Mar
31
2010

Consolidation and change were the foci of the Trends Executive Edge sessions at this year’s AAHA Yearly Conference in Long Beach, Calif.

The first session featured a panel of speakers who have a range of experience in the consolidation field. The panelists were Phil Homsey, president of VetPartners; Tom Kendall, DVM, CVPM, director of Arden Animal Hospital; Hal Taylor, DVM, owner of Healthy Pets of Wedgewood; and Dick Goebel, DVM, senior associate of practice brokerage Simmons & Associates.

Goebel said that of the approximately 20,000 practices in the United States, about 41 percent are solo practices.

“Those practices can be efficient if they are busy and fully using their facilities, but many of the solo practices are too small to be attractive in the marketplace,” Goebel said.

Goebel cited statistics that say since 1972, on average the veterinary industry has grown 6.6 percent per year, while the overall U.S. economy has grown by 3.3 percent. He said if a practice is not growing at the 6-7 percent rate that the profession is seeing, that practice may want to consider consolidation.

“If you’re not happy with the organic growth, think about your neighbor and the efficiencies that come with it,” Goebel said.

In response to an audience member’s question, Goebel cautioned against merely raising fees to sustain growth.

“The surveys have pointed out that all we have done since ‘99 was raise fees, and we became more affluent as a result,” Goebel said. “If you look at many practices, for the last decade there has been a decline in transactions. We’re not doing some things right.”

Homsey has represented many veterinarians over the years who have bought and sold practices. The veterinarian is the biggest “X-factor” in the industry, and the doctor’s personality is difficult to work in to any predictions on the future of consolidation, he said.

“This is a relationship driven industry, and you can’t model that,” Homsey said. “The doctor-patient relationship, the doctor-client relationship, doctor-staff relationship, it all starts with the doctor and ends with doctor.”

However, one thing is for certain, consolidation will occur, whether by acquisition or attrition.

“In 15 years, 40 percent of practices will not be here,” Homsey said. “Whether you like it or not, consolidation is going to happen."

The panelists also advised against a “vulture” mentality when dealing with neighboring practices that are struggling or trying to sell. Just letting the practice fail could backfire and the clients could go somewhere else besides your practice.

“Pony up and pay for the value,” Goebel said. “Avoid that vulture mentality. Payback on an acquisition like that is very quick.”

Terry Werth, a practice manager at Capri Plaza Pet Clinic in Tarzana, Calif., was in attendance at the first session. Werth said his practice is big enough for a three-doctor practice, but they currently have only one, his wife. That fact was part of the reason he wanted to hear more about consolidation, and after the panel he said he was planning to look into it more seriously.

“It would be nice at some point to have more doctors,” Werth said. “There is a practice down the street we’ve been interested in for some time.”

Change meets strategy

The second part of the session was led by Karen Szymanski, PhD, of Gateways Learning, Inc. Szymanski advises professionals and executives on how to increase performance and get results, especially in the face of change.

Szymanski took an interactive approach to leading her session.

“One of the ways you get into this is making it a full contact sport,” she said.

She posed a series of questions to the audience members, who then split into groups and discussed questions such as:

  • What will block you from making changes in your practice even if you believe that changes are necessary and desirable?
  • When challenges come up how are you likely to react?
  • If you do nothing to change you practice, how is the future likely to play out for you?

Some of the changes that veterinarians and practice managers discussed were management changes. For example, one practice manager said her clinic is owned by a 65-year-old solo owner of an eight-doctor practice, and no one knows what the owner’s exit strategy is. She pointed out that she would like to know what the changes were going to be so she could prepare for them. In addition, the practice is walk-in only, so she thought the practice might also consider changing to at least include some appointments.

Another manager spoke about the reluctance of people to continue making changes, or change fatigue. Her practice just switched from one to four doctors.

“I want to keep changes going, but the doctors are like ‘whew, it’s over,’” she said.

Szymanski said some practices fear change because they are afraid of what the clients will think. Good communication is the most useful tool, she said, and letting clients know what changes are happening is a good way to proceed.

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