Increase practice yield through improved compliance

A perennially recurring theme of the veterinary practice management circuit is that of doing more with what you have. For the last decade, national demographic statistics indicate slow-growing (from approximately 2.8 percent per year from 1991 to 2002) population numbers of canine and feline patients. The equine population has fared better. Despite lacking data, the American Association of Equine Practitioners speculates that equine ownership has risen since the bullish economy of the 1990s, lending opportunity for equine practitioners to focus on better clients seeking higher levels of care and the ability to charge suitable and rewarding fees. But even this practice arena faces challenges of revenue generation.

In general, American businesses increasingly recognize what veterinary practice administrators have known for years: It is less expensive to keep existing customers happy than to attract new ones. Additionally, through client relationship management (CRM), we believe veterinary practices can do more with the existing and available client base. After all, you already possess a valuable data system of names, addresses and phone numbers. Wouldn't money be best spent on fertilizing freshly planted seeds already in the ground and providing a bit of irrigation, rather than looking for new land to purchase and plow?

Planting the seed

The profession of veterinary medicine traces its roots to agriculture and animal husbandry. Let's learn from our veterinary ancestors and consider all the options for increasing outputs, be that bushels per acre, gallons per head or average sales per client. The successful farmer is expert in competently attending multiple responsibilities that stretch far beyond the initial planting. He masters multiple disciplines that lead to profitable returns over many years, evening out periods when times are bad. Does your practice have the systems in place that prevent financial disaster, even in the face of economic drought?

Rule 1: Know what you have, so you can stay the course to your destination. Establishing and maintaining solid methods of measuring client base, patient numbers, average transaction charges, reminder system compliance and a plethora of other practice stats are crucial. A good dairy farmer keeps excellent records of production, days to freshening and efficiency of feed intake to know which cows to nurture and which to cull. The crop farmer takes soil samples to know what combination of fertilizers and soil-enriching techniques are required to maximize crop yield. As a practice manager striving to maximize client compliance, maintain, protect and use the data your practice creates cumulatively over its history. Make good decisions based on facts, not fantasy.

Rule 2: Act on your assessments. Based on a reliable record-keeping system that allows you to spot trends proactively, look for opportunities to do better and make timely adjustments. Within the existing client base, are you aware of percentages of delinquent reminders and do you do something about it? Are addresses complete and telephone numbers correct, so that efficient client recontact can be made, rather than simply waiting to see if the phone will ring? If the weather holds no rain, then gas up the irrigation pump. If milk production is down, and cow water consumption is off, is there a problem at the watering trough to be fixed? If client compliance is worse than it was last year, is there a controllable internal problem (like a rude receptionist) that could be addressed and resolved?

Rule 3: Use test plots and try new blood lines. Take the risk of trying new things. Your perception of what clients want and what you believe they want could be completely different. Past survey results indicate misperceptions haunt veterinary practices just as they do many other aspects of life on earth. It is easy to get caught in old beliefs. Constantly revisit old tenets and challenge yourself to assure you are not overlooking golden opportunities with your existing client base.

For example, consider survey results published by the joint effort of Pfizer Animal Health and the Iams Company as part of the initiative for promoting senior care health month. Only 57 percent of veterinarians surveyed believed that clients would comply with practice recommendations for multiple annual examinations of senior dogs. These beliefs were significantly out of touch with pet owners' concerns which indicated that 75 percent believed that senior pets should be seen by their veterinarian more than once a year. Do you suffer the same blind spots because of your own upbringing or because one or two clients apparently turned down past care recommendations?

Rule 4: Nurture what you have. Constantly explore how existing bloodlines and land can be improved. Improved efficiency through better equipment and staff training, timely attentiveness to callbacks, and practice systems that assure that the reminder system is milked on time, are all examples of how client compliance can be improved through practice-controllable factors.

By following these four rules, you can exponentially increase current practice earnings. Your attentiveness to a variety of practice tasks, chores and communications are required, but the improved output to be gained makes it worthwhile. Not only is there the potential for increasing current revenue streams, the long-term value of the practice entity appreciates. A compounding effect takes place over each month, and each year. Incremental improvement leads to richer and more fertile soil. New stock and tweaking the breeding program lead to better and more productive bloodlines. Attention to equipment and staff expertise leads to greater efficiency in managing patients and clients. A well-maintained, newer model combine and experienced operator lead to fewer beans left in the field.

