Managing Your Veterinary Practice Like You Manage Patient Care

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Written By: Travis Meredith DVM, MBA, DIP. ACT- Community Veterinary Partners; Director of Member Services

Quite often as veterinarians, you will encounter a case where a pet’s health has been rapidly declining and their owner is growing anxious for you to solve the problem. Managing cases like this can be tough as you want to take immediate action and get the pet back to good health. As you think about managing a case like this, what do you normally do?  Take the animal straight to surgery?  Start him on medication?  Tell the family that it may be time to think about letting go?

Of course not.  As clinicians we are trained to use a systematic approach when we treat our patients. We have to take the time to examine the pet and make sure we are really listening to their owner.  We perform diagnostics and may even consult with outside experts on more complex cases. We come up with a plan, initiate a therapy and encourage the owners to follow our plan to give their pet the best chance at recovery.  And, as their healthcare provider, we make sure to follow up with the clients as many times as needed until the problem is resolved.

Managing a small business is no different in that a systematic approach is the best course of action. When I visit with colleagues about the topic of practice management I always use the same patient analogy.  For many veterinary practice owners, they continue to see their business declining and have not been able to pinpoint a specific cause.  Often we just blame it on the “economy.”  And while most veterinarians use a systematic approach to patient care, they do not always do the same to when finding a solution to bettering their practice’s financial health.

The same systematic approach used in patient care also should be used when successfully operating a veterinary practice.  1. Look and listen to what’s going on around you 2. Do the diagnostics 3. Get help from experts if needed 4.  Come up with a plan 5. Put the plan into action and 6. Monitor, Monitor, Monitor.  Over the next few months I’ll discuss at each of these components and hopefully better illustrate how the principles that ensure good patient care can mean financial wellness for your veterinary practice.


Visit Community Veterinary Partner’s Booth #4118 At NAVC 2015!

Will You Be Attending The NAVC 2015 Conference in Orlando?

Stop by booth 4118 for a FREE “Meet The Experts Series” featuring some of the nation’s leading veterinary business experts. Join us at our booth to sit down with one of five outstanding professionals in the fields of practice management, accounting, finance and business strategy. You’ll get answers to your questions, learn about new resources and more! NAVC 2015

 

 


Is It Time To Hire Another Doctor At Your Veterinary Hospital?

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IS IT TIME TO HIRE ANOTHER DOCTOR?  QUESTIONS TO ASK YOURSELF BEFORE YOU DO.

Written By: Melissa Bingham- Community Veterinary Partners; Field Operations Manager

Is it time to hire another doctor at your hospital?  It is a weighty decision.  As a practice owner, there are many things to consider, financially, operationally and personally.  It can be helpful to ask yourself some questions to be sure of what is driving your desire to add a doctor and recognizing if it’s the right time to add another doctor.  Most importantly, don’t move forward until you feel confident that your decision is based on good judgment and a good plan, not gut feelings or a knee jerk reaction.

Some questions that are important to ask yourself are: What is driving your desire to hire another associate doctor?  Have you been working long hours for a long time and want to cut back?  Do you want more time to devote to mentoring your medical team or giving back through community outreach?  Do you want to spend more time on a particular area of veterinary medicine of interest to you?  Do you need time to reflect, review and implement the next stage of hospital growth?

Yes it could be the right time to hire another associate vet for you but make certain is it also the right time for your hospital and your existing doctor team. Some alternate questions to consider are:

For your hospital:

– Do you want to expand your days of operation to be more available when your clients want to come in? -Do you want to add a doctor during your busiest times of day to increase appointment availability for clients?

– Do you want to add a doctor with an interest or specialty your clients want or need?

– Is your hospital in healthy financial shape to support the salary and benefits for an additional associate vet?

– Have you identified the personal production needed for an additional associate doctor to “cover” their costs and your profit margin?  Production is determined by the number of clients seen per day times the average transaction.  The new doctor will need to meet or exceed the personal production goal.

– Do you have the time, energy and interest to mentor a new graduate or onboard an experienced doctor?  If not, is there a doctor on your team who would enjoy the assignment?

For your existing doctor team:

– Is your existing doctor team feeling overloaded or working more hours or days than they want to work?

– Can your clients come in the same day for routine appointments with their preferred doctor?  Or is the next available appointment a few days or even weeks out?

– Are your busiest days and times always booked in advance?

– Are surgery days consistently full?

– Do you feel confident that an additional associate will add business rather than share existing business with the current doctor team?

– Do you need to hire a full time doctor?  Or could you fill the gap with a part time doctor and add experienced veterinary technician to your support staff?

