Inflation hitting veterinary practices
Although COVID is still top of mind for most, a sharp rise in the Consumer Price Index (CPI) over the past year—up 7.1% since December 2020—is competing for people’s attention, and with good reason: It’s the fastest annual rise since 1982.
It’s affecting almost every business sector—including the veterinary space, where Inflation has led to increases in lab and vendor fees, as much as 12% in some cases.
How can practices stay competitive while sustaining economic growth?
Raising prices, for one thing.
“Even service companies with an altruistic nature such as animal hospitals owe it to themselves and their patients to stay financially healthy during inflationary periods,” Brian Beaulieu, CEO and chief economist of ITR Economics, told NEWStat. A veterinary consultant and a former economist for the US Department of Labor where he worked on the Health Care component of the CPI, Beaulieu added, “That means making a profit and protecting profit margins.”
“Fees are going way up,” confirmed veterinary consultant Owen McCafferty, CPA, CVPM, founder of Owen E. McCafferty, CPA, inc. And while It may be small comfort, McCafferty said that all of your vendors are going through the same thing.
‘‘And they’re raising praises to try and stay ahead,” he added. “They’re just not as hesitant [as animal hospitals.]” As a result, practices are seeing “Some pretty healthy increases.” And it’s going to have an effect: “You’re going to see a substantial impact.”
And it’s not just labs, he said: “It’s everything.” He notes that for most practices, the cost of labs makes up 5% of gross costs at most. Employee salaries and benefits, in contrast, generally make up 48-52% of total costs. “That’s something you’ve got to open your eyes to in terms of inflationary impact.”
That’s because. “We’ve got to raise salaries but we don’t dare to without raising fees,” McCafferty said. He said his firm is advising clients to keep ahead of inflation by instituting quarterly fee increases, and monitoring their staffing. That means “making sure we have a good core group of people we really, really take care of. Those are the ones who are with us when the times get tough.”
“Make sure you’re paying staff as much as you humanly can,” he advises. “Make sure you’re having quarterly fee increases. Watch production on a per veterinarian basis. Make sure your doctors are competent.” That last one may seem like a no-brainer, but competent doctors correlate with the number of labs you practice orders.
“If you don’t have a competent veterinarian diagnosing your patients, they’re going to order more tests to try and figure out what’s going on,” he explained. So watch the diagnostics, “Because running too many lab tests without any measurable results is going to make the clients look elsewhere.”
He concedes that during the pandemic, that may not have been a problem: “Right now it’s all about access/ Clients don’t really care about price.”
That’ll change once they start feeling the same inflationary pinch practices are.
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