How to service a mixed-demographic clientele

It should go without saying, not all veterinary practices are alike. Not all regions of the country are alike. Not all communities are homogeneous. Not all clients have unlimited resources to devote to the care of their pets. Yet, over the years, we have found ourselves frequently confronted with opinion pieces, written by practice management “experts” whose advice may be distilled down to one catchy phrase: “Charge what you’re worth.” Those of us who have been doing this for a while know things aren’t always quite that simple. My practice of 27 years was a good example. We were located equidistant from million-dollar homes and Section-8 housing. The former group of clients appreciated the fact we kept our pricing under control, the latter group absolutely required it, and we serviced every demographic group in between. The real cost of treatment A litany of very good reasons is always advanced for raising prices, including the rising debt-to-income ratios of our newer veterinarians, the need to attract skilled support staff into our clinics, and the overall rising cost of doing business, which always seems to exceed the rate of inflation. None of this is disputed; nevertheless, one critical factor never seems to change for most of us, and hasn’t changed for me during my many years in practice, and that is the way we get paid. The vast majority of our clients still reach in to their wallets to pull out what’s left after other household priorities have been met. If you are lucky enough to practice in an area where incomes are a decimal point higher than the median, this may not present much of a problem. The rest of us find ourselves constantly facing the challenge of balancing what we know to be the best treatment options for a particular pet with that pet owner’s ability to pay. It is instructive that in the most recent edition of the AVMA Pet Ownership and Demographics Sourcebook, the median income for all pet-owning households is listed at a mere $55,000. Even in the Midwest, where I live and practiced, this is not a lot of money. So it would appear our profession has a choice to make: Do we want to continue to service pet owners from all walks of life, or do we want to morph into a boutique profession, catering only to those with large disposable incomes? For those of us who elect the former option, the question then becomes, how do we service pet owners in a community where many are on limited or fixed incomes? Is it possible to model a veterinary practice to serve the needs of this demographic mix without sacrificing quality of care, and without going broke? Part of the answer lies in basic economics. As it turns out, there are only two main variables we have to work with when it comes to generating gross revenue. One is the number of clients we see, and the other is our average client transaction (ACT). Multiply the two together, and you have your gross. If you are servicing a client base where many of your clients are of limited means, your ACT must naturally be constrained. Thus, to generate a healthy gross revenue stream, you will need to increase your volume. This truism then creates its own dilemma: how do you increase your volume while maintaining excellent quality of care, a healthy bottom line, and without burning out your associates or turning your back end into a dumpster fire? In my experience, the answer is obvious: you must have adequate staffing. This concept is alien to some, especially in the corporate world, but is instantly apparent to all who actually slug it out in a busy veterinary practice. In the context of a 20-minute appointment, you can’t give the client or the patient proper attention if the veterinarian is required to take X-rays, draw blood, give vaccines, trim toenails, and fill medications. It can’t be done. It’s not what you hired your veterinarians to do, anyway. If you insist on doing it this way, you will enjoy low morale, high turnover, and disappointing Google reviews. Veterinarians must be freed up to do what they’re trained to do: Take histories, perform physical exams, make diagnoses, devise and execute appropriate treatments, and communicate effectively with clients. To the extent a veterinarian’s time is diverted to technical duties best performed by technical staff, efficiency is lost and productivity suffers, as does quality of care. This is where many corporate managers get it wrong. They seem to believe they are saving money by limiting staff and having their veterinarians double up as technicians, when exactly the opposite is true. Getting a client to buy in to a costly diagnostic or treatment plan requires time spent educating the client about their pet’s condition, and explaining why certain options are better than others. A veterinarian can’t be doing this while helping a technician express anal glands in the back while the next appointment is sitting in the lobby, waiting to be put into a room. The staffing question I can’t tell you how many technicians-per-veterinarian constitutes “adequate” staffing. It depends. If you are lucky enough to have technicians who can hit veins on the first try, who can multi-task, and who always seem to anticipate what needs to be done next, you can probably get by with fewer technicians, while still enjoying excellent production. If, on the other hand, your technicians’ venipuncture skills constitute cruel and unusual punishment, and their best talents lie in structural engineering (i.e. holding up walls), you may never achieve the productivity you seek, no matter how many of these people you employ. Good technicians are hard to come by. A busy veterinary practice can’t function well without them. If you happen to have one, pay him or her accordingly. Quibbling over a dollar per hour, after all, represents $10 a day. Factor that into the productivity you would lose if that individual were to give you two weeks’ notice. If, on the other hand, your practice gains a reputation for paying staff appropriately and for treating them as professionals, you may find yourself with a better pile of résumés the next time you put up your “help wanted” sign. So what is the effect of a higher volume, lower ACT model on the bottom line, or “EBITDA,” as the corporate-types like to call it? The math is pretty straightforward: If your pricing is lower to accommodate your demographics, and your staffing is higher to service your volume, your profits, as a percentage of gross, will almost certainly fall below published “norms.” But remember what we agreed upon at the outset: not all practices are alike. If you have accepted the responsibility of servicing the needs of a community where many of your pet owners are not that well-off, this will become your “norm.” Your net can still be a good number, but it will be driven by client visits and not as much by ACT. The importance of a team I was fortunate enough in my career to be able to assemble a great team, and to apply these principles successfully for many years. We slept well at night, knowing we had made our services accessible and affordable to the widest possible spectrum of our pet-owning client base, many of whom were fixed-income seniors. When it came time to sell, a corporate buyer was selected who promised not to change the nature and culture of the practice. So far, they have lived up to that promise. Not all my colleagues have been so lucky. Large, busy practices have become attractive targets for corporate buyers in recent years. Some of these corporations, unfortunately, have adopted a one-size-fits-all management style with the practices they purchase, presumably based on the economics of the coastal communities in which they are headquartered. They often find out, to their dismay, that what works in Los Angeles, Portland, or New England may not work as well in Cincinnati, Oh., or Grand Junction, Colo. Profitability must always be a concern for any business, but it can’t be the only concern. Veterinary medicine, after all, is not just a business, it is a profession. My advice to corporate owners is to learn from the veterinarians who sold their practices to you. They live in their communities, know their clientele, and have structured their practice and its culture to serve that particular niche. Whatever it was about a particular practice that made it attractive to you as a buyer, try to adopt the following strategy: If it ain’t broke, don’t fix it. For 27 years, Stewart S. Smith, DVM, PhD, was owner of Beechmont Pet Hospital, a busy, small animal general practice in Southeastern Cincinnati. Before entering the profession, he worked in medical research at the V.A. Medical Center in Washington, D.C., and later at the University of Cincinnati. Dr. Smith served twice as president of the Clermont County (Ohio) Humane Society, and received the 2008 Distinguished Practitioner Award from the Ohio Animal Health Foundation.

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