Following the rules

Let's examine some specific examples of opportunities that exist in the veterinary industry. Remember Rule 1? Recordkeeping systems and accurate data compilation are essential for measuring where you have been. Quantifying opportunities monetarily requires good historical data. My gratitude here extends to IDEXX VetConnect Systems and Mr. Daryn Kinsinger (IDEXX Practice ProfileTM Coordinator) for generously granting permission to use 2002-data averages that exemplify the hidden potential existing in every practice.

Here are the facts. In 2002, a variety of practices using IDEXX Cornerstone", Better Choice', and VPM' software contracted with IDEXX to compile data reports (Practice ProfileTM). Data was then averaged nationally for practices with four or more doctors and for a second subcategory of those practices with three or less veterinarians.

Comparison of these two practice types illuminates many aspects of faulty practice management systems. In the scope of this article, it is impossible to reap all the information possible, but let's focus in two areas that integrate with each other: patient reminder systems and client retention rates. First, a caveat. An interesting side statistic suggests apparent differences in data housekeeping compliance in each of the two categories. We note that in practices with four or more doctors (an average of $2 million of revenues, nationally), the percentage of active clients with 2002-sales as compared to all active clients in the database was 40.66 percent as compared to practices of three veterinarians or fewer (average gross revenues of $1 million), where the same statistic was nearly eight percentage points higher, at 48.29 percent.

The difference might be traced to the relative number of years practice software programs have been in existence. A more likely reason resides in relaxed employee attention to record-purging tasks as a practice becomes more complex. Exploring the full gamut of reasons for housekeeping failure related to practice size would be a long topic, suited for a thesis.

Truth in numbers

Data management issues and recordkeeping deficiencies are further highlighted in the next statistic regarding canine patients. For smaller practice units, the percentage of dogs seen in 2002, yet shown as missing reminders, was 13.86 percent. In larger practices, this percentage jumps to 22.91 percent. Feline patient numbers are even worse. The percentage of cats seen, yet missing reminders in the 2002-year, was 18.75 percent for smaller practices; and a full 26.65 percent for larger practices. Clients presented a substantial number of patients for one reason or another, yet no reminders were ever established to help the client comply with future follow-up care (see related story p. 22).

This lack of reminders linked with patient records leads to the next statistical finding. IDEXX Cornerstone", Better Choice', and VPM' software tracks client return rates, defined as the total number of clients invoiced by a practice in 2001, divided into the total number of clients seen in 2001 which were subsequently invoiced in 2002.

In smaller practices, the client retention rate averaged 70.35 percent. Larger practices fell to a relatively low retention rate of 61.45 percent on average. Although larger practice units clearly have a retention problem, we cannot believe that smaller practices have perfected their client reminder systems either. Certainly, the previous statistics cited for dogs and cats missing reminders indicates otherwise.

However, one cannot overlook the substantial 8.9 percentage point difference between larger practices and smaller practices. The difference likely reflects housekeeping difficulties, staff non-compliance with maintaining systems, and a whole slew of other issues that require debate and investigation. Let's compute the lost opportunity just based on the apparent difference between large and small practices for this one statistic. How badly small practices compare to the perfectly run practice is unknown; nevertheless, we can benchmark the 8.9 point differential between the larger practices and the smaller practices that provides a means to measure (in dollars) improvement potential with the next computation.

Larger practice units averaged 4,833 active clients with 2002 sales. If the larger average practice had been able to achieve the higher retention rate proven by smaller practice units, the average number of targeted clients with sales would have been 5,305, an increase of 472 clients.

Next, we reviewed the average 2002 annual sales per client in larger practices at $418.47. Multiplied by 472 opportunities for additional retention, these lost clients could have resulted in an additional $197,518 of revenues.

Can you imagine what the potential impact is to the entire veterinary profession if this lost opportunity of revenue generation on a per practice basis was extrapolated across the profession for practices of four or more doctors? Additionally, what is the opportunity for improved reminder system notification and other aspects of client compliance with doctor recommendations because of all the other factors we have only touched upon in this article?

Be on guard against the misconceptions that might exist within your own practice. Not offering services, assuming the reminder system is operational, relying on employees through abdication, rather than supervised delegation, and a whole variety of other factors lead to poor practice performance. Judicious attention to detail, just as the savvy farmer does to reap the maximum yields from a field, is important for the successful veterinary practice. Be aware that the little changes you make that improve the likelihood of client compliance with pet care can reap huge benefits for your veterinary practice and animal welfare.

Suggested Reading

Since 1990, Dr. Marsha L. Heinke, DVM, EA, CPA, CVPM, DABFA has served as a consultant and accountant with the firm of Owen E. McCafferty, CPA, Inc. This year she founded Marsha L. Heinke, CPA, Inc. and can be reached at (440) 926-3800 or via e-mail at MLHeinke@aol.com.