NCVEI chief notes lack of productivity and efficiency in veterinary practices
The head of the National Commission on Veterinary Economic Issues (NCVEI) had some sobering advice for veterinarians this year. Presenting at the AAHA Yearly Conference’s Trends Executive Edge session “Crunch and Grow Your Numbers,” NCVEI CEO Karen E. Felsted, CPA, DVM, CVPM, told the audience that practices can no longer count on raising fees alone to deal with the tough economic times.
"We are passing along our lack of productivity and efficiency to clients in the form of fee increases, and that is not sustainable," Felsted said.
The session was attended by close to 200 people, or nearly 10 percent of registered attendees at the Phoenix conference.
Machel Jordan, CPM, practice manager for the Animal Avian Hospital of the Village in Houston, Texas, said she thought Felsted was right on the mark with her comments about fees.
“I thought it was really refreshing,” Jordan said. “It was something sobering that people needed to hear.”
Felsted stressed that practices need to start making use of financial concepts when running their operations. She cited an AVMA-Pfizer business practices study, which showed that 62 percent of practice owners don’t use financial concepts to manage their businesses. Those that ran their practices like businesses showed 2/3 more earnings than those that did not, she said.
From 2001-2007, practices have seen between 7 and 18 percent growth in average transaction charges (ATC). However, the actual number of transactions per year has either decreased or increased only slightly during that period. In order to get through the recession with their clienteles – and bank accounts – intact, practices must start to improve earnings without simply raising fees, Felsted said.
This can be achieved through increased compliance efforts such as making all appropriate medical recommendations; a focus on service in order to keep existing clients and attract more; and improving profitability by keeping expenses under control and not giving away services.
Felsted said to remember the acronym CRAFT when working on compliance. CRAFT stands for “Compliance = Recommendation + Acceptance + Follow Through.”
Effective compliance comes from investment in compliance improvement, attending compliance workshops, staff training, and client education.
“There’s no question that improved compliance is a way to increase earnings without raising fees,” she said.
Service and value are key factors in retaining and winning clients.
“Most clients can’t judge the medicine, so they focus on the service,” Felsted said.
Felsted also warned against offering too many discounts. She gave an example of a five-doctor practice, where the veterinarians gave discounts between 2 and 19 percent. At that practice, the discounts added up to a loss of nearly $250,000 per year, about 10 percent of annual revenue.
Medical record audits can be very important in order to capture lost or missed charges. The cost of having an employee review the records is almost always less than the lost revenue, according to Felsted.
“If you did nothing else, these medical record audits and the resulting procedures are one of the most significant things you can do in your practice,” she said.
She noted that her advice was general, and not necessary for every single practice.
“If your practice is doing well, then don’t change anything,” she said.