Risky business

Saturday morning, Springfield, USA

Dr. Marty Malone briskly walked between the array of SUVs and onto the sidewalk. He then looked up at the short parade of young people exiting the electronics store. He smiled a bit and slipped inside. He quickly glided past the obligatory greeters and peered at the signs from the ceiling. Marty saw the blue sign hanging near the back of the store. It read: "Computers and Laptops". His pulse quickened in anticipation. Saliva moved freely.

Marty's own laptop crashed a few days ago. Since then, when not seeing patients alongside his partner Dr. Sandra Ashton in their growing small animal practice, he was thinking of little else other than purchasing the "latest and greatest" iteration offered by the computer industry.

He eyeballed the line of analytical super engines beckoning with video graphics swirling away in a manner suggestive of a late-evening walk in the old part of Las Vegas. It was pitiful how these machines seemed to mesmerize customers milling along in an altered reality that only computers seem to impart. Marty was no different. Armed with a copy of Consumer Reports and vague recommendations from friends and well-meaning geeks masquerading as sales staff at the store, he soon found his ideal computer.

A few short minutes later, a box appeared. It had the usual English titling in large fonts along with a significant amount of Japanese cryptography in predictable places. Marty's salivary glands were by now somewhat exhausted. With his stomach seeming to be within the vicinity of his voice box, he clamored with suppressed glee to the checkout counter.

The salesperson searched frantically for the bar code at the counter. After a few minutes, she finally found it "hiding" on top of the box. Marty impatiently moved his feet back and forth preparing to dash from the store. Taking no notice, she methodically explained the rebate program and the in-store promos and several other convoluted issues. She finally said, "Mr. Malone would you like to purchase our 'super-duper' extended warrantee, which virtually guarantees that we will fix your computer for another 36 months past the manufacturers warrantee of one year."

Marty knew what this meant. It meant that the store clerk was eyeing the few extra bucks if he bit on dropping the extra dough that would easily be loaded onto his credit card. He thought about it a few moments. The warranted was an extra $180, and he already was over budget on this little beauty.

In exasperation at the crazy decisions that seem to dominate his life, he simply blurted out that he wasn't interested. He would simply take the risk.

Meanwhile across town

Dr. Sandra Ashton looked down at the paperwork. Randy Johnson waited on the other side of the small desk in the dealership. Sandra noted a small memento. It was a second-place trophy given for a gold scramble in 1999. On the wall was a picture of Randy, his girlfriend at the time and a local senator, all looking like lifelong buddies. Sandra thought to herself that Randy had likely waited in line to have the snapshot taken. She bit her lip and tried to remind herself not to be so cynical. It was a defense mechanism built up over the years having to deal with salespeople and a spattering of devious veterinary clients.

Randy coughed.

Sandra examined the pile. Among the tax documents, trade-in allowance documents and various waivers and other mind-boggling minutia was an agreement for a warrantee extension that started with the totally unoriginal title of "bumper-to-bumper 60-month extension plan". This plan was another $2,700 layer of icing added to the fabulous package already put together by Randy and his sales boss near the Pepsi machine on the other side of Randy's cubicle.

"Doesn't the car come with some sort of warrantee already?" Sandra pleaded to no one in particular.

Randy jumped all over the question. The answer along with its combinations and permutations were explained in dramatic style. In the end, they were unconvincing to a wary Dr. Ashton. A smaller monthly payment would sway the day.

She reasoned to herself that although she had to pull a thousand dollars here and there from her savings account to fix up an occasional car, it had never really broken the bank.

Sandra signed the papers and eschewed the extended warrantee plan. She would simply take the risk.

Monday morning

Malone and Ashton Veterinary Hospital LLP

Beverly Newton waited patiently for Dr. Malone. She could hear him talking in the next room. He had been in to examine "Rags" about 30 minutes ago and said he would be right back.

Rags waited on the exam table. She was not a very active dog anymore and had been sick for some time. She had seen Dr. Malone already twice last week. Beverly was nervous.

The door opened and Dr. Malone came in. He was not his usual self.

Marty had the diagnosis at last. Lymphoma was the "word" on the report from the pathologist. It was not a good day for anyone.

"What is our next step, doctor?"

Marty provided a list of potential approaches that included chemotherapy and multiple trips to the practice. There would be much testing and imaging. He was gently urging the best in that Rags was otherwise very healthy.

Beverly wanted to help Rags, but she was a single mom with three kids in grade school and was having a difficult time.

"Can you tell me what this will cost?" she murmured somewhat timidly.

Marty told her that it could cost several hundred to several thousand dollars.

"Is there a cure?"

Marty's mouth twisted and crow's feet appeared on the lateral edges of his eyes. He hated dealing with this side of veterinary medicine. He went on to say that the best that could be done here is give Rags some time. Referral to an oncology center was a possibility. Also, the university veterinary schools have some of the best cancer doctors in the world. He was giving her the best but knew the inevitable.

Beverly was stunned. She looked at Dr. Malone and blurted out a statement heard thousands of times by veterinarians all over the country. "I wish you could buy insurance for your pets like people."

At this point, Dr. Malone knew that the conversation was not going to be fruitful. He explained as always that insurance had been available for some time and that his practice has promoted it over the years. Unfortunately, he told her that she was not able to use it for a pre-existing condition like the one presented before us today if she purchased insurance for Rags. It was the same ongoing rhetorical conversation that veterinarians have been having with their clients for years.

In the end, Beverly took home some steroids, antibiotics and pain pills for Rags. Rags would have to make it as best he can until that inevitable day. Beverly hoped it would be later than sooner.

