5 case studies of prepaid wellness plans

If the cost of wellness care keeps pet owners away from veterinarians, then prepaid preventive plans may be the answer to bringing them back. But offering these plans isn't a good idea if you don't first answer some important questions:

> How can you ensure you're paid each month by clients using the plans?

> What will you charge?

> What should you include?

> How will the plans affect doctors who receive production-based pay?

To find answers, I spoke to five veterinary practitioners and managers who offer prepaid preventive health care plans. And they each shared their insight on implementing these plans in practice.

Karl Salzsieder, DVM, JD

Practice owner, Yelm Veterinary Hospital Yelm, Wash.

1 Salzsieder lays claim to one of the longest-running prepaid veterinary plans in the country. He's offered prepaid plans for more than a decade, and he's surprised the plans didn't become popular sooner.

Salzsieder began offering the plans out of necessity. His first practice was in a blue-collar community, and people didn't have a lot of money to spend on their pets. He was frustrated when clients didn't return for rechecks or to finish vaccination programs. That's when he hit on the idea of letting them pay for pets' care in installments.

He offered the prepaid plan to puppies and kittens first. Fifteen years ago, corporate practices started offering similar plans for all pets, and Salszieder thought, why not?

He did market research and cost analysis before setting up the adult pet plans. He made the plans affordable. Most clients, he figured, could afford monthly payments of $35 to $45. The plans included discounted services by 50 percent and didn't include products, except for vaccines.

Today, Salzsieder offers unlimited exams under his plans and says his clients rarely abuse it. Those with plans make appointments for pets when they should, because they know that no matter what else they need, the exam's already paid for.

"The staff members love the plans almost as much as the clients do," Salzsieder says. "They see that people do more for their pets than they would otherwise, and they know that the plans save clients money."

The practice promotes the prepaid plans with indoor signs, and staff members are happy to talk about the plans. He's learned that high-pressure selling turns clients off, so he encourages colleagues to give them at least 18 months to catch on.

When it comes to payment, Salzsieder doesn't accept credit cards—except for the first payment. After that clients pay by checks or debit cards. Income generated by the wellness plan is managed in a separate account; transfers are made to the hospital account each time the plan is used. This makes tracking easy, he says, and clients get a fully detailed receipt for their bill, showing zero charges for the things included in their plan. The method reinforces the value of the plans in clients' minds.

More than 10 percent of his clients have opted into the plans, and the renewal rate on the plans is better than 80 percent. On average, the practice sees clients on wellness plans three times a year. Doctors don't get paid for the plan exams, but they get commission on any other work they do. They receive full commission on work not included in the plans and commission on 50 percent of the value of the work done under the plans.

Most of all, Salzsieder likes that the plans help clients say yes to preventive care and helps the hospital offset slower seasons. It's an opportunity to call clients to remind them to use their plans, and that builds goodwill and better patient care.

Denise Saxon

Practice manager Powell Boulevard Veterinary Clinic Portland, Ore.

2 Denise Saxon's practice, owned by Dr. Greg Lathrop, has 3.5 doctors and is already focused on wellness care, especially pet dentistry. Like many other practices, Powell Boulevard Veterinary Clinic has seen business slow in this economy. Saxon thinks her clients want to comply with recommendations, but they just don't have a lot of extra money for veterinary care.

In her experience, clients seem comfortable with payment plans. "We didn't leap to payment plans," Saxon says. "We 'eased' our way in."

Saxon's practice experimented with prepaid pet dental plans before offering full preventive healthcare plans. She said the dental plans were successful from the start, and clients were saying yes to $1,000 dental procedures because the plans gave them a way to afford them.

The practice now offers six general wellness plans. Clients pick the plan that best fits their personal budget and their pet's age. Puppy and kitten plans, for instance, come with and without spay and neuters because the practice sees puppies and kittens that have already had these surgeries. The plans include physical examinations, vaccinations, deworming and blood work, and clients can include preventive dental procedures as well.

The practice has only offered the preventive plans for a little over a year, but revenue from the plans from the first 12 months was $22,000.

Saxon says team members like the plans too. They've seen how the plans help pets get the care they need.

Of course, there are challenges. The practice's doctors, for instance, had to accept being paid at the plan rate, which often reflects a 15 percent discount on services. The hospital gets the credit for plans sold, and doctors are paid for services they provide under the plans as clients use them. Still, Saxon says the plans mean more pet owners bring their pets in for care, and that means fuller appointment schedules for all.

Keeping track of plan usage turned out to be relatively painless, Saxon says. Her practice software automatically takes care of zeroing out services as clients use them.

Saxon says staff members also need to be on board with the plan. She called an educational meeting before the plans were rolled out. Front-desk team members, technicians, assistants and doctors all learned enough to feel confident talking to clients about the plans. Nowadays, technicians especially like bringing up the plans when they go over estimates with clients and point out how much they could save by signing up. To help keep the plans top-of-mind, Saxon even rewards staff members with Amazon gift cards for selling plans.

When it comes to accounts receivable, Saxon watches them closely with the help of her practice software. In most cases, a declined payment usually just means a credit card expiration date needs to be updated.

Saxon says she and the practice owner are still tweaking the plans, but overall they're satisfied. "The practice is moving in the right direction and starting to grow again," she says.

Brenda Tassava, CVPM

Director of operations Broad Ripple Animal Clinic & Wellness Center Indianapolis

3 Tassava says her seven-doctor practice tried prepaid preventive healthcare plans five years ago, and the clients just weren't interested.

"But it's a different story today with the economic concerns that people have," Tassava says.

A recent client survey showed that Broad Ripple clients wanted affordable care and they weren't coming in as much as they should because of money concerns. They reintroduced the plans in August 2011.

