Mar
19
2008

What would you do if one-third of your clients cut back on their spending for veterinary services? That heart-stopping statistic came from a December Fleishman-Hillard survey of how an economic downturn could impact pet owners.

Almost one-third of respondents said they might cut their spending on veterinary visits and preventative medications if faced with financial constraints. So with the economy stumbling and everyone muttering the dreaded “R” word, should veterinarians be worried?

Not according to Dennis McCurnin, DVM, MS, professor of veterinary surgery and management at Louisiana State University.

“Imagine if you were asked that question,” asks McCurnin. “You’d obviously say, ‘Yes, I’m going to cut back if I have to.’ But when it comes down to the reality of your pet, your family member, and you’re told it has cancer or a broken leg and needs surgery, you can throw that statistic out the window.”

The real impact will, of course, be felt by those with little to spend in general—but who will go to any lengths to give their animal the best care possible.

“Now, if the client doesn’t have any money, that’s another issue,” McCurnin continues. “But if they have resources, they will spend them. Studies have shown that when people were asked how much they’d pay to save their animals, cat owners would spend $1,000 and dog owners would spend $2,500.

Spending stability on the part of pet owners is not without precedent, says McCurnin.

“Back in the late 80s and early 90s, for example, we had an economic downturn. A year or so later, the AVMA reviewed their data of veterinary income and found that companion animal practices continued to experience growth when other businesses and industries were cutting back.”

Now that many industries are entering a panic mode, what’s the ideal position for practice owners?

“If you’re already doing what you should be doing – such as communicating with clients, have a good marketing plan and a positive attitude – I suspect there will be little effect, if any, by a recession,” McCurnin says. “Now, you might not grow as fast, but you’ll continue to grow.”

That’s exactly what’s happening today at Tufts University’s veterinary teaching hospital, says Steve Rowell, DVM, hospital director and assistant dean for clinical studies.

“People are still coming to see us,” he says,  but they’re not willing to go as far. They’re putting the brakes on sooner. We’re still seeing revenue growth, but not at the rate we anticipated. Our average fee per case is flattening out and beginning to decrease.”

“Historically, the business cycles haven’t had a dramatic effect on our profession. So it’s hard to get excited about this,” says Dick Goebel, DVM, special assistant to the dean at Purdue University. “Certainly there are pockets that get hit. If a big employer closes down the street, you’re probably going to be feel the impact.”

Veterinarians in rural areas could be affected in others ways by an economic turndown, says Lowell Catlett, PhD, professor of agricultural economics at New Mexico State University.

“Here in New Mexico, some people are walking away from their foreclosed homes and leaving their animals behind,” Catlett says. “Now, you can take an abandoned cat or dog to the humane society, but what do you do with a horse?

“Veterinarians need to be vigilant in their communities because it will fall to them to be a resource on how to find homes for these animals.”

McCurnin believes that each case can be broken down economically on the basis of individual clients.

“Frankly, communication with the client in the exam room is more important than the economic conditions of the nation,” says McCurnin. “Most responsible pet owners will follow the recommendations of their veterinarian if they understand the seriousness of the recommendation. If it’s a casual or offhand recommendation, the client might put it off if they’re having financial problems. That’s just common sense. You’d do the same thing.”

“We’re telling our doctors that this is the time to step up, not just with their regular communications, but to be very clear with clients about the costs of a procedure or treatment so they can make good decisions for themselves and their pets,” says Rowell.

Rowell adds that clients are becoming more price-conscious, asking more questions and looking for more options,.

“Since we’re a teaching hospital, we do a lot of tertiary care,” he says. “We’re at that high end of specialized care. So if it comes down to, ‘Well, are you going to do that MRI and spend another $1,200 or not,’ some clients are saying, ‘You know, I don’t think I’m willing to spend that $1,200.’ A year ago, they would have said, ‘Yes.’

Still, the relationship between pet and owner is the primary spending catalyst.