Making the choice to hire an additional associate vet can be overwhelming.  Don’t let it be.  A careful review of the needs of your clients and the future needs of your hospital will provide reassurance as you make this important decision.


Key Data Points in Your Vet Hospital’s P&L Statement

Written By: Karen Felsted, CPA, MS, DVM, CVPM

The first question that people ask is:  “Why do I need to look at my profit and loss statement?”  The answer lies in an old cliché that says “If you can’t measure it, you can’t manage it.”  While it is easy to ignore clichés because you’ve heard them so many times, these phrases are generally clichés for a reason—they are widely applicable truths that should not be ignored.  Obviously these specific words have to be taken with a grain of salt—it’s not necessary to count the paperclips on a daily basis in order to manage the purchase of office supplies but managing most areas of a veterinary hospital well means you need to measure the activities involved.  Your veterinary hospital profit and loss statement (aka “income statement” or “P&L”) is a good starting point for revenue and expense analysis.

P and L Statement Example

Revenue

In most hospitals’ P&L statements, revenue is only displayed as a single number called something like “Fees-professional services.”  While comparing this figure for a month or year to the prior month or year and calculating the percentage change gives you some idea about the magnitude of revenue growth or decline, the profit and loss statement doesn’t have a whole lot of other information about revenue.  In order to analyze revenue more deeply, it’s necessary to look at some of the metrics related to the drivers of revenue—transactions, average transaction charge, revenue by doctor, new client numbers and revenue by category.

Expenses

In comparison, the profit and loss statement is an excellent source of information for expense analysis.  You’ll get better insights, however, if the information from the income statement is put into a spreadsheet that allows for comparison of changes over periods of time and allows the expenses to be reviewed as a percentage of gross revenue, not just in absolute dollars.

The key data points on which most of your time should be spent are the high-dollar items–labor costs (both doctors and staff), and drugs and medical supplies expense.  However, don’t forget the smaller items–all expenses should be examined in detail at least once a year.

The first comparison to be made for any given expense is between the current period (month, quarter, or year) and the prior period; for example, support staff costs are compared from 2013 to 2014.  Expenses that generally fluctuate with revenue changes are better examined by looking at them as a percentage of revenue rather than as a direct dollar comparison.  Support staff costs may have declined dollar-wise from one year to the next but if revenue is declining as well, the support staff costs may actually have gone up in proportion to revenue.  If you only look at dollar amounts, you won’t see this.

This internal benchmarking is often the easiest kind of analysis to perform because the data is readily available—it’s all internal.  However, there is no guarantee that improvement means a practice is doing well; it may simply mean they are doing less badly than before.  Some comparison to outside benchmarks is important to make that assessment.

AVMA, AAHA and Advanstar all collect and publish a fair amount of financial and operational metric information that can be used for this kind of comparison purposes.  No practice is going to be exactly like the practices included in the study population but this analysis is very beneficial for most practices.  For example, if your drugs and medical supplies expense is 17.1% of gross revenue and one of the published studies says this expense is 17% in a typical practice, you aren’t going to get too worried—it’s a minor difference.  However, if your expense is 25%, then you should do some investigating.  If the majority of practices can keep their drugs and medical supplies expense at 17%, why can’t you?  Improving your inventory control could drop a lot of money to the bottom line.

Once you have a handle on which expenses seem high, you need to look at the drivers of those expenses.  For example, if your staff compensation looks high, are staff working too many hours?  Is there too much overtime?  Are they overpaid?  Some additional metrics to look at in sorting out the issues are staff hours per transaction and staff hours per day (particularly in comparison to doctor hours/day.)  Does this fluctuate per week or month?  What can be done to increase efficiency?

Net Income

The last item to discuss is the “net income” figure on the P&L.  This is what’s left over after expenses are subtracted from revenue.  Perhaps the most important indicator of financial success in a veterinary practice is the true operating profitability.  Unfortunately this is the most difficult number to get because it doesn’t show up on any report a practice regularly receives, even when those reports are properly prepared.  The net income figure on the P&L is generally a meaningless number and doesn’t represent the operating profit.