Tassava hoped the prepaid plans would attract new clients, increase visits and let the doctors do more for patients. Today, the doctors are paid on production. A client's monthly payment counts toward the original doctor's production (the doctor who saw the patient when the healthcare plan was initiated). After that, the credit for any diagnostics go to the doctor who sees the patient. Clients get a 10 percent discount on ear cytology, skin scraping and more, and those count toward doctors' commissions. There are no discounts on prescriptions.

Tassava has been surprised by the skepticism some clients expressed about the plan. "Their attitude was, 'What's the catch?'" she says. She plans to do more market research this year to see how clients feel about the plans now that they've had a chance to use them.

To get the staff on board, she compared what they do for pets with what they wanted to do for pets. They wanted to practice good medicine and not compromise their standards on patient care. Staff members came to see the prepaid plans as a way to accomplish that.

Next, to help get the word out, Tassava decided to make a YouTube video to explain their new plans, and ran the video on their lobby's flat-screen TV. She also blogged about them.The goal was to create an initial buzz so clients would get excited and tell their friends. It worked. Forty percent of patients seen for their semiannual exams enrolled in the first 90 days after the plans were introduced.

The hospital offers three levels of care, depending on the plan: Core, Core-Plus and Premium/Senior. All have a flat $44 enrollment fee. Monthly payments are, respectively, $28, $38 and $48.

Jeffrey Klausner, DVM SVP and chief medical officer Banfield Pet Hospital

4 The idea of offering affordable, quality healthcare for pets was part of the vision of Banfield's former CEO Dr. Scott Campbell, according to Klausner. Banfield has offered subscription healthcare plans—known as Optimum Wellness Plans—for preventive pet wellness care since 1988. The services included in the plans have changed over the years to keep up with best pet preventive practices, Klausner says, but the goal was always to provide quality pet healthcare at an affordable price.

Banfield statistics show that pet owners on wellness plans spend two to three times more than people who do not have their pets on prepaid wellness plans, according to Klausner.

"We know the plans allow us to take better care of pets," he says. "But it's the stories about the pets that keep us motivated."

One such story involves a client's cat, Booki, on a Basic Plus plan. The 8-year-old, spayed Domestic Shorthair, arrived at a Mesa, Ariz., hospital, with inappetence, an inflamed mouth and a fleshy growth on her lower left jaw.

Booki's veterinarian started her on prednisone; gave her an antibiotic injection and scheduled her for radiographs and a dental biopsy. Then the doctor discussed the results with the client, and the client agreed to schedule Booki for the needed tooth extractions, follow-up visits and home care. It helped the client to know that much of the cost of diagnostics, dental extractions and treatment plans was already covered and the rest would be discounted under Booki's wellness plan.

Klausner says one of the main advantages of working with clients who put their pets on wellness plans is that the conversations change. Now, he says, when they talk about dentistry with the client, it's about what the pet needs, not about the money.

All of Banfield's more than 780 veterinary hospitals in 43 states offer wellness plans for pets. Close to half of all Banfield clients choose a preventive plan for their pets, but the number could be higher, Klausner says.

"The hardest part is helping clients understand that the plans are about preventive care, not insurance," he says. "We'd rather try to prevent diseases than treat them."

All Banfield plans are geared for wellness care, Klausner says. They include unlimited office visits and two comprehensive physical exams annually as well as parasite detection, deworming, annual vaccine boosters and a 5 percent to 20 percent discount on services not in the plan.

The most basic plan is $21.95 per month; the most comprehensive is $78.95 per month. The comprehensive plan covers everything in the primary plan plus laboratory screening, a CBC, a blood smear, urine sediment exams, urinalysis, two electrocardiograms, three chest radiographic views, annual dental prophylaxis and cleaning and a 20 percent discount on services not in the plan.

Annette Engler

Hospital administrator Union Lake Veterinary Hospital Waterford, Mich.

5 The practice owners at this seven-doctor practice saw the number of wellness exams sink when the recession started. Worried that the biggest barrier to pet care might be cost, they decided to let clients break up payments to make the care affordable.

Three years ago, Union Lake Veterinary Hospital introduced prepaid preventive healthcare plans for pets. An important feature of the plans was to provide unlimited pet visits so that clients would know they could bring in their pets for any reason and the exams would be covered. The hard part, Engler says, was figuring out how to make the plan work for clients and the hospital.

She started from the beginning, deciding what services clients on plans would use. She estimated her costs this way. For example, she assumed that clients with adult pets would use two wellness visits, two medical exams and two rechecks in a 12-month period. Then she added in costs of vaccines and other preventive services and discounted the entire package by 10 percent. She created puppy and kitten, adult pet and senior pet plans to offer customized coverage to individual pets.

At least 10 percent of new puppy and kitten owners sign up for the plan, Engler says. The senior pet plans are the hardest to promote.

The learning curve for the practice's 55 team members has been a challenge, she says, and the practice continues to adjust the plans as they see how clients use them. It also took time to convince the comission-based doctors they were not really sacrificing income but instead had a way to practice better medicine. Under the plans, doctors receive credit as services are rendered. They receive full commission on pet exams, even if clients use more than the six exams covered under their plans. Doctors have found that clients now bring in their pets for ear problems and accept cytology and laboratory work because they can afford to do more.

Karyn Gavzer, MBA, CVPM, is a veterinary business consultant and nationally known writer and speaker. She says her job is to help practices "go and grow" with training, marketing and new ideas. She is a Certified Veterinary Practice Manager, an adjunct instructor for AAHA, and a founding member of VetPartners (formerly the Association of Veterinary Practice Management Consultants and Advisors).