“The human-animal bond definitely helps us,” Rowell insists. “But, at the same time, we need to be careful not to judge people. If I client says, ‘No, this is as far as I can go,’ we shouldn’t turn them against us because times will change and they’ll come back with their pets in the future. We shouldn’t assume what clients want to do, but lay out all the choices and help them make the best decisions.”

Communication with staff is also important.

“Our people see what’s going on,” Rowell says, who manages a staff of 300. “They’re paying more for gas and groceries. And they notice that things aren’t as busy in the hospital as they were a year ago. They’re actually very eager to know what they can do to help the practice thrive.

“I try to communicate to them that, as a business, we have to meet certain financial objectives and they’re part of the equation. If we’re all to succeed they need to participate in that. It’s not just something like, ‘The boss will handle it for us.’ Good times or bad, the top three things on everybody’s list should be service, service and service.”

Veterinarians can also lessen the shock of an economic downturn by better managing their costs, says McCurnin.

“Be sure to take discounts when offered by their suppliers. Sometimes they’ll give you a one percent discount if your account is paid in ten days. That may not seem like much, but a one percent discount in 10 days equals a three percent discount in 30 days. And a three percent a month discount would be 36 percent a year.

“Doing those little things adds up. Like managing your inventory closer. Try to get as much turnover on products as possible. Avoid carrying a lot of duplicate products. If you focus on reducing expenses while still trying to grow your revenue, chances are, at least in the small animal veterinary profession, your practice will prosper.”

At the very least, McCurnin adds, look at other industries as a guidepost.

“Imagine if you were in the restaurant business,” he says. “People aren’t eating out as much. What are you going to do? Advertise and reduce your prices and hope for the best. That’s about it. We veterinarians are blessed.”

“Years ago, I purchased a practice from a veterinarian who’s father founded it in 1915,” says Goebel. “The father told me that he never suffered, even during the Depression. People continued to use his services. And those times he wasn’t paid in cash, he got paid in chickens and potatoes.

“We’ve always been a stable profession and our services have always been valued by our clients. I don’t expect that to change.”

 

ECONOMIC ROUNDTABLE

Economists for the most part agree the short-term outlook is bleak for the US economy. So what does this mean for veterinarians? NEWStat spoke to four management consultants and a practice owner to glean their perspective. Here’s what they had to say:

 

What can a veterinarian expect regarding number of visits and cost per transaction during a recession?

Robin Brogdon, MA, President, Blueprints Veterinary Marketing Group, Huntington Beach, Calif.: Pet owners most personally affected by the economic downturn may skip or postpone general wellness care until they are more financially stable. Some may seek emergency care only or euthanize a pet due to inability to pay for care. Those that do visit veterinarians may not agree to all recommended diagnostics and instead proceed directly to any available, economically feasible treatment. They may opt for lower-cost rather than optimum treatments, and afterward some may not comply with recommended follow up visits or additional care. Those whose pets undergo specialized treatment may forgo ancillary services such as rehabilitation. Pet owners are likely to purchase lower cost prescribed medicines and may be willing to shop pharmacies and online vendors.

Wendy Myers, president, Communication Solutions for Veterinarians, Littleton, Colo.: Cat visits are declining. Extended vaccination protocols, difficult trips to the clinic and cats’ cleverness at masking signs of illness are possible causes. The average number of veterinary visits for cats over a twelve-month period is 1.5, compared with 2.5 for dogs, according to The Feline Study conducted in 2005 by BNResearch on behalf of Banfield, the Pet Hospital. Only 31 percent of cats and 58 percent of dogs visit two or more times per year.

Kevin Scott, Senior Consultant, Brakke Consulting, Chicago, Ill.:  Both these areas have been trending up in recent years.  I believe this will continue slightly in 2008. 

Dr. Frankie Williams, COO, Veterinary Cancer Group, Culver City, Calif.: Clients will continue to take care of their pets but will give serious thought to "elective" items such as dentals and non-critical blood work, so the average ticket is probably going to go down.