Why is net income usually a meaningless number?  Net income (i.e. the operating profit) should represent what’s left over after all of the normal and necessary expenses of the veterinary practice are paid at fair market value rates.  Often times, not all of the expenses in a veterinary practice P&L statement are “normal and necessary” or they are not “paid at fair market value rates.  Some common examples are:

  • Practice owner compensation that is not calculated based on the medical/surgical/management work the owner does but instead is just a random amount determined by how much money is in the bank
  • Perks (trips to Tahiti, dry cleaning bills, liquor store bills, airplanes, personal lawn service, etc.)—i.e. expenses that are not necessary for the operation of the practice but are paid by the practice in order to gain a tax advantage
  • Salaries for family members that are not paid at fair market value rates
  • Facility rent that is not representative of fair market value

There are usually 8-12 adjustments that need to be made to an income statement to determine what true operating profit is.  You will generally need to get help from someone with veterinary practice financial expertise to know how profitable you are.

The P&L statement is a great source of information for making better management decisions.  A monthly review will help you identify problems early on when it’s easier to correct them.


Finding the Best Person for the Job: Making Better Hiring Decisions At Your Veterinary Hospital

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Written By: Katina Palm- Community Veterinary Partners: Field Operations Manager

Finding the right person for the job is key to your hospital’s success. As hospital owners and managers, we tend to be naturally drawn to applicants that are similar to our own strengths and weaknesses. Sometimes, this may lead to a hire that isn’t the perfect fit for the position.  Don’t be afraid to hire someone unlike yourself. Instead, strive to hire someone that can provide the skills that you require- the differences may be just what your hospital needs to successfully fill this position.

To get you started:

Before you build your job ad, start by updating the job description to insure that the role you are trying to fill is highlighted. Be as specific and clear as you can. Mentioning specific tasks and situations that the role may encounter can help a prospective candidate see if they are a good fit. Sometimes job ads can be generic when they should be much more specific. Don’t be afraid to ask for what your want in your candidate.

For example:

If you are seeking a manager, you will want to attract a certain person.

– A generic job ad could say something as simple as: “Looking for strong managerial skills”

– A more in depth ad should say “Seeking an experienced manager who has at least two years of management experience in a customer service based industry.

If you are seeking a receptionist, consider using similar phrases:

– “We strive to provide excellent customer service and we depend on our reception team to lead this process. Customer service experience is required.”

– “Veterinary experience is recommended, but not required.”

Remember that veterinary information can be taught, but personality is less likely swayed with training.

Success is measured by skill and personality. Take the front desk for example. Your selection of a Client Service Representative should be someone outgoing and comfortable working directly with people. Hospitality and good customer service are essential skills that will make your clients feel welcome. This person should also have an eye for detail and an ability to think outside the box to maximize the client experience.

Your technical team will vary depending on their area of expertise.  Exam room techs should connect easily with the clients and patients. Your client’s perception of his or her visit is primarily based on an emotional response since how they feel is critical. Surgical and laboratory technicians will likely have a different demeanor as they are more specialized in tedious tasks. For smaller hospitals, it is sometimes necessary to find techs that are able to adapt to wearing many hats and this requires good communication during your interview process to find the right fit.

You should have a job description for each role within your hospital. Use this tool to clearly spell out your expectations to candidates to determine their skill level. These are also great to refer to when you are reviewing resumes and interviewing.

Wait until you find the right fit for the job! In a future blog, I will discuss how to set up new hires for success.


How to Know When It’s Time to Expand Your Facility

karen felstedBy Karen Felsted, CPA, MS, DVM, CVPM

When looking to make any expansion changes at your veterinary practice there are a few things to consider to make sure you are making the best choice for your hospital. The first question to ask when you’re thinking about expanding is: What is the problem you are trying to solve?

For example:
• “Clients are stacking up in the reception area and have to wait too long”
• “We are turning away business because we are fully booked”
• “Our workflow isn’t very efficient because we don’t have enough exam rooms”
• “We’re tired of stepping over boxes of medical supplies every time we enter the restroom”

Before launching forward with any solution, you want to be sure it will solve the problem you have. For example, if clients are stacking up in the reception area, you first need to figure out why. If it’s because you have a doctor ready to see them but there aren’t enough exam rooms, then this may really be a space problem. But if it’s because all the doctors in the practice spend 30 minutes with a client in an appointment scheduled for 20 minutes, then adding exam rooms won’t help. Instead you have a scheduling issue or a doctor efficiency issue. If you’re turning away business because you are fully booked, adding another doctor or using technicians more efficiently may be the first step in solving this problem. Do you have to have more space for these extra appointments? Maybe or maybe not; before launching forward with the expansion, make sure you are using your current space to its best advantage.

