Living Wage: Hospitals Focus on Better Pay for Team Members

Hospitals are facing tougher times as team members take jobs at other practices or leave the field completely. Employees may love animals, but they can’t be expected to accept low compensation for their efforts. Here’s a look at how four hospitals are working to value their people.

by Maureen Blaney Flietner

GETTING AND KEEPING TALENTED VETERINARY STAFF, particularly credentialed veterinary technicians, can be challenging.

With the current national average hourly wage for veterinary technicians hovering around $17 an hour, it is not surprising that there is a national shortage of members, according to Kenichiro Yago, MS, RVT, VTS (ECC SAIM), president of the National Association of Veterinary Technicians in America (NAVTA). Low pay is the top reason given for leaving technician jobs or the veterinary field altogether.

The reported average annual turnover rate for full-time veterinary staff is 23%, according to survey results in the ninth edition of AAHA’s Compensation and Benefits. Compare that with the 15% average annual turnover rate for all US workers. Online job sites reflect the situation with some advertisements for veterinary positions offering signing bonuses.

“There’s been a definite shift in consciousness in what people need to pay to find adequate and competent help,” said Gary I. Glassman, CPA, of Burzenski & Company in East Haven, Connecticut. “We’ve seen hospitals that need to pay more because new employees are demanding more than existing employees are paid.”

While some practices prefer to hire as cheaply as possible, others are taking a different approach: working toward a pay scale based on the idea of a “living wage.” But exactly what “living wage” really means can vary.

Perhaps the closest “official” definition is offered by Amy K. Glasmeier, PhD, professor at the Massachusetts Institute of Technology, who devised a “living wage calculator” (livingwage.mit.edu) in 2004. According to its website, the calculator was developed to determine the current wage rate—at county level—that allows US residents to meet minimum standards of living for basic needs.

Low pay is the top reason given for leaving technician jobs or the veterinary field altogether.

Meeting Challenges

Maybe you would like to raise wages. But how would you cover expenses? Could you increase fees, even though veterinary medicine is already seen as expensive by some pet owners?

Glassman described it as “a tug and pull. Employees want to get paid a living wage but clients have to want to pay a higher rate. Living wages equal ability to charge appropriately for services.”

But raise the prices of commodity-based services such as fecal and heartworm tests, spays and neuters, and vaccines—where client decisions focus on price and not value—and clients will head to practices with cheaper prices, he said.

The wage scale even figures into the buying and selling of practices. According to John Bryk, DVM, of Total Practice Solutions Group Veterinary Practice Sales and Appraisals in Polk, Ohio, “a practice typically budgets 18–22% of gross for the team. A practice grossing $2 million would have $400,000 for the team. If a practice grosses $500,000, it can only afford to pay $100,000 for the team. It’s all about percentages—so much for veterinarians, drugs, rent, staff. That’s why a low-grossing animal hospital, while cheaper to buy, can put the owner always behind the eight ball.”

So, what do you do? Four AAHA-accredited practices shared how they are adjusting.

Innovating for Change

Neffsville Veterinary Clinic, Lancaster, Pennsylvania

“‘How can we increase compensation without raising fees and still stay viable?’ Is that million-dollar question everyone is trying to figure out,” said Hospital Administrator Bethany Mihalik, CVPM, MHRM, CVT.

The hospital, which tracks area trends and cost-of-living analyses, has increased its base wage by $2 to $3 per hour in the past two years because of market conditions. Pay is tiered based on duties, responsibilities, and levels of risk. If monthly goals are met, everybody gets a bonus, and, she said, “we have consistently been hitting goals.”

“We don’t start anyone at minimum wage. The federal minimum wage is still at $7.25 an hour. We start our inexperienced kennel staff at $9 an hour. Receptionists with little to no experience start at $12 to $14. If they take on more responsibility, they are better compensated.”

Mihalik said she doesn’t feel credentialed veterinary technicians are paid as they should be. One way that Neffsville has found to improve that is with a 90-day formal review, followed by annual reviews thereafter. If the person has taken on more responsibility, perhaps by managing the in-house lab, pay adjustments are made.

Benefits also play a role in valuing staff. For example, the practice pays 80% of insurance premiums for health, vision, and dental for full-time staff; provides autoenrollment into a 401K with a 3% safe harbor contribution for employees 21 and older; and pays 2% in profit sharing.

