'What's this going to cost?' Answer with caution

Everybody loves detailed estimates. It's just that practices cannot afford them. The labor is just too costly.

For an $80,000 veterinarian and a $15-per-hour assistant, we would have to add 20 percent for benefits for a total cost of $114,000 per year. Based on 2,250 hours a year, that would equal $50.66 per hour and 84 cents a minute at 100 percent efficiency.

A non-owner might be 60 percent efficient without the pressure of financial management and the cost per minute would only be $4.65 for the veterinarian and $1.53 per minute for the assistant. That's a total of $0.84/0.6 or $1.40 per minute.

Oops! Did I forget that the team salaries must be 20 percent or less of the income produced? That means the $1.40 must be divided by 20 percent to yield an effective rate of $7 per minute or $420 per hour!

Yes! Seven dollars per minute in the exam room. Seven dollars per minute in the truck traveling to charge $75 — $7 per minute for everything this team does.

If you think I am joking, you had best make an appointment with your accountant, who will explain to you the facts of practice economic life. (Take along this article.)

A practical application of this not-so-esoteric discourse is the idea of giving clients detailed estimates for their pet's hospitalization and care. At $6.18 per minute, estimates can be very costly to the hospital.

Many hospitals just don't recognize the human cost of preparing estimates for individual clients based on their pet's needs. Usually, this is during busy examination hours and too often it is the veterinarian himself/herself thinking through the estimate process and hoping not to miss too many service fees.

The process is an unnecessary expenditure of our time. It is unlikely to cost you less than $20 for a printed estimate explained to your client and totally unnecessary as well.

Your client is asking only "Can I afford this?" He or she is not asking for a menu of options. The client brought the pet to be treated and almost never judges the need for a medical/surgical procedure.

We ought to charge $20 just for this estimate because that is what it costs us to prepare.

For subscribers to Veterinary Productivity (www.vethelp.us), we supplied clinical estimates for some 275 medical and surgical procedures with their Perception Of Value Fee Schedule. Use them.

Where did these come from?

Using Veterinary Pet Insurance actuarial findings in tens of thousands of like claims for each diagnostic entity, we integrated them with the demographics of each hospital's area, matching household growth or decline along with household and family incomes and other data to create their unique practice fee schedule.

Now, you can confidently refer to your bound fee schedule and show the client that "80 percent of cases of this disease will usually cost between $X and $Y."

The client wants only one question answered. "Can I afford this?"

Take your car in for service, and the service people simply type in "replace doohickie."

The computer then generates an estimate based on average labor time needed, the list of parts and the cost of these parts.

You have these estimates. It's no different for you.

During my 30 years of practice, not one detailed estimate was ever prepared.

"What's this going to cost, Doc?" Our standard answer was: "Less than $10,000."

You read that correctly. Just as you may have chuckled, so did our clients. They followed with one of two replies.

Many said, "I guess you're right. You just can't tell yet! Whatever it is, I just want Schitzo to get better."

Others asked, "Can you get a little closer on that?" That's when I said, "I won't know any more until I get the lab tests and X-rays back. It's really hard to guess at this stage. The diagnostics cost about $200 and, after that, it could be as little as $50 and perhaps as much as $450. Again it's hard to say."

Never give the lower number of an estimate range unless you write it down for them. They will often remember the lower number.

The pet is admitted only after a hospitalization consent form is signed showing an estimate of $250 for diagnostics and $50 to $450 for treatment. A mandatory deposit of $250 to cover the initial examination and diagnostics was required, and then we would both await the results.

In some cases the client might say, "I can't (or I'm not sure I can) afford that!" Your consistent and only reply should be: "What do you mean by that?" Follow that with a dose of silence. Let the client explain. Don't jump in to discuss a lower fee. It is rarely necessary.

Most often, "I can't afford that" will be explained as "I don't get paid until Friday or I can't pay that in one payment," but hold checks, split payments on credit cards or some other method solves the problem 95 percent of the time. The fee was rarely adjusted.

There might be the rare long-term client, down on their luck, for whom a very liberal payment schedule was worked out, but the fee was based on real costs and could not be lowered.

You must break the detailed estimate habit. It is just too costly.

You must reclaim the time spent by associates or technicians in preparing estimates. This is valuable time lost. Ten minutes every day is 51 hours every year. Detailed estimates will cost you more than $10,000 in billable time every year for as long as you practice.

Keep saying to yourself, "Less than $10,000, less than $10,000."

Whoever said you can't make a great living in veterinary medicine was wrong. But you do have to think ahead and realize your costs. Profit is always the last dollar collected.

Dr. Snyder, a well-known consultant, publishes Veterinary Productivity, a newsletter for practice productivity. He can be reached at P.O. Box 189, Hebron, KY 41048-0189; (800) 292-7995; vethelp@insightbb.com Fax: (859) 534-5265.