Free Trends article: Peak performance
Find Your Sweet Spot with Benchmarking
—BRIDGETTE BAIN, PHD, AVM
What if you could sneak a peek inside other veterinary practices’ financials to see how you stack up? Drill down to discover whether you really have lost income to online pharmacies, or if it just feels that way? Or see into the future with “If I do this, then that happens” scenarios?
Financial benchmarking can do that for you.
This article covers what benchmarking is good for—or not good for. We’ll cover five veterinary financial benchmarking tools. And we’ll answer questions like: How do they compare? Which one is right for you? How can you use benchmarking to improve your practice?
Let’s start with what it is: Benchmarking means comparing your business with others. You can look at the big picture of your practice’s overall performance or you can focus on specific metrics, like client retention. The key is to compare your practice with others like it; there is no sense comparing a companion animal practice with an equine practice, or even a rural practice with a metropolitan one.
Benchmarking is a planning tool; it helps you see where you stand and decide where to go next. Use it to
- identify your practice’s strengths and weaknesses,
- prioritize areas that need
- set goals and performance expectations,
- monitor your performance and manage the changes, and
- gain deeper understanding of your practice and its competitors.
“If your numbers are quite different from other practices, ask why,” said Karen E. Felsted, CPA, MS, DVM, CVPM, CVA, of PantheraT Veterinary Management Consulting and author of the Veterinary Hospital Managers Association’s (VHMA) Insiders’ Insight Monthly Report. “Are our numbers justified, or do we need to change things?”
If both your support staff costs and your profitability are higher than most other practices, she suggested, consider that your support staff costs drive your higher-than-average profitability. On the other hand, if your support costs are higher than average and your profits are lagging, then ask why that is so.
To start, think about how the benchmarking tools are made: all of them rely on data provided by real practices. The benchmarks publisher decides how all that data will be organized in expense and revenue categories. If you organize expense and revenue categories differently, then your numbers won’t compare to the published benchmarks.
“If you see a huge deviation in your numbers against the averages, investigate whether you are including things differently,” advised Bridgette Bain, PhD, an economist and associate director of analytics of the American Veterinary Medical Association’s (AVMA) Veterinary Economics Division. “It is not a cause for alarm if things look different; it is a cause for investigation.”
Click the link to download a chart comparing the benchmarking tools described in this article.
The key to smart benchmarking, Bain and Felsted agreed, is to ask good questions.
The benchmarking tools described here are alike in important ways; for example, they survey a variety of practices across the United States, they use experts to verify the raw survey data, and most offer some advice for improving performance. But they also differ in important ways.
Each benchmarking tool offers its own scope, features, and benefits to answer different questions or satisfy different purposes. Your success depends on picking the right tool for your practice and using it well.
Here are some brief descriptions of four major veterinary benchmarking tools. For more detailed, head-to-head descriptions, see the table accompanying this article.
AAHA Vital Statistics Series
What it is: This ongoing series includes three separate publications focused on fees, compensation, and productivity. Each study is recreated from surveys conducted every other year. The series set the standard for other veterinary benchmarking tools by supplementing the data with expert advice, management tips, and interactive tools.
How it works: Benchmarking data is presented in tables, organized by practice demographics and specifying averages, medians, and quartiles, so you can accurately compare your performance with others. A short introduction to each table explains the data, why it matters, and how to identify and fix problems or gaps.
Judy Rose Lanier, CVA, CVPM, used the tools as a practice manager before becoming regional field manager of AAHA’s Member Experience team. She suggests practices use benchmarks as active management tools. By comparing a new doctor’s performance with their experienced colleagues, for example, you will discover whether additional coaching is needed to avoid missed charges, she told Trends.
Why it’s unique: This is the most comprehensive and well-established benchmarking tool, first published more than 20 years ago, with a new publication each year. It’s also the most comprehensive, with hundreds of benchmarking data points based on a randomized national survey of 650–900 companion animal practices of all sizes, including multigroup practices. A companion website offers a host of interactive tools for simulations, including one that helps staff right-size inventory orders.
—DENISE TUMBLIN, CPA, WTA VETERINARY CONSULTANTS
AVMA P&L Calculator
What it is: AVMA’s P&L (profit and loss) Calculator is an online tool that lets you compare your expenses and revenue with other hospitals with the same number of full-time equivalent (FTE) DVMs. You can use the calculator to identify opportunities, change spending patterns, develop new revenue, optimize your team, or make other improvements.
The calculator is based on a subset of the data in AAHA’s Vital Statistics series.
How it works: Start by inputting the number of FTE doctors in your practice. Then “play with the numbers” to run scenarios. Input a higher total revenue to find out, “If I grow my revenue this much, this is what I can expect in expenses,” Bain explained.
To prepare for using the AVMA P&L Calculator, users aggregate their expenses and revenue, preferably from a profit and loss statement created by an accountant, Bain pointed out. This statement should include all expenses, from pharmacy income to depreciation and amortization. With those figures in hand, the user inputs their practice’s data into the AVMA P&L Calculator.
Why it’s unique: It is interactive. Though similar in purpose to one of the Financial and Productivity Pulsepoints interactive tools, the AVMA P&L Calculator is designed to function like an app. The data tables that dominate most benchmarking tools operate mostly in the background as users input their own data to compare their performance and simulate the financial impact of management changes.