The hospital seeks ways to increase compensation without having to hike fees, said Mihalik, but finds itself at the mercy of the pharmaceutical industry and challenged by online competitors, mobile practices, vaccine services, and big-box corporations that are getting into the veterinary business.

“My personal philosophy is that you have to spend money to make money and you never want to compromise service,” she noted.

Galway Veterinary Hospital, PLLC, Galway, New York

Galway uses industry benchmarking tools and trends toward the upper end of the average range calculation, said Hospital Administrator Cheryl Smith, CVPM, a director on the AAHA board.

“New York’s cost of living is one of the highest in the country and must be considered when determining salary ranges. Offering a living wage has enabled our hospital to attract more candidates for each position, providing more opportunities to identify the best fit for our hospital.”

Benefits also help keep wages from being eroded by other costs. Smith pointed out that AAHA data shows the industry has opportunities to improve: The average veterinary hospital covers 64% of employees’ health insurance premiums; 58% of veterinary practices offer a retirement plan match; and fewer than a third provide disability and life insurance.

Among Galway’s benefits, she said, are a SIMPLE IRA with match, paid time off accrual of two weeks in year one and three weeks thereafter, and 86% of premiums paid for health insurance with vision. The hospital’s commitment to pay a large portion of premiums enabled a new hire to receive healthcare.

“Practice owners must think broadly in terms of protecting talent for the entire veterinary industry and long term for their individual hospitals,” said Smith. “We need to retain the most dedicated and talented employees, and it is unrealistic to expect those individuals to accept less than a living wage.”

Centerville Animal Hospital, Chesapeake, Virginia

Centerville has taken a bold move: It has flipped the idea of compensation on its head.

The idea first centered around the job description of a credentialed veterinary technician, explained Hospital Administrator Lindsay Peltier, LVT.

“Almost everybody experiences difficulty in hiring licensed veterinary technicians,” she noted. “A practice may bring somebody on board, train them, and, when they are finally ready for that position, the person is being solicited by another practice. They are more difficult to hire and harder to retain. Being in a highly competitive area and not the only AAHA-accredited hospital made it a real challenge.”

Peltier and practice owner Amanda Hayden, DVM, looked into why people would graduate from school and then leave the field after a few years and why people would feel comfortable with a résumé showing multiple positions with short tenures.

It came down to compensation, she said. The starting wage needed an adjustment.

Peltier said she and Hayden, who have worked together for 20 years, “like thinking out of the box. If it doesn’t exist, why doesn’t it? If it should exist, we’re gonna go for it.”

“We looked at our starting wage, at what we pay after 10 years, and our wage cap for the position. Pay increases—a raise every year—tend to be looked at as a reward for longevity. That’s the industry standard. We thought: ‘Let’s flip this.’”

At the end of 2019, the hospital began to offer newly graduated licensed veterinary technicians $20 an hour if they could navigate all areas of the position description. But prospective employees were also told about the downside: Wages don’t automatically go up each year.

Peltier provided the rationale: “Someone who is more secure with their wage is not always pinching pennies or out looking for another job because they feel that they might get an extra 60 cents an hour. Each year with us, the LVTs are more competent with client communication and more educated about the services we offer and more comfortable conveying that. They make the practice more money. We consider our [technicians] revenue-generating employees. Their experience and comfort level are what makes this a winning proposition for our bottom line.”

But what about pushback on the higher starting salary from long-term technicians? Peltier said they explained to team members that it was an investment in their profession. Instead of upset, said Peltier, they found agreement and excitement. The strategy already has shown success, she explained: One technician was able to return from maternity leave secure in knowing that she could balance the cost of childcare with work.

And wages for other positions? Peltier said the hospital could not start everyone at $15 an hour but could start them at a point that their education and experience supported and then allow them to increase compensation by moving to other positions—depending on motivation and capability. It’s a matter of keeping those conversations open, said Peltier.

Compensation also includes a SIMPLE IRA with a dollar match up to 3% of W-2 compensation, two-weeks of paid personal leave, and 40 hours of paid and 40 of unpaid sick leave that begins 90 days after employees start. An employee assistance plan provides access to any counseling or advice for situations that would prevent an employee from doing their best job.

