Giving away services has far-reaching consequences

Giving away services has far-reaching consequences

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Jun 01, 2003

Lucy Fosse was proud of her little veterinary clinic. She had pulled this little practice together over the past two years from out of nowhere in the shadow of her old employer.

At her very first job Lucy had argued with her former boss about the practice of charging for "every little thing" and thought that her boss had worried more about his daily receipts than his patients.

Lucy also remembered that her boss had been an excellent veterinarian, but she felt that real compassion included discounting the fees when possible to those "in need." She remembered that Dr. Jones had to sit her down from time to time to warn her that she should not be giving away her services. Lucy resented this.

In spite of Lucy's penchant to play the Wal-Mart bandit, Dr. Jones had allowed her to continue until the day she quit. Lucy had quit in a huff over having to charge a small fee to reinsert a drain that a patient had pulled out. She herself had decided not to put an Elizabethan collar on the patient-so it really had been her fault. This logic meant that the hospital would have to pay for the second procedure.

Moral high ground

Lucy rationalized that she indeed held the moral high ground on this issue, and therefore her contract and her non-compete clause were essentially void.

In effect, she could not continue to practice in a place which violated her own set of ethics grounded in what she had been taught in a special class during veterinary school on ethics taught by a professor in the department of philosophy.

What made Lucy happiest was to shower her patients and clients with love, attention and little gifts. Lucy was always giving away bottles of vitamins, free exams and toenail trims, and in almost all cases any and all charges related to rechecks and complications. This was her primary marketing strategy, and it seemed to have worked wonders. Her clients seemed to love her.

Lucy had misinterpreted this as the "They Love Lucy Show." She was noticing that these clients had other friends in need and the word soon spread. Lucy played to a packed house almost every day. She happily worked 24/7, and her trusty employee, Sally, worked long hours into the evening with no complaint. Her not-so-secret motto was: "Take that, Dr. Jones."

Trouble looming

She was now one year into her new practice and very happy with her approach to medicine and management.

One major thing loomed over her head-now she was trying to seek answers to the financial dilemma she was facing. Already deeply in debt from veterinary school, Lucy had borrowed and depleted the resources from friends and family in order to start her little practice in a small shopping mall. She had quickly added some nifty new equipment on lease.

In spite of being her own boss, Lucy just last month had once again approached her father to lend her a bit more in order for her to meet some personal expenses that had come up. Her dad had once again given her a portion of his fixed income.

In addition, another vet erinarian had just opened a small clinic about a mile away. She had noticed that some of those fans from the "They Love Lucy Show" had somehow slipped away to the new clinic. She had learned from Sally that they had been lured away because the new veterinarian was letting new people charge "at will"-something that Lucy had been forced to abandon a few months ago.

Unraveling

Lucy was two weeks behind paying Sally. Her trusted sidekick, for the first time in two years, had complained a bit. She thought to herself, "That is so unlike Sally." Lucy knew that the big problem was the drug bills. Sally had left numerous notes to Lucy from various companies asking for payment. Lucy became furious. She thought to herself, "These big companies put on huge spreads at the veterinary meetings and lure you into these huge buying opportunities, and then pull the rug out from under you." Lucy was beginning to hate the drug companies.

In fact, she was buying from new companies all the time in order to establish new sources for her clinic. Lucy had been issued various credit cards on behalf of her credentials as a doctor and for several months had started to pay drug bills with them. Sally also had left a note that she was behind on her lease payment for the new X-ray machine.

Emperor with no clothes

Sally, for her part, loved animals and had been on her own and working and paying bills since she was 16. Her parents early on had helped some, but she had been on her own for eight years, owned an old truck and was debt-free and had a small savings account. She balanced her own checkbook as well as that of the practice.

Just then Mrs. Elliot appeared at the front door with Franklin, an intact black Labrador. Franklin was having complications. Three days ago Lucy and Sally had worked into the night on Franklin. Sally had even spent the night with Franklin because Mrs. Elliot had insisted on continuous oversight.

Mrs. Elliot hadn't paid her bill when she had picked Franklin up from being hospitalized for a dogfight, and, as usual, Sally had authorized the charge. Unknown to Mrs. Elliot, Lucy had already heavily discounted the bill for Franklin, because Mrs. Elliot was an influential member of a local kennel club and Franklin had been picked up as a stray.

Hoisting Franklin onto the exam table the problem was obvious. Mrs. Elliot had felt sorry for Franklin, removed his E-collar and he had torn out all his drains.

The only person not seeing the irony in all of this is Lucy. Lucy is a bit like the emperor with no clothes. She is somehow incapable of seeing the obvious. She is disconnected.

Expectations gone awry

Lucy has misdirected her anger at Dr. Jones and at the drug industry. She is unable to comprehend her new world in the private sector. Lucy is using friends and family in a way that is sure to create problems down the line. If the underlying disconnect continues, it will surely affect the local practices directly and all practices in this country indirectly.

Veterinary school

The attitudes and backgrounds of veterinary students have changed over the years.

Students are less likely to be independent and some are more likely to harbor self-doubt. Many have been in school without pause since kindergarten.

Because these students are very bright, most have fast-tracked their way through high school and college without any coursework in personal or home finance. Match that with enormous debt load being amassed, and you have problems.

Here are some suggestions to the veterinary schools if anyone is listening:

Veterinary schools need to require coursework in personal finance, business or even accounting at the pre-vet level and as a part of the primary track in veterinary school. Personal and financial counselors should be available to veterinary students.

