or perceived lack of access to capital may be an issue as graduate veterinarians manage increasingly larger student-debt burdens.

Market Forces: In many metropolitan areas or regions, the demand for veterinary services may be considered a mature market, having reached a balance of supply and demand. Competition, differentiation, and diversification all become more prominent in mature markets. In response to these forces, practices will continue to consolidate, and new practice models will spring up to exploit smaller or more specialized or fragmented niches.

Supply of Veterinarians: Veterinary student enrollment has grown systematically. The supply of specialists has grown consistently due to the high interest in specialization and due to growth in the number of internship and residency training programs in private practice. Speculation about the consequences of these changes is rife within the profession and can be polarizing. In recent years the increases in the supply of veterinarians have coincided with reduced demand for veterinary services and reduced rates of pet ownership to some extent, producing a relative or absolute oversupply of veterinarians in some areas of the country. The increased supply of veterinarians has facilitated the operation and growth of larger practices, from an ease of staffing perspective.

EXAMPLES

CURRENT MODELS

Primary-care (general) practice has been the most common practice model traditionally. Varying sizes of