ACT is dead - long live ASPP

The King is dead. Long live the King.

— Traditional proclamation made after the death of one monarch and accession of the new one.

Every business industry has its touchstone numbers to assess and understand its essential inner workings. As I mentioned in my article "8 veterinary practice financial myths busted" — you can read it in the July 2010 issue or at dvm360.com/8myths — I believe the average client transaction (ACT) has served its purpose. Now is the time for us to move on to the annual services per patient (ASPP). I hope that showing you what the ASPP is all about and highlighting some of the shortcomings of the ACT will encourage you to track this useful number.

Short-term vs. long-term

The ACT is akin to the average check at a restaurant. Dairy Queen's ACT is about $5 while an upscale restaurant's ACT comes in at about $50. The ACT focuses attention on short-term finances. Employers tell associates, "Your ACT is low — get going." Yet, the ACT fails to address the overall picture of the total and comprehensive healthcare practiced at your hospital.

In addition, short-term incentives tied to ACT create some problems. For example, they tend to encourage associates to throw everything at a case, even if it may be unnecessary. Every vomiting dog does not need a $300 workup, but some doctors order one every time. Every skin case does not need a culture and sensitivity testing, but some places include it in their protocols. Every coughing dog does not need ultrasonography, but some hospitals trot the machine for every case. I've seen $800 worth of radiographs for a 14-year-old dog that had simple geriatric vestibular syndrome, so I know that it does happen. However, I tend to see that it happens a little more often when there is ACT pressure.

Instant gratification has become a way of life for many businesses — call it Pavlovian business thinking. It works in restaurants, but it undermines a long-term healthcare focus. Your ASPP is a long-term assessment. It tells you more about comprehensive care activities than the ACT does because it looks at all the care given over a year. The ASPP's focus is on total healthcare.

Inverse relationship between the ACT and ASPP

There's an inverse relationship between the ACT and the ASPP. For example, workups for patients with bad yeast infections in their ears include performing cultures, sensitivity tests and diagnostic tests, all of which increase the ACT. Follow-up visits drive down the ACT, but push up the ASPP. The same is true for dental work. The initial dental procedure pushes up the ACT, but rechecks and preventive steps drive it down and increase the ASPP. This pattern continues for eye cases, renal cases, endocrinology cases, cardiology cases and many others.

Productivity

Peak-time management — the creation of busier times within the practice for activities — enables a practice to maximize personnel, improve delegation and increase the overall quality of care. The ACT business model undermines peak-time management because it emphasizes doing everything in one visit. This emphasis on the short-term financial benefits of the ACT depresses staff numbers relative to veterinarian numbers. The all-in-one visit mentality directs traffic away from times of peak activity.

The ASPP model enables staff members to triage, create setup appointments, and arrange for patients to return for a day of diagnostic tests. For example, if a polyuric-polydipsic dog was presented to a clinic for diagnosis and treatment, an algorithm would be needed to conduct a proper workup. And to perform that workup correctly might require two to four visits. Complex problems defy an all-in-one visit. A focus on the ASPP shifts attention from the short-term work pattern to the long-term one.

An emphasis on the ACT and commissioned pay forces many new graduates to stick to the simple wellness stuff for visits to keep up their ACT. This focus limits the development of expanded skills. And in my mind, we see more burnout of the younger minds with this aforementioned issue at its core.

Niche thinking

In veterinary practice management literature, oftentimes all practices get lumped together. But when we look just at small-animal practices, we can identify 20 types. These various niche practices have different income analyses, expense analyses and ASPPs, but the ACTs are similar.

Within these 20 types of practices, the ACT assumes that apples are oranges. The ASPP, however, focuses on comprehensive care within these practices to identify apples as apples and oranges as oranges.

The importance of this concept is the capitalization costs for each niche practice. An illustration of capitalization costs can be found when comparing Subway, McDonald's and an upscale restaurant. The equipment and furnishings for these restaurants are very different, and the capital investment for each is appropriate for the food services to be provided. It would not make sense for a Subway to be equipped like a McDonald's or for a McDonald's to have the setup of an upscale restaurant. The same goes for veterinary practices.

Let's create three veterinary niche practices: 1) an entry-level wellness practice, 2) an AAHA+ABVP practice and 3) a surgical specialty practice. As an introduction to the actual numbers, the ASPP for these practices will be $200, $500 and $1,000, respectively, and each practice will have 2,000 patients. The equipment needs of these three practices are quite different. Yet we see the wellness practice putting in the AAHA+ABVP equipment package, and the AAHA+ABVP practice going toward the surgical specialty practice equipment package. When looking at the practices' different ASPPs, we can quickly see how the gross revenue numbers for each of these practices are going to affect the entire cost structure.

Getting started with ASPP

Your practice will have a unique ASPP based on your niche, personality and interests.

To determine your ASPP, count the total pets you've seen in the past 12 months. Take this number and divide it into the total gross veterinary revenue, specifically removing boarding, grooming and over-the-counter sales. That's your ASPP.

Now track your ASPP backwards for three years, and then create a spreadsheet and begin tracking it monthly (tracking patients seen per month rather than per year). For all practices, the ASPP needs to be going up monthly and annually.

To help increase your ASPP, remember that 80 percent of your revenue comes from 20 percent of your clients. Pull a sampling of files on this 20 percent, and review them for compliance and, more specifically and importantly, for undiagnosed and occult conditions.

The onion rule can help increase your ASPP. How does it work? We all have clients that want only the legally required rabies vaccine. With client education and without undue pressure, we can introduce additional preventive steps, adding a layer to the client onion each time. When dental care is introduced, a layer is added to the onion. As life progresses, each new patient service is an onion layer. Then when the geriatric years come along, the onion — which you have been patiently layering into an onion of wonderful healthcare — lends credibility when you suggest diagnostic tests to search for occult geriatric internal medicine issues. Although the onion rule concept drives up your ASPP, it will only minimally increase your ACT.

Next month, Part II: How to increase your ASPP.

Dr. Riegger, dipl. ABVP, is the chief medical officer at Northwest Animal Clinic Hospital and Specialty Practice in Albuquerque, N.M. Contact him by telephone or fax (505) 898-0407, Riegger@aol.com, or northwestanimalclinic.com.

Find him on AVMA's NOAH as the practice management moderator. You can order his books — Management for Results and More Management for Results — by calling (505) 898-1491.

For a complete list of articles by Dr. Riegger, visit dvm360.com/riegger