“Living wages equals ability to charge appropriately for services.”
—Gary Glassman, CPA

Animal Care Daybreak, South Jordan, Utah

Pam Nichols, DVM, owner and medical director, and president of AAHA, recalled that, in the early 2000s, she had several good candidates that she couldn’t get because she didn’t pay enough and was not making enough money to pay more.

“I’m ashamed to admit that I was paying my team the least I could to keep them happy. We, as practice owners, have taken advantage of the fact that employees will work for practically nothing because they love animals so much. I think I always knew that if I paid my employees more, I would keep them longer, they would be more efficient, and I’d be more profitable. It was a catch-22.”

Nichols joined a Veterinary Management Group in 2004 that focused, in part, on how to afford better employees. Her team for the next 15 years was better compensated with further improvements, especially in the past five years, she said. While not all positions earn a living wage, which she defines as one that allows a person to live independently and still save money, it is a topic of frequent VMG discussion.

“My goal now is 20% of gross for support staff wages and 5% for benefits. I just opened a new hospital with the endgame in mind. In staffing it, I pay $3 to $5 more per hour than other practices for every position.”

“Every day, employee hours are budgeted based on the gross that we earned the day prior. That simply means that I chose my level of pay and I budget for the amount we need to gross around it. It is also pretty much a team effort. If someone is not pulling their weight, the team rebels,” explained Nichols.

“The best part about paying better wages than anyone else is that my team knows it—they have pride in their work [and] they have pride in their career, I think because they know how much I value them. I truly believe that if we would pay people what they are actually worth, we would dramatically reduce the amount of burnout and suicide in our profession.” 

Ways to Work Toward Better Wages

Interested in reassessing your pay structure? Consider these suggestions from our sources.

  • Make the best use of credentialed veterinary technicians.
  • Check out the MIT living wage calculator and figure in more complex factors such as education and licensure requirements. Investigate benchmarking tools and online job site data for wage trends.
  • Consider turnover costs. What are you paying for recruitment? What are you losing in revenue? What are you losing in morale?
  • Talk with your staff about their ideas for a wage scale. Try an anonymous survey with open-ended questions or a roundtable focus group. Don’t spend a lot of time designing a wage plan that you think they want but misses the mark.
  • Hire practice managers with financial backgrounds. Use a financial coach. Join a management group.
Maureen Blaney Flietner
Maureen Blaney Flietner is an award-winning freelancer based in Wisconsin.

 

Paying More the Right Way

Using Process and Tools to Provide Fair Wages

by Stith Keiser

“Expect more, earn more.” The slogan greeted the veterinary support team during their weekly Tuesday staff meeting. As simple as the slogan was, it reflected months of forethought and planning and plenty of number crunching as Alpine Animal Hospital, a four-doctor, mixed-animal practice, wrestled with the dilemma that so many of us do: How do we remove, or at least elevate, the earning ceiling for our veterinary teams?

Challenges, and opportunities, associated with the COVID-19 pandemic exacerbated a challenge that our profession has been facing for years concerning recruiting, retaining, and advancing our support staff. Finally fed up with feeling they were letting their team down and were stuck on a hamster wheel from which they couldn’t jump off, the ownership and management at this particular hospital decided it was time to reapproach team compensation. The reimagination followed a fairly simple process:

  1. Establish a clear baseline for compensation and benefits.
  2. Orient with a reference range establishing what “normal” looks like.
  3. Define livable wages for the area and then set a goal for compensation.
  4. Develop a strategy to move from existing compensation structure to target levels.
  5. Introduce and execute the plan.

Regardless of geographic location, hospital business model, or any of a host of other factors, this process can be adopted by any hospital wishing to re-evaluate its compensation structure.

Establishing a Baseline

Establishing a clear baseline for compensation and benefits began by running a profit and loss statement—leveraging the AAHA/VMG Chart of Accounts—to define what the hospital was currently spending. This exercise consisted of not only determining total payroll expenses or even total support staff payroll but also breaking down payroll at all levels of staffing.

Marrying that information with the existing number of team members and their respective wages allowed leadership to understand how the current structure was supported by the middle of the profit and loss statement. Upon determining wages, management layered on the value of the benefits package to determine the total value of the compensation package.

