Has your associate's salary peaked?

By John Lofflin, Special Assignments Editor

The first year in practice can feel like a mountain climb at 70 miles per hour to a recent graduate who suddenly needs to deal with all manner of practice chaos and the patient that presents with lameness or disease. An associate who joins the practice in mid-career still likely feels that the highway runs uphill as he or she adapts to the new team. But with more experience under the belt, he or she faces fewer unexpected twists and turns. For both doctors, the road eventually levels out, their careers kick into fourth gear, and practice life begins to roll smoothly toward the horizon.

That is, it rolls smoothly for a while. After five years or so together, many associates and practice owners reach a crossroads: The associate’s salary is maxed out; he or she is out of economic gas. The owner’s worried about losing a valued revenue driver. The negotiation through this critical intersection affects both the associate’s career and the practice owner’s business.

“A lot of us are facing this dilemma on any given day,” says

Veterinary Economics

Editorial Advisory Board member Dr. Dennis Cloud, owner of two St. Louis practices. “I have three associates now who fall in this category, so I’m looking for solutions myself.”

Down the road, in Tulsa, Okla., Dr. Ross Clark thinks through a list of the associates he’s brushed shoulders with between the time he started his first practice in 1966 and 1996 when he helped found National PetCare Centers. He figures he employed 35 associates, maybe 40. And he can’t think of any who left the practice over this kind of salary block.

So he has a pretty good idea which road to take when you get to this—sell them an ownership stake or even give them one, he says. But Dr. Clark’s quick to point out that it’s not as easy as it sounds, especially when it comes to recent graduates who may not be as interested as their predecessors in ownership.

The tough part is this: When you arrive at the crossroads, the choices aren’t exactly as narrow as “turn east” or “turn west,” but they aren’t plentiful, either. Here’s what a few consultants and owners in the thick of the issue suggest.

From scheduling to fees...

Board member Cynthia Wutchiett, CPA, co-owner of the consulting firm Wutchiett Tumblin and Associates in Columbus, Ohio, often addresses the associate pay stalemate in practice. “I look at the practice schedule for open appointments first,” says Wutchiett. “Available appointments indicate places to earn more revenue—which could mean more available associate pay.”

And an open calendar, she says, suggests two possibilities. First, you may need to work harder at channeling clients to the associate. For example, are receptionists recommending the new doctor? Have you observed your associate’s exam room communication skills to make sure he or she is making the best possible connection with clients?

If you answer all these questions yes, Wutchiett recommends that you monitor the number of new clients that each associate sees each month. Also monitor client retention and ask receptionists whether returning clients are requesting the associate after their initial visit with him or her.

If these steps show that an associate hasn’t developed a following with clients, the barriers keeping him or her from attracting a full load of clients may be the same issues blocking income growth, whether it’s communication issues or efficiency problems.

If the calendar is full and the associate has a loyal following, Wutchiett evaluates the associate’s efficiency. For example, does the doctor consistently spend more than your standard appointment time with clients? If so, your receptionist may be reluctant to schedule more clients per hour than she believes the associate will realistically see. So the calendar looks full but isn’t. In this case, Wutchiett suggests you and your associate take a hard look at the practice philosophy and an average work day, and ask yourselves why the associate can’t complete the visit in your standard appointment time.

“Sometimes the associate just doesn’t manage his or her time well,” says Wutchiett. “To stay on track, the associate may need to organize their exam room time better. For example, if you schedule 20-minute appointments, you’d spend three to five minutes having the assistant prepare the patient for the doctor’s exam, asking the purpose of the visit and doing a nail trim, if necessary. During the next 10 to 14 minutes, you’d examine, diagnose, prescribe, and answer pet owners’ questions. The final three to five minutes should be spent discussing home care, medications, and so on, and completing the medical records.”

Wutchiett says the associate may also need to leverage support staff members better. “Often we find the associate doing work technicians or other support staff members could handle,” she says.

Of course, your practice’s business cycle also affects an associate’s earning potential. New practices tend to grow quickly, allowing for rapid salary increases as caseloads and client traffic increase. And mature practices may grow much more slowly, inhibiting caseloads and salaries.

