The deadly middle: Why veterinary practices' fee structure is failing

We have met the enemy—and he is us. We are destroying our profession by continuing to pile up a monumental deficit in self-esteem. Published studies have documented that from the time of admission to veterinary college, student self-esteem falls further with each year of training. Then graduation tosses the new graduate into the clutches of experienced practice owners who may denigrate his or her state-of-the-art skills.

In many parts of the country, veterinarians and their teams are underpaid and struggling to meet expenses. However, my consulting experience shows that practice owners often have to be dragged into greater profitability. So many want to play zebra, mixing in with the rest of the anonymous herd—trying to charge just enough to get by—not only avoiding the attention of the prowling competitors but failing to provide for their family and themselves the financial comforts so easily in their grasp.

Veterinarians, by and large, adjust their fees only under duress and seldom ask accountants for advice. Veterinary management consultants are also seldom consulted, even when the bottom line starts playing Titanic.

Apple just broke new ground with retail store sales of $4,000 per square foot. Tiffany was no slouch at $2,700. Best Buy is struggling at $1,000, and Wal-mart gets $400 for each square foot of store offering the lowest prices in your town, or any town. The solo veterinary practice only gets $320 per square foot. Wal-mart fills its space with shelves and racks. We fill ours with expensive high-tech laboratory, radiographic and surgical equipment. We cannot continue to survive without fee adjustments.

Fear is the destroyer

Is there a reader out there who hasn't experienced fear at raising office visit fees a few dollars? Did you not expect an avalanche of disgruntled clients storming in to get their pet's records and transfer to the competing hospital down the street? Did it happen? No! In fact, I can assure you that a 15 percent increase in non-shopped fees across the board would elicit complaints only from clients who would complain even if you lowered your fees. Yet, you and your staff remain like 80 percent of practices, dwelling in the deadly middle—underpaid and struggling.

To most Americans, the middle is the place for not the cheapest and not the best. Do you want that reputation? High prices mean high quality with great service. That's what clients want when their beloved finned, furred or feathered family member gets sick. Low prices mean low profit, no loyalty.

You need to be slightly above the rest with the perception of being the best in service and quality. The smartest and wealthiest practitioners today give their e-mail addresses to clients with hospitalized pets. They charge fees that are demographically correct without regard to competition, and they correct for inflation quarterly. Rarely is that e-mail abused, but loyalty zooms through the roof along with average hospital transaction.

Is there a glass ceiling for fees? Yes—and you set it! I have clients charging $450 for two radiographic views. I have clients charging $60 for any pharmaceutical injection. I have two clients in the same block where one insists on an IV line for any surgery but can't seem to get clients to agree to a pre-op EKG. Her neighbor insists on a pre-op EKG but can't get his clients to agree to an IV line. You set your own ceiling.

I know of a relatively small town with three veterinarians with exam fees of $38, $49.70 and $58.40. The higher-fee practice sees 24 percent more transactions per veterinarian than the second-highest. The lowest-fee practice just laid off her associate.

You are worth it

Now, don't get me wrong: Fees must be related to service, and that means good communication. The highest-netting practices have VIP programs with a separate phone number for the best clients—who get no discounts but priority appointments and staff calls after each visit to answer questions. Their clients know that they could go elsewhere to save 10 percent to 15 percent, but they don't care. They know that their doctor is attentive and available, and they're willing to pay for that. Remember that only the lead dog gets to have a change of scenery.

Laying off associates is a prime game today made possible largely by very poor fee management. Unless your practice is in downtown Detroit or underwater Mississippi, profits are down because fees have not risen. Gasoline has risen, food costs are up 20 percent, but your fees seem to stay too low too long. Fees lost can never be regained. Fee setting must be proactive. If your quarter is down 10 percent, that money will never be recovered. On the other hand, if you had adjusted your fees before the quarter, the loss might never have occurred.

How long will you be able to retain staff with declining net? Most choose to continue supporting associates and paraprofessional staff while drawing less for owners, hoping for a miraculous turnaround. Here's a newsflash for you: The economy is not going to turnaround for about five more years.

In most states, I understand the common penalty for shooting a management consultant is 30 days of probation with mandatory classes in reloading ammunition. You may not want to hear this, but it's the truth: It's all about self-esteem. It's all about fair fees for quality service with excellent communication. It's about enjoying our profession to the fullest with quality equipment and staff. It's all about the life we worked hard to achieve and that we assuredly deserve.

Dr. Snyder, a well-known consultant, publishes Veterinary Productivity, a newsletter for practice productivity. He can be reached at 112 Harmon Cove Towers Secaucus, NJ 07094; (800) 292-7995; Vethelp@comcast.net; fax: (866) 908-6986.

For a complete list of articles by Dr. Snyder, visit dvm360.com/snyder