VetSuccess: Performance and Compliance
What it is: VetSuccess is a data company offering a suite of products that allow practices to track and benchmark their performance. Products include Practice Overview Report, Compliance Tracker, and Daily Dashboard. The reports provide an immediate, visual picture of individual practice performance. Through direct data connections, the system generates analytics and benchmarks for practices based on their transactional data.
How it works: VetSuccess software extracts relevant data directly from the customer’s practice information management system (PIMS). Working behind the scenes, proprietary software maps revenue and expense categories to the AAHA/VMG Chart of Accounts. That means practices may organize their accounts as they like, and the software will automatically match them to the standard Chart of Accounts for apples-to-apples comparison. Customers log into a secure VetSuccess portal to view monthly reports and daily dashboards.
Why it’s unique: The company’s proprietary data normalization process ensures the accuracy of reported data and metrics and generates one of the largest pools of veterinary data for benchmarking. Reports are highly visual, with trendlines, bar charts, pie charts, and enhanced graphics to point out key performance indicators.
“Veterinary practice data is complicated, but we’re able to make sense of it by assigning each revenue transaction to the appropriate category, regardless of what each individual practice uses for software system, item code, or description,” said VetSuccess vice president of sales and marketing Sheri Gilmartin.
VHMA KPI and Management Trends and Compensation and Benefits Survey
What it is: The Veterinary Hospital Managers Association offers two benchmarking tools, one focused on key performance indicators (KPI) and the other on compensation and benefits for associate DVMs, practice managers, and non-DVM staff. The monthly Insiders’ Insight reports focus on KPI and management trends. The compensation report is issued every two years. Both are free to VHMA members.
How it works: For the KPI tool, VetSuccess, a data company, extracts information directly from participating practices’ PIMS. Participants may view the VHMA dashboard on the website to see national data or receive an individual monthly report that includes their practice data in comparison with national data. A monthly blog provides commentary on trends and tips for how practices can use the data to improve their practice performance. The Compensation and Benefits Survey is based on a survey of practices in North America.
Why it’s unique: The KPI report is the most frequently published benchmarking tool, with monthly updates. The compensation and benefits tool includes information on qualitative aspects of veterinary employee management, including position and responsibilities, credentials, job longevity, and use of split shifts.
“Understanding the economic trends that impact our industry empowers practice owners and managers to make well-informed decisions to improve practice performance,” said VHMA president Jessica Speas, CVPM, SPHR, PHRca, SHRM-SCP, CCFP.
What it is: This is a private benchmarking tool by and for members of Veterinary Management Groups (VMG). Each member belongs to a study group of 15 to 20 noncompeting practices. Financial reports are reviewed and compared during VMG member meetings and can also mine data from all VMGs to allow comparisons with like-sized or similar hospitals.
How it works: VMG members organize their PIMS and accounting software to align with the AAHA/VMG chart of accounts. Each practice’s quarterly financial data is entered into the Veterinary Study Group (VSG) DATALINK portal (automatic data transfer from PIMS is available) and audited by certified public accountants specializing in the veterinary field. Members receive quarterly financial and key performance indicator reports showing their hospital’s data (revenue and expenses) and how they compare with other hospitals in their group, the entire VMG membership base, and the top-performing VMG hospitals.
“VMG members find it valuable to collaborate with their peers, and it provides a great level of shared accountability and mutual encouragement to make changes in their practices,” said Matt Salois, PhD, president of VSG.
Why it’s unique: Because the practices organize their expense and revenue categories in the same way, it’s an apples-to-apples comparison. In addition, VMG staff offer member support, and the data is audited by VSG’s CPA firm, which attends VMG meetings to educate members on how to interpret the reports and pull actionable data to target specific areas for improvement.
Well-Managed Practice Benchmarks
What it is: This is a curated benchmarking tool that allows you to compare your practice with 100 handpicked practices that meet the four criteria of a Well-Managed Practice, listed below.
How it works: The benchmarks are published as a series of four books, each one focusing on a single area: revenue, fees, expenses, and a special topic. Each book is based on a separate survey, with one survey conducted every six months, so that all four topics are covered in two years. Then the cycle repeats. The most recent special topic was telehealth (2021).
Why it’s unique: Four things set this research apart, according to Denise Tumblin, CPA, owner of WTA Veterinary Consultants, which produces the tool along with Brenda Tassava, CVPM, CVJ, MVLCE, founder and owner of VetSupport. (1) It includes select, Well-Managed Practice participants; (2) experts review the data for accuracy; (3) the reports offer management recommendations for using the results to improve your practice; and (4) experts contribute their views on a variety of topics related to practice performance.
The recent report Telehealth 2021: The Future Is Here answered questions about remote prescribing, the client experience, access to specialty care, efficiency and productivity, trust and access, regulatory implications, and fee-setting.
“Anyone can read published data. The key is understanding how to apply it in your own practice,” Tumblin said. The Well-Managed Practice benchmarking reports feature expert contributions that share broader perspectives on a variety of topics.
Constance Hardesty, the former editor-in-chief of AAHA, managed creation of the AAHA/VMG Chart of Accounts, directed the Vital Statistics Series, and created some of its interactive tools.
Photo credits: Nuthawut Somsuk/iStock via Getty Images