Students should be warned about borrowing the maximum, and then turning around and using excess proceeds for personal items like stereos and automobiles.

Scholarships are preferable to debt. All veterinary students are scholarly by definition. Therefore scholarships should always be awarded based on financial need not based on politics or "whom they know" or even their grade point average.

Debt load of new grads

Other authors have adequately defined these problems. However, the usual solution given for the financial problems of recent grads is to pay them more; in other words, some backseat quarterbacks (i.e. non-practice owners and most veterinary school deans) imply that all practice owners are "fat cats" and need to cough up enough money to solve the new grad's and the profession's financial problems.

All data available in the last few years indicate that new grads' incomes have risen faster than those of practice owners. This indicates that practice owners are in fact heeding the call, but at their own expense. Sometimes, in order to have a little time off for themselves, they are paying young graduates out of proportion to the income they generate in comparison to the owner. In some cases if you apportion the return on investment along with management and risk returns appropriately and subtract them from what the owner draws from the practice, the remaining income assigned for the return of owner professional activity is less than the amount paid to the associate. This is sure to discourage the ownership and the sale of veterinary practices in the long term. In fact, a growing number of associates never want to own a practice.

At this time economies of scale do not exist in this profession; in other words, expenses as a percentage rise at a faster pace than growth in overall income as the practice expands. Technology seems to be adding more expense than it generates. This is good for our clients and bad for us. It also means we do not charge enough. Part of the reason we don't charge enough is that we let the Lucy's of this world impact the fee schedules of all practices.

Solutions

Debt load solutions start with the student and they start early.

The profession needs to understand that debt load problems have financial responsibility of the student as part of the overall equation-(students have divulged to me that they have used loan money to buy personal items including stereos and cars. This starts in pre-vet and extends into veterinary school.)

Veterinarians need to encourage parents of high school students interested in veterinary school to include work at summer jobs and the establishment and monitoring of their own independent checking and savings accounts as viable preparation for owning a veterinary business. Parents should encourage coursework in business at the high school level if possible.

Veterinarians need to realize that veterinary clinics are convenience stores and not Wal-Mart. You will never compete with the Internet, the feed store or anyone else including other veterinary clinics based on pricing alone. Price your services in order to provide a good income for you, your staff and associates and eventually a rising tide will raise all boats.

Young veterinarians, as associates or as new owners, owe not only a school debt but also a debt of financial responsibility to the profession. Your profession needs you to charge appropriate professional fees in order for you and the profession to move to the next level of care.

The free clinic snare

People know a sale whenever they see it. Most clients who find their way to your door because of freebies and low fees can be very fickle, indeed.

These same clients can be the most demanding and are likely to exhaust both your emotional and your financial resources. When they perceive a lower price or a more convenient location somewhere else, they will be gone. There is only one place a freebie can be accounted for-it comes directly from profit (your back pocket) and nowhere else.

Can Lucy be reconnected?

Yes, but she will have to work her way through on her own. Up to this point, she has been sheltered by a system that requires long and arduous schooling prior to exposure to economic reality. Lucy has up to this point spent her whole life getting things for free - supported by friends, family and government, and to certain a degree, by her first employer. She, of course, worked hard during her education and at her first job. Yet she was able to pursue her dream independently without a real financial barometer to measure or balance her life. She got it in spades when she started her own practice.

In addition, Lucy is likely dealing with problems of self-image. Attracting clients with freebies and showering them with attention and service beyond what is necessary for any professional to give is a product of poor self-esteem. Self-esteem problems are based on an inordinate fear of rejection and everyone on planet Earth wants to be liked. This often leads people to give away time and money in order to establish a connection with a client. This connection will often fail to be permanent. Down the line, lack of self-esteem leads to poor financial performance that drags the whole profession down with it.

Lucy (or Louie), if you are listening, the ball is in your court. The setup

There are Lucy's (and Louie's) everywhere in America-not just in veterinary medicine.

It seems everybody loves Lucy, except maybe Lucy herself. The long journey through college and veterinary school has left many, like Lucy, a financial cripple in the process. Unlike other professions available to Lucy, veterinary medicine can be especially unforgiving with respect to financial constraints innate to this profession. In fact, many young veterinarians have never had to deal with the financial consequences of life. The norm today is for parents, so enamored by their young child's obvious intellect and interest in any field of medicine, to try to fund all the education and personal living expenses from point A to point B. After all, isn't that a parent's "responsibility?" Unfortunately Point B is a long way off. In the process, the child is never exposed to the financial consequences of the relentless "expense and income" equation of life.

On the other hand, if the parents are unable to "pony up" the full fare, Uncle Sam is willing to lend a half a generation's worth of debt to our young students. To the student this is a little like Monopoly money. Unlike the Monopoly game, you just can't hide it in the closet until next winter-this debt is real.

Idealistic pendulum

Most students, if offered a course in practice or financial management, will forego that for a chance to take some exotic course that is of great interest, but of little practical use after veterinary school. Many cannot or will not balance a checkbook properly. At this point in their life the world of veterinary medicine hangs tantalizingly on the brink and the pendulum of idealism seems to swing freely with no prospect of swinging the other way.

Don't get me wrong. I was the same way. However, the long educational process, which focuses on classical educational content with little practical balance lays a foundation for the inevitable hard lessons, lessons that life finally offers up; lessons that impact the entire profession.

-Dr. David Lane