COMPLACENCY is a disease
that could have catastrophic
effects on the financial health of
veterinary practices in the UK, a
meeting of senior figures in the profession and the
associated industry was
told at a meeting at the
Royal College in London
on 15th May.
A range of economic trends is
showing a steady decline in profitability,
particularly of small animal practices,
both in the UK and in other developed
countries. If left unchecked, those
trends will erode the income and
status of veterinary surgeons and leave
them poorly equipped to meet the
challenge of providing
a high-quality service
for clients and their
patients.
Yet most
practitioners and
their professional
bodies have failed to
recognise, let alone
respond to, the dangers
ahead, the meeting
heard.
The event, organised
by business consultant
John Sheridan and
Veterinary Practice, drew
representatives from
across the profession and the main
industries supplying products and
services to veterinