Monitoring your practice in today's economy
Jan 01, 2009
When our grandfathers sat us down and told us about the good old days, their memories were very selective.
They probably walked five or 10 miles a day because there was little in the way of convenient transportation. Few people had a telephone in their own home and radio was the most common form of entertainment.
But the grittier details of two world wars and other conflicts, the flu pandemic, the Great Depression and other troubling events somehow got left behind in their recollection of the good old days.In veterinary medicine, those who practiced in the last two decades may be in the same position. I cannot tell you what wonders our grandchildren will take for granted that we can't even imagine today, but I can tell you that veterinary practice will change considerably — and not necessarily for the better.
The counterproductive instinct innate in most practitioners — to provide more services for fewer dollars — will lead to the extinction of about one in six practices in the next decade. You cannot continue to give away profits in the continuing down economy of the next decade.
We must give value for the client's dollar, but not at the expense of our livelihood.
What is this insane urge to design and build award-winning cathedrals of veterinary hospitals? Overhead soars as our clients, increasingly desperate to retain their discretionary income, increasingly procrastinate over services that were commonplace just yesterday. Dentistry, now getting performed on just 3 percent of dogs and 1 percent of cats, is the first casualty that will fall to the cash-strapped clientele.
Veterinary services are a matter of educating our client on value vs. costs. If cost appears greater than the value, the service is declined. If perceived equally, indecision reigns. Only when value exceeds cost does the pet get the needed service.
Now the problem becomes the question: Who on our staff is capable of communicating value over cost? Certainly some are better than others, but improvement never starts without recognition of the relative communication failures.
In this example, the office exam fee is $41.40, and each doctor's average transaction should be four times that or, in this case, $165.60. Drs. B and D meet or exceed this benchmark. Dr. C is 14 percent too low and Dr. A, who happens to be the practice owner, is 34 percent below this mark.
Assuming about 5,000 transactions each per year, Dr. A is costing the practice about $170,000 per year. This is largely because he wants to be a nice guy and discounts a lot to the gazillion friends he has built up over the 30-plus years of his practice. Unfortunately, many clients know this and request Dr. A to save money. This means that, at a time of life when he would like to relax a little, he is almost double-booked most of the time.
Trying to see all of his "friends" is wearing out Dr. A, and he is missing some lessons in his haste to be the nice guy. This is noticeably obvious, in that he has the lowest dentistry and laboratory percentages. However, in the discounts column, he looks good. This is what the Russians call maskirovka, or political deception. If he gives two injections and only charges for one, the discount is not tracked by the computer. Oh well, no system is perfect.