This first step is critical because it reveals whether a hospital has the existing opportunity to improve wages or whether operational adjustments need to be made first. For example, a hospital can desire to increase compensation to allow for a livable wage, but if support staff payroll is already in the mid- to upper-20% range of gross revenue, there is unlikely a margin in the business to do so.

Not to worry: there are plenty of solutions to correct this, but action must be taken before increasing wages or the top, and bottom, line of the hospital won’t sustain the increase.

Find the “Normal”

It’s easy—and I’ve found myself in this situation more than once—to get so immersed in our own hospital that we find ourselves on an island thinking we are alone in dealing with the challenges of our profession. We lose sight of, and context for, what “good” and “great” look like, and it’s hard to embrace change if we’re not aware that there could be an even higher bar out there. Fortunately, the solution is simple, and it hinges on using outside resources to serve as a point set. For example, AAHA’s Compensation and Benefits, Ninth Edition, is an invaluable resource to add some perspective to the compensation environment for veterinary hospitals of all sizes across the country.

As Alpine’s leaders were reorganizing their compensation structure, their second step involved acquiring the book so that they could get a bird’s-eye view of not just their island but of the veterinary archipelago. I am not suggesting that every single hospital adjust their compensation to reflect the ranges described in the book, but I do submit that, as practice owners, we owe it to ourselves and our teams to be aware of industry averages. If we find our hospital is below average, we can ask why.

If other hospitals can do it, we should be able to as well, and if nothing else, challenging ourselves at least sparks healthy conversation about how we might be able to overcome existing hurdles. If reviewing the detailed data places us at average or above, we at least know we have less ground to make up in becoming an employer of choice.

Figure Out Your Location’s Living Wage

I’ve never spoken at a conference about anything related to financial health of a veterinary hospital without a colleague challenging me on why their hospital could never meet benchmarks because of their location, their clientele, or another factor. The path to doing more for our team starts by acknowledging what may be a “unique” challenge, and then quickly turning our focus to how to overcome it.

Every hospital, regardless of geographic location, will deal with challenges unique to that location. Same goes for client demographics. Same goes for competition from other hospitals. The hurdles may look somewhat different, but they always exist. Our job, in this livable wage exercise, is to use what we know about our area—cost of living, competitive going rate for the level of staff we’re seeking, what our staff members value (compensation, benefits, or perks like work schedule)—and then determine desired compensation level.

Create a Strategy

The cover story this month, “Living Wage,” showcases what several hospitals are doing to move their team from where they started to where leadership wants them to land. In addition to the strategies highlighted there, Alpine Animal Hospital’s strategy for meeting, and exceeding, livable wages focused on low-hanging fruit found in every hospital, to varying degrees. That fruit? Building a process, system, and flow that allows every team member to focus the majority of their time on what they are most uniquely qualified to do.

This doesn’t mean that team members can’t be cross-trained, and it doesn’t suggest that any team member shouldn’t pitch in and help out where needed in a pinch. It does mean that job descriptions, patient flow, and support staff leverage and ratio are designed to optimize each individual’s skill sets and interests.

For many hospitals, and this was the case for Alpine, it means change. It meant change in how veterinarians and technical staff supported each other, it meant change for how clients were checked in and checked out, and it disrupted the traditional model of patient flow. And it meant that team members were expected to do more. Most, with the appropriate support, training, and resources, rose to the challenge. Some did not. This is the uncomfortable piece of the equation, but I submit to you that it is a necessary piece. Earning more means expecting more in order to support that ability to earn.

Implement the Plan

“Expect more, earn more.” The phrase hung in the air for a moment as the words settled on the team at the staff meeting. It was followed with the announcement that Alpine was setting a new, higher minimum wage for all new hires and that any existing employee below that wage would be meeting with the management team one on one to receive a raise and a customized development plan to ensure they were ready for it. All in all, support staff payroll increased by almost $20,000 annually in one sweeping statement.

What followed was a year, 2020, marked by a $600,000 growth in gross revenue (no new doctors were added) and a profit margin exceeding 18%. Turnover decreased, new applicants started suddenly appearing as word spread in the community, and the phrase became the internal rallying cry, a point of pride and differentiation, for the team.

Stith Keiser
Stith Keiser is CEO of Blue Heron Consulting in Danville, Kentucky.

 

Photo credits: ©nadia_bormotova/iStock via Getty Images Plus, ©AAHA/Robin Taylor

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