Raising fees not a practitioner's favorite job

There's one person Dr. Dave Richards must confront every time he prepares to raise fees in practice - himself.

Dr. Dave Richards

While an advocate of annual fee increases, the practitioner in rural-based Valdosta, Ga., still hesitates to pinch more from his trusted clientele even when it yields better care.

"I'm the only stumbling block. That's the way most (veterinarians) are, because we're nice people. Nobody wants to have a confrontation with their clients," he says.

Yet his financial books show no proof of client confrontation. Richards' annual 5 to 6 percent fee increase across the board generated a 15 percent jump in gross this year; net is up at least 30 percent.

Apparently, the sluggish economic news circling the country also skipped areas like Merrimack, N.H., where Dr. Eric Clough is enjoying similar financial gains.

In 2002, Clough risked practice growth by raising fees 9 percent compared to the usual 3 to 5 percent annual increase, due partly to his location. New Hampshire is reportedly in the top10 states for household income.

His gamble paid off.

Clough's practice, in a professional suburban environment, was up 14 percent in May and at least as much in June, both his busiest months. "The economy being what it is, we're of course nervous, but our practice is growing," he says.

Such success stories appear commonplace but don't diminish the reluctance veterinarians have toward raising fees.

Case in point, the 2003 DVM Newsmagazine exclusive State of the Profession Survey of more than 350 practitioners cited 28 percent who said the biggest challenge to the future success of their practice was fees/economic factors, greater than finding and maintaining staff; clinic competition and over-the-counter sales.

Further rocking the waves of concern over fees was a July 2003 Consumer Reports article that openly criticized the pricing structures that veterinarians employ. Many practitioners argue the article misrepresented the profession and could puncture holes in the veterinarian-client relationship. (See July 2003 cover of DVM Newsmagazine.)

Balking clients

However, Dr. Nan Boss of the greater Milwaukee area isn't too worried.

Dr. Terry Ford

Despite a tighter economy in her area, Boss doubts her clients will allow Consumer Reports a final say on veterinary services. "I don't think it occurs to people that 'I need a veterinarian, I think I'll refer to my Consumer Reports.'"

Meanwhile, Dr. Terry Ford, of North Dallas Animal Hospital, says it was "hard to stomach" the Consumer Reports article, because his practice goes to great lengths to accommodate the client with pricing.

"You don't want to outprice a procedure for someone to be able to do it, so you try to offer alternatives," he says.

The fee policy at his practice has been to "spread out" the increases so that every procedure goes up a small percentage. "Otherwise, it's going to be noticed and hamper their ability to do things," he says.

Clough says he expects the occasional "gulp, balk and no thanks" when clients hear of estimates in the $500 to $1,000 range. But he doesn't let them get away without an attempt at compromise.

The real problem veterinarians have with fees has little to do with the client, suggests Dr. George Makar of Orange County, Calif.

Fee mentality

He says there's a generational influence at work causing many veterinarians to continue to undercharge for their services.

"We are the newer generation but we inherited some of that undercharging mentality," Makar says.

His practice is currently training new clients on a newer fee structure with no complaints. "When you provide the good service and people see the value and animals getting good care, people don't mind (increased fees)," he says.

For Richards, while raising fees on trusty clients is never easy, the end result can benefit both parties. "Strangely enough I think when we raise fees, we do a better job because we're much more conscious of our fee increases than the client is," he says.

Louise Dunn, veterinary practice consultant, has observed many veterinarians who procrastinate fee increases until their cash flow forces them to respond.

"In spite of the tools in the examining room, in spite of presentations around the country about raising fees, I am finding the one biggest factor for practice owners to increase prices is because their bottom line is not where they want it to be."

Sometimes fee increases don't work out as planned.

When fee hikes fail

Boss, of a mixed blue- and white-collar Milwaukee suburb, wishes she could take back her fee increase from 2002. At a seminar, the speaker advised the people who are already charging higher fees, of whom Boss is one, to "get their butts in gear" and charge more because the other practices follow them.

Based on that advice, she raised fees 7 to 14 percent, but the plan backfired.

"Now I'm higher than everybody else," Boss says. "Last year was not a problem. But this year, because the economy was really slow and our area was the last to get hit, I have more laid off clients now than I ever remember having."

Her practice is down 6 percent, after being up 12 percent the year prior. "This is the first time I really did raise prices and then see clients leave. A lot of them didn't really want to leave but felt financially strapped that they had to cut back somewhere."

Aside from uncontrollable economic circumstances such as Boss's, Richards is a firm believer that often the second "biggest hurdle" to raising fees is staff. "We try to let the staff know why we have to raise fees. For us to do more things for them, we have to raise fees," he explains.

Staff hurdles

His hospital recently purchased a new digital fax machine and its price was kept no secret. "By that afternoon, everybody in the office knew it cost more than a thousand dollars. They know we don't generate any money from this machine, but it's part of doing business. Pretty soon they realize there are a lot of ongoing costs that we can't recover unless we raise fees."

The National Commission on Veterinary Economic Issues, a joint collaboration of three leading veterinary organizations, offers an online resource for practitioners to evaluate their fee structures against a professional benchmark.

Professional resources

Howard Rubin, CEO of NCVEI, says, "Often as a result of that, veterinarians get a little courage. They'll begin to make novel incremental fee changes in a couple areas."

Contrary to popular belief, those fee changes aren't always increases.

"Often, veterinarians find it's in their interest to lower fees … and find that they raise volume as a result of that. It's not always a raise-your-price game."