Assuming you really have a problem that will be solved with extra space, the next question to ask is: What will be the impact on cash flow of expanding? If you’re expanding to accommodate more clients, you will likely see a dip in cash flow in the short-run but a later increase as more pet owners visit the practice. If you’re expanding simply because the space is too cramped but don’t expect much client growth, then the dip in cash flow may take longer to recover from. This isn’t always a bad thing; simply having room to turn around can be worth the extra bucks. If you will need additional clients to make the project pay off financially, you need to be confident you can attract them. The days of “build it and they will come” are behind us. Of course, you can borrow the money needed for the expansion but unfortunately, lenders want to be repaid at some point and you need to make sure you’ve got enough of a cushion to weather any dip in cash flow once you have to start repaying the loan.

Answering these two questions in depth will help you make the right decision in determining it it’s time to expand.

Dr. Karen Felsted is a senior advisor to Community Veterinary Partners.


Only One Week Remaining To Reserve a Seat For The Fall 2014 Practice Builder Workshops Hosted By Community Veterinary Partners!

Community Veterinary Partners has released the agenda for its free two-day summit in November aimed at building leadership skills for veterinary hospital owners and key staff members.

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Everyday Leadership Workshop for Associates and Managers

Saturday, November 8th 9am- 4pm

Every practice has staff members in positions of leadership. While some are natural born leaders, others struggle to find their way and earn the trust and respect of the practice team. Designed for doctors and support staff in supervisory roles, this workshop will focus on developing employees into everyday leaders. Due to space limitation we request that practices limit registrants to two staff members.

AGENDA

 “EVERYDAY LEADERSHIP WORKSHOP FOR ASSOCIATES AND MANAGERS”

9:00 AM-   9:45 AM                Speed Chatting and Appreciative Inquiry Icebreakers

9:45 AM-   10:30 AM              Leadership (Servant, Good to Great, E.I.)

10:30 AM -10:45 AM              Break

10:45 AM- 12:00 PM              Culture and Core Values

12:00 PM- 1:00 PM                 Lunch

1:00 PM – 1:30 PM                  Accountability

1:30PM – 2:30 PM                   Situational Leadership

2:30 PM – 2:45 PM                  Break

2:45 PM – 4:00 PM                  Wrap-Ups and Wind-Ups

 

2014 PRACTICE OWNERS SUMMIT: CULTIVATING THE NEXT WAVE OF LEADERS

SUNDAY, NOVEMBER 9TH 11:30AM- 4:00PM

This year’s program theme will be “Cultivating the Future Leaders in Our Practice. Dr. Wendy Hauser will moderate parts of the day’s events as we share and debate the strategies and challenges to creating leaders within our own practices. We invite Practice Owners and Senior Managers to take place in this summit. Due to space limitation, we request that practices limit registrants to hospital owners and one guest.

AGENDA

2014 PRACTICE OWNERS SUMMIT: CULTIVATING THE NEXT WAVE OF LEADERS

SUNDAY                                  November 9, 2014

1:00 PM — 2:00 PM                 Introduction and Situational Leadership

2:00 PM – 2:30 PM                  Accountability

2:30 PM — 2: 45 PM                  Break

2:45 PM — 4:00 PM                  “Cultivating Our Leaders” Roundtable

 

The workshops are free for hospital owners and staff in good standing with Pennsylvania Veterinary Medical Association or the Delaware Valley Academy of Veterinary Medicine.

The event will be held at Seasons 52 Restaurant in King of Prussia, Pa. Space is limited for this event so please register your team members by emailing travis.meredith@cvpco.com. For more information, click HERE for an informational flyer.

 

 

 


Is your hospital growing this year?

A new national survey of veterinarian owners shows a majority of hospital revenues are up 2 to 5 percent this year.

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Other key findings from the survey:

– Pricing appears to be slightly improved with more vets raising prices 3-5% and fewer raising 1-2%. However, 23% of respondents (9 of 40) did not raise prices, up from 15% (6 of 39) last year.

– Wage pressure appears to be increasing with 38%, or 15 of 39, expecting increases of 3-5% compared to only 23%, or 9 of 39, expecting over 3% increases last year (including some increases over 5%).

– More than half of veterinarians surveyed said they were increasing their use of generic medications.

– All owners were planning to keep prices flat or raise them in the next year.

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The survey was conducted by First Analysis, a Chicago-based equity research firm. A link to the full research report is HERE.

 

 


Do You Know What Your Veterinary Practice Real Estate is Really Worth? Part 2

Do You Know What Your Practice Real Estate is Really Worth?