And, she says, owners typically hire before the workload is truly a full doctor over capacity. So, for example, a two-doctor practice will hire when the caseload only supports two-and-a-fourth or two-and-a-half veterinarians. All sides should realize the third associate won’t immediately be contributing as much income to the practice as a long-term doctor. In fact, net income may drop until the new associate builds his or her own client base.

Wutchiett’s final advice: Don’t forget about the role fees play in compensation. Your associates’ salaries are directly related to your fees. “The economics are straightforward,” she says. “Even associates who earn a straight salary should earn an amount that’s consistent with what they’d receive if you paid them a percentage of their production. This allows associates—even those who are maxed out in terms of the number of clients they can see—to continue to earn raises via fee increases, which, at a minimum, would be cost-of-living increases.

Just to be clear, Wutchiett sees a need for far more than cost-of-living increases in many practices. “You need to pay an associate who’s producing well, practice’s good medicine, and has good people skills a fair living wage,” she says. “If you can’t, you need to really think about why. What’s going on at the practice that you can’t afford to pay the associate more?”

Compensation isn’t always cash

“If it were as simple as leveraging better and raising fees, we’d all do it and there wouldn’t be a problem,” says Dr. Cloud. Yet he says the problem is quite real, and predictable.

“What happens is that the associate gets to the $65,000 to $80,000 range—that’s in the Midwest—and they’re just stuck,” he says. “If they produced $300,000 last year and earned $60,000, then this year they increased production 10 percent, you can pay them 10 percent more. But once they get into the $350,000 to $400,000 production range it becomes harder to produce more.

“Everyone in veterinary medicine today is thinking about how to help the new graduate, about hiring and training. But, here’s our real dilemma: What about the associate who has five years invested in the practice? What do we do for him or her?”

High-density scheduling is one solution, he says, but he cautions that not every practitioner can function in that practice environment. “It becomes a quality-of-life issue,” he says. “I could draw up a schedule so you could make $100,000 a year, but none of my associates would want to do it. They’d be working long, horrible hours to get it done.”

Dr. Cloud’s solution: He gives associates who’ve worked five years or more at the practice time off to learn new procedures, develop new areas of expertise, or study for boards in specialty areas. His associates get half to one day off each week. Pay isn’t much of an issue because his associates are paid a percentage of production only. “They miss a little bit of work to do this, but surprisingly they manage to produce more because of the increased skills and motivation to succeed,” he says. These one-day-a-week sabbaticals, he theorizes, benefit the practice because of the associates’ increased expertise.

“The better educated associates become, the more income they produce, because they learn to look deeper into the case,” he says. The result will be more sophisticated medicine that brings more income into the practice, he predicts. In turn, more income will make higher salaries possible.

For example, Dr. Cloud describes a situation in which an associate earned the highest percentage possible and growing mildly frustrated at not being able to advance. He sat down with the associate to address the issue and decided the practice would support the doctor in taking every course he could take in a specialty area.

His other strategy: Pay associates to take on management responsibilities. When he had an associate stuck at a salary level, he offered the associate extra management duties, for which he paid the associate more. So far, he says, this option is working well for both of them.

Promote mutual understanding

Dr. Clark says the key to handling the salary impasse with associates who want a more balanced life is for everyone concerned to simply have their bright beams turned on. “Everybody needs to understand the situation and agree on the solution,” he says. “I employ a male associate who provides the second family income—he’s really Dr. Mom. He loves surgery and he wants to be off every day by 2 p.m. so he can pick up his children. We’ve put together an arrangement that’s great for everybody.”

He pays his associate a base salary plus a production percentage. Dr. Clark says this arrangement helps clarify salary issues when the veterinarian works modest hours. “As far as we’re concerned, your salary is really unlimited when you are paid on production,” he says.

His second suggestion is to offer associates what he terms “phantom” stock. The stock doesn’t provide voting rights or share profits as real stock would, but it does increase in value as the practice grows, and it’s always calculated from gross income, he says. At some point, the associate can either cash in and become a partner, or cash out and move on.

This approach lets you offer the associate a stake in the practice, he says, which keeps him or her engaged—and helps keep turnover down. In fact, Dr. Clark has kept an associate for thirty years using this phantom stock idea. “I believe that giving associates a stake in the success of the practice is key to keeping them for the long haul—and keeping them happy,” says Dr. Clark.