Dr. Nan Boss, owner, Best Friends Veterinary Center, Grafton, Wis.: Less visits, I think, but the clients that are coming in probably spend about the same. The ones who are struggling usually put off coming in altogether, in my experience.

 

What can smart veterinarians do now to weather this storm, and what should their priorities be moving forward?

Brogdon: Be certain you deliver outstanding customer service. Tighten processes for maximum delivery of care. A happy pet owner is the best free advertising, so general practices should develop a referral program if they do not already have one. Also, community support goes a long way. Sponsor and or support relevant charities, fund raisers, and so on. Create awareness. Specialists and referral hospitals should take this time to develop stronger relationships with primary care veterinarians. Invite referring doctors to visit your hospital so you can teach them more about your capabilities and specialized equipment. Truthfully, economic slowdowns can be an excellent time to do a little staff house cleaning. A good recruitment campaign during these times can bring some great new team members.

Myers: Regardless of the economy, veterinarians need to energize efforts on wellness services. Audit your reminder system and measure response rates. A postcard can easily be mistaken for junk mail. I recommend multiple communication tools, including postcards, e-mails and phone calls. Go beyond vaccines to remind clients for all wellness services. And track your rechecks. Veterinary Metrics’ data found a typical practice misses 300 to 600 rechecks for chronic conditions and drug monitoring. Rather than tell the client you want a recheck, say, “I will have my receptionist schedule a recheck appointment for your pet again on this date.” Explain why the recheck is so important, and be specific and confident. If the client doesn’t schedule the exam at checkout, the receptionist should enter a callback to follow up.

Scott: Build your relationship with your clients and explain the importance of regular visits.  Continue with reminder cards and calls to schedule visits. It may make sense to offer clients an incentive to schedule their regular visit. 

Williams: Smart doctors spend the extra five minutes to give more detail on the treatment plan they recommend. Clients are smarter and more savvy. They will research your recommendations, so spend the time up front with them. The other smart service tactic I recommend is to have a client care specialist or receptionist do a follow up call with a client for any recommended big ticket item, such as a surgery or cancer treatment, to see if the client has additional questions or concerns that have come up since the visit. I suggest doing this within 48 hours of the visit. The client will thank you for your thoughtfulness.

Boss: Take really good care of the clients you do have while you ride out the economy.


Is there a particularly useful skill set or mindsets veterinarians can adopt to cope with the recession?

Brogdon: Don’t act like there is a recession with your clients. Continue to practice the same high quality medicine and make all your normal recommendations for treatment. If clients decline treatment, be aware that you must ask the right questions to ascertain if it is a financial decision, and then be prepared to offer an alternative lesser cost option if appropriate.

Myers: Exceptional client service is the key to long-term success regardless of the economy. When you have strong relationships, clients trust your recommendations. Wow clients every time they walk through your door. Receptionists should stand to greet clients and pets by name and confirm the services they need so you don’t miss opportunities. Check when the pet last had an intestinal parasite test, preventative purchase, heartworm test, wellness blood screen or food purchase. Make sure every client leaves with everything he or she needs. Use exam report cards to note key findings and recommendations so clients can communicate your instructions with their families.

Scott: Stay positive!  Let the client know the options available to properly care for their pet and give them a choice of products\services based on value. 

Williams: Empathize with a clients push back on some items. Be honest and say, "I know it’s a lot of money, but think about the money you save in the long run by treating this now before it becomes an issue” or something similar to that. Check your egos at the door and be willing to answer more questions.

Boss: I actually appreciate some slower days when I can spend more time with the clients who do come in. I often have a higher ACT when Im not rushed and can discuss topics such as senior wellness testing at length

 

What are smart veterinary practice owners doing right now?

Brogdon: Working even harder to create a perception of value and giving clients enough time to answer all of their questions when coming in. They are also executing compliance programs if not already in place to help get patients back in for appropriate intervals of care.

Myers: Identifying opportunities to grow profit centers in wellness and dental services. Every pet needs these services, so choose areas that will reach the most patients.