Part 2- Diversification and Maximizing Value

Written By: Daniel Eisenstadt and Ian Widensky of Calico Real Estate

Like we discussed in Part 1 of “Do You know What Your Practice Real Estate Is Really Worth?”, today many veterinary practice owners are recognizing that their practice and building are two different and unique assets. And, if they own both, are realizing that viewing each separately can create greater financial value and more flexibility. Two other scenarios that can highlight the value of leasing your practice real estate rather than owning are Diversification and Maximizing Value.

Diversification

Many veterinarians that are considering selling their practice are surprised that their prospective buyer — a corporate group or an associate— is not interested in buying the practice real estate.  For some veterinarians the opportunity to collect rent is an appealing option.  For others, a lump sum cash payment means they can prepare for retirement with a well-diversified portfolio of investments.

Maximizing Value

Veterinarians are often surprised to learn that a sophisticated veterinary real estate investor may value their building for more than the standard real estate appraisal.  When this is the case, the opportunity for a veterinarian to sell his or her real estate and lease it back to the practice can be more financially rewarding than other traditional options.  In fact, certain veterinarians may garner higher values for their real estate through a sale today then by waiting for years to sell the real estate along with the sale of the practice.  In light of today’s historically low interest rates, real estate investors are often able to pay more now than they would in a higher interest-rate environment.  Many practice owners can maximize the value of their real estate when the practice is performing well as opposed to waiting until the growth of the practice begins to wane as the lead veterinarian slows down.


Do You Know What Your Veterinary Practice Real Estate is Really Worth? Part 1

Do You Know What Your Veterinary Practice Real Estate is Really Worth?

Part 1- Creating Liquidity and Building Improvements

Written By: Daniel Eisenstadt and Ian Widensky of Calico Real Estate

Thirty years ago nearly every owner of a veterinary practice owned (or wanted to own) the real estate where his or her practice was situated.  While this continues to be the norm for many owners, like so many other aspects of veterinary medicine, “the times they are a changing.”  Today, more practice owners are recognizing that their practice and building are different assets and that viewing each separately can create greater financial value and more flexibility.

In many other healthcare fields (dentistry, physical therapy, etc.) practice owners rarely own their own real estate, choosing instead to focus on building the business of their practices.  Most owners enter into long-term leases for well-equipped facilities in good locations.  In fact, most corporate groups that acquire veterinary practices utilize the same principles and negotiate long-term leases as part of a purchase agreement.

Similarly, certain consultants and advisers have come to view the separation of practice and property as a good way of creating options for owners.  Says Dr. Karen E. Felsted, CPA, MS, CVPM, president of PantheraT Veterinary Management Consulting, “Traditionally, practice owners have sold their real estate when they’ve sold their practice.  This is a good option for some practice owners but not necessarily for all.  An opportunity to cash in on the value built up in the real estate without having to sell the practice gives veterinarians more financial choices and the ability to customize their succession plan to their individual needs.”

Although no situation is alike, there are several scenarios where value can be created by viewing and treating the practice real estate as independent from the practice:

Creating Liquidity

After years of building a successful practice, many owners are content to practice for another decade (or more) and enjoy the stability of owning a healthy business.   But many admit to feeling a financial crunch as their children grow older and head off to college.   Many want to buy a second home or travel more, but feel unable to do so.

Some veterinarians may be concerned that selling the practice real estate separate from the practice may make a future sale of their veterinary practice less attractive.  In fact, as long as a lease is assignable by the practice owner to a future buyer of the practice, the sale of the real estate will not restrict the sale of the practice.  And, though some associates may be interested in buying real estate few associates and no corporate buyers will pass up the chance to buy a good practice because the facility is leased.

For most veterinarians their practice represents their largest financial asset.  But without selling the practice, many see no easy way to create liquidity.  Some veterinarians in this situation work harder to meet their increased personal financial needs while others put off personal needs and/or the responsible preparations for retirement.  For these veterinarians, a sale of their real estate to a landlord that will lease the property back to the practice can be a creative solution to address this financial need.

Building Improvements

After years in the same building, many practice owners recognize the value (or the impending need)  of renovating and/or expanding their physical plant.  But many of those same owners choose to defer these large-scale projects for financial reasons or because they don’t want to take on additional debt late in their careers.  Regrettably, the decision not to renovate can compromise their ability to recruit quality associates or future buyers, detract from the customer and patient experience, and  lead to a deterioration in the practice’s value.  Few consider the option of selling their building to a landlord who will invest and manage a renovation project and integrate these costs over the course of a long-term lease.

Coming Soon: Part 2 of “Do You Know What Your Practice Real Estate Is Really Worth?”- Diversification and Maximizing Value.