Practicing in the new economic reality

Well, it's all finished, and I am so relieved! The Great Recession is over! I know this because I saw a government official say so on TV.

Obviously, all those cynics working in the construction industry, education, real estate sales, technology and elsewhere aren't watching enough television, because they are my veterinary clients, and they all say that the economy hasn't been worse in their lifetimes. Maybe they just need more cable channels so they can get the word. Then again, having their full-time hours restored or jobs reinstated might help.

While the politicians spin each new economic number to make it sound as if it was, if not great, better than last year, better than expected, better than Yemen's, better than something, from the phone calls and e-mails I receive every day, I am getting a much different picture of the economy. At the same time, I am seeing a tremendous change in the nature and seriousness of disputes that develop in and around the veterinary practice arena.

This month, I would like to share my experience with the burgeoning economy. My frame of reference, of course, is the information and insight I glean from my clients. So here is what my law and consulting clients, all of whom are somehow involved in the animal health or related industry, are telling me (and I can tell you categorically that it isn't better than last year, and it isn't better than five, 10 or 15 years ago).

A big-city problem

The bulk of the new problems we are seeing, employment wise and cash-flow wise, seem to be originating in the parts of the country that had traditionally been considered the haven of the high-spending client. Veterinarians and their office managers are calling frequently from New York, Atlanta, Los Angeles, Las Vegas and many areas throughout Florida. They are experiencing legal problems that didn't exist when clients were free spending and had limitless job security (or at least thought they did).

Multi-doctor practices in large cities are faced with huge overhead, most of which is personnel costs. Clients are tightening their belts, and practice revenues are having a tough time keeping up with increasing fixed costs. It is putting a monkey wrench into plans previously embraced by several categories of staff members.

Associates

In many parts of the country, particularly metropolitan areas, associate veterinarian employment contracts, which were assumed to be perpetually available for renewal at the whim of the associate, are appearing to be much less secure. I am receiving calls from associates requesting to have their contracts reviewed so that they are certain as to the period their boss must keep them employed between a termination notice and the end of their employment agreement.

Also, owners of multi-doctor hospitals are contacting me to ask what their options are when an annual associate contract calls for a minimum base salary but the client base has dropped off to the point where it is costing the practice money just to keep the associate on staff. I'm hearing it all:

• "Is there more than one way to interpret the word year?"

• "Is there any wiggle room on the expression 'minimum base salary?'"

Last week I received a call from a practice owner who had hired more veterinarians than he could now afford. He wanted me to assure him that his employment agreement with his most recently hired associate was "just a letter of intent, right? It's not really a contract..." Yeah, okay.

Potential partners

The dynamic of practice purchase/buy-in has been changing along with the enthusiasm of many of the big-city associates who had previously felt that they wanted to purchase or buy in to the clinic where they work. In turn, many practice owners are feeling caught between two daunting forces: sagging commercial real estate prices and escalating labor expenses relative to practice revenue.

Sellers' angst isn't lost upon the potential buyers, either. Savvy associates who had been considering buying in to the once-expanding practice are now looking twice at the financial benefits to owning a piece of a business that has salary, overhead and insurance costs advancing solidly while client transaction numbers are retreating noticeably.

These potential partners are caught between a pair of their own upsetting realities: uncertain return on their investment in a practice and a serious decline in housing prices. A down residential market potentially impacts access to investible home-equity funds. Associates who are upside down in their homes (owe more on them than their appraised value) appear to be rethinking or delaying their decision to move forward with clinic buy-in plans. Naturally, when previously committed buyers become discouraged, so do potential sellers.

Specialists

This group seems to be particularly stressed—emotionally and financially—by the economic realities of the new decade. Board-certified and board-eligible veterinarians are contacting me more than ever, and the topics we discuss have changed.

Previously, these highly trained doctors were interested in negotiating their best employment deal, having their contracts fine-tuned or reviewing their benefits options in a universe of full employment.

The tenor of my discussions with specialists is often less upbeat these days. Here is a sample of what I'm hearing, particularly from specialists in multi-specialty practices in big- or medium-sized cities:

• "I took this job on a percentage-of-production-only basis, and this practice can no longer provide me with enough cases to match the salaried job I left in order to come here."

• "My contract calls for me to be paid the larger of either a base salary or a percentage of my gross production. I have asked repeatedly to see the production numbers, but all I get are empty assurances that they are coming. Do you think my caseload is so weak that they don't want me to know?"

• "These guys recruited me from a great practice on the West Coast, and I couldn't turn down the opportunity, especially the signing bonus, which was supposed to be split into three quarterly payments. I've been here a year, and I can't get the second and third bonus checks no matter what I do. I really don't want to be suing my boss and working here at the same time."

• "My practice has cut me down to less than full time but has said that my non-compete will be fully enforced. I just got out of my residency and owe a fortune, so less money just won't do."

As I pointed out at the beginning, I am certain these doctors are feeling anxious for no good reason. Government figures prove that the recession is over. You practitioners out there need to quit worrying and just start watching more TV.

Dr. Allen is president of the Associates in Veterinary Law P.C., which provides legal and consulting services to veterinarians. Call (607) 754-1510 or visit info@veterinarylaw.com.