Scott: Watching their financials closely - they should be aware of the number of visits & revenue per visit to see if there is a slowdown.  Watch inventory levels and receivables and pick out ways to be more efficient.

Williams: Ramping up their marketing. One of the things we are doing at Veterinary Cancer Group is looking at the referrals we have lost or have slowed down and sending our vets out on visits. The rDVMs are thrilled that Dr. Mona Rosenberg has come calling on them. Look at where you can regain business or create new business.

Boss: Marketing, such as calling on groomers or trainers who could be a source of referrals. Staff training, too, so your team can help give clients the best experience possible and help you to sell ancillary products and services.

 

What are smart veterinary practice managers doing right now?

Brogdon: Training, cross-training, and letting go of marginal staff members. They are also taking extra time to shop vendors. This could be the annual time to do cost comparisons, shop insurance, office suppliers, and so on. Managing costs as well as working to stave off revenue declines is equally important.

Myers: Training the team on client service. Help team members understand how everyone impacts the service experience. Brainstorm ways with your staff to reduce client wait time, improve compliance for preventatives, effectively offer treatment plans, and increase callbacks and reminder calls.

Scott: Keeping a close eye on all aspects of the business and finding ways to improve the value they offer to clients. 

Williams: Talking to the staff and doctors about the economy. This is hitting everyone where it hurts. I dont want the personal feelings of the doctors and staff to carryover while they are discussing a treatment plan with the client. Talk to the staff about how the business is doing and what they can do to keep the practice on track.

Boss: Do some staff training so that your team can help give clients the best experience possible & help you to sell ancillary products & services.

 

What should veterinarians avoid?

Brogdon: Carefully evaluate any major equipment purchases and don’t buy if there you need an aggressive amount of new business to cover the cost. Delay the purchase if necessary, unless it will increase efficiency and care immediately, which will ultimately be a great cost saver.

Myers: Don’t panic. You are in control of your business. Focus efforts on providing exceptional client service and medicine. Have weekly team meetings to share key performance indicators such as average charge per transaction, new client numbers, client retention rate and compliance. Keep everyone’s eye on the goal to achieve the progress you desire.

Scott: Avoid being negative!  Everyone seems to complain about the economy. It would be more proactive for the veterinarian to talk about the animal’s health care needs. 

Williams: Don’t cut back on your marketing efforts. It’s more important than ever to keep your name out there. Do more lunch-n-learns for the veterinary community and continuing education events.

 

What opportunities might crop up?

Brogdon: When done well during an economic slowdown, your efforts to market your practice, improve word of mouth advertising and deliver excellent customer service will reap greater rewards when things improve. Increases in market share and stronger relationships with clients can be the results of great customer service and more community involvement.

Myers: Refocus your business on wellness services. Do you have a senior program? As the owner of a 20-year-old cat, I spend much more than a puppy or kitten client. Senior blood tests, urinalysis, therapeutic diet, medications and twice-a-year exams add up to better health for my cat and better income for the practice that provides Ollie’s care. Dentistry has tremendous potential because 85 percent of adult pets have dental disease. Do you assign a dental disease grade during your physical exam? If a pet needs a dental cleaning, do you automatically present the client with a treatment plan? Do you have recommended service codes in your software so if a pet owner doesn’t schedule the procedure at checkout, the code automatically triggers a callback one week later?

Scott: Show clients sensitivity - perhaps have a "discount" week to do dentals or other procedures.

Williams: Look at where you are inefficient and have redundancies in your processes. More than ever, strive for excellence. This is the perfect time to examine your practice and where you can effectively cut costs.

 

Parting advice?

Brogdon: Be Great! Deliver value, provide the extra touches with follow up calls. Celebrate pet birthdays. Make clients feel special.

Myers: Be the cheerleader for your team. Share your vision and identify new opportunities to grow wellness and dental services.

Scott: Now is the time to really manage the practice - having the right measurements in place is required to keep track of the financial health of the practice.

Williams: Be patient. The economy is cyclical . Dont panic. If you find that you must cut back, talk to your staff sooner than later and be honest.

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