Next up

Julie Pinkerton watched Rags exit the room as Dr. Malone exchanged some grim pleasantries at the front desk.

Beside Julie was an 8-week-old Bulldog with the fresh moniker of Winston. He was a picture of health as far as Julie could tell. He had been purchased from a local breeder. Winston required a roll of paper towels wherever he went. "He should be next up," Julie assured herself.

Sure enough, Winston was soon perched on the stainless-steel surface recently vacated by Rags.

The young Bulldog was white and caramel colored and was shaped like a small loaf of bread with hairy wrinkles. A mist of sinus spray was irregularly released from the flattened snout as is often the norm for this breed.

Dr. Ashton walked into the room and beamed at the young animal on the table. "He seems to be a jolly little man, Julie!" Sandra chortled.

"Oh, yes we love him so much already, and he seems so healthy," Julie exclaimed.

Dr. Ashton started her examination and after several minutes proclaimed him as fit as they come for the breed. After looking at the papers and records that Julie had brought with her, Dr. Ashton began to explain potential breed-related problems and other health problems inherent in all dogs. Julie listened carefully but had trouble listening to everything that was being said. After all, she thought, Dr. Ashton seems to think that Winston is very healthy.

Finally Sandra explained that because Winston is so apparently healthy that this would be a perfect time for her to purchase medical insurance for her new puppy. Sandra brought in a brochure from the front desk and described it in some detail.

After recovering from the initial shock that such a thing was really available for pets, Julie slowly considered her options and started a long and slow conversation with herself.

She thought: "It seems that the price is pretty low — at least compared to human medicine." She then thought of her dad that had passed away last year from cancer. The bills had been astronomical and even with the co-pay; her mom was having an extremely difficult time.

She then considered the $1,200 that she had just paid for Winston. "That is a lot of money, but he is worth it," she thought.

She looked at Winston and then said to Dr. Ashton, "Let me think about it!"

Julie assembled the preventive medications that Dr. Ashton had recommended and with her new pup ambled off to the front desk.

After paying a bill of around $200 for the trip, Julie was satisfied that she was all set. She had received a veterinary bill and instinctively knew that veterinary medicine was not a debilitating financial risk, nothing like her father's situation. The pet insurance proposal would soon be forgotten.

Meanwhile, business partners, Dr. Ashton and Dr. Malone were drinking coffee in the break room. Recalling the events of the past half-hour, they both appeared rather glum. Their conversation focused on the coming necessity of pet insurance and that their clients were being "penny-wise and pound foolish."

Marty closed his laptop. He looked at Sandra.

"Hey, by the way, let me take a look at your new car!"

Risk

Extended warrantees and pet insurance have lot in common. They don't cost a tremendous amount of money and provide extremely good coverage. What can possibly be the problem? Everybody ought to purchase these products. It is a no brainer — right? Well, the issue is not about coverage, but risk.

People need to purchase any kind of insurance for only one reason — to protect themselves from potentially disastrous financial consequences. That means that in exchange for money you transfer some of these risks to a third party. The third party takes on this risk only if, in the end, a profit can be generated. When an insurers' risks and losses go up, premiums escalate disproportionately until a healthy bottom line appears for the companies.

What's the diff?

Everyone needs a car. Liability and collision are true necessities for car owners; the consequences for the average American are too high not be insured. The same concept applies to medical insurance.

Trying to compare these risks with warranties and pet insurance or even dental insurance is problematic. If the perceived risks are not there and the paper work and new involvement is viewed as another task in their already busy life, the consumer will almost always self insure.

Veterinary medicine

In spite of the fact that the cost to deliver veterinary medicine is increasing at a faster pace than human medicine — 6 percent last year versus 5 percent for human medical care — we are still a logarithm or two behind in the cost of delivery department. Even if these percentages remain the same, the real cost between the two professions will continue to widen. The financial risk for a human being to be very sick is real and very obvious. Not so for veterinary patients — at least not yet.

Why is this? Well, if the animal-owning public were to really start feeling the financial pinch it would be when visiting a referral center. In fact, when I speak to specialists, I am surprised to learn how few clients actually use pet insurance when pets are brought to their specialty practices. And nationwide my understanding is that the basic penetration of pet insurance is about 3 percent. Costs at these referral centers can be very high. Still, the public seems to pony up and trot along.

More time?

Pet insurance has been around a long time now. Clients use it in my practice but not to any great extent. It seems to be great thing for the tiny minority that has insurance — they are usually quite satisfied but do not seem to be good evangelists. The fact is these clients are quite likely now living in the "golden age" of pet insurance — at least from the consumer standpoint. Coverage is great and costs are low.

The product itself is not being promoted based on risk; instead it is often promoted as an alternative to euthanasia. I suppose in the future if costs get out of hand an insurance company could total your dog like an auto insurance company would total your car. I am reasonably sure this will not go over well with pet owners.

I suppose that as veterinary costs begin to escalate, the tide will finally turn and there will be great risk not to have pet insurance. At that time, will our profession find itself in the same quagmire ensnaring the human medical profession? After reading this article, would anyone out there like to risk a guess?

Dr. Lane is a graduate of the University of Illinois. He owns and manages two practices in southern Illinois. Dr. Lane completed a master's degree in agricultural economics in 1996. He is a speaker and author of numerous practice management articles. Dr. Lane also offers a broad range of consulting services and can be reached at david.lane@mchsi.com.

The people introduced in this column are fictitious.

Have an opinion? Send your letters to Editor Daniel R. Verdon at dverdon@advanstar.com or 7500 Old Oak Blvd., Cleveland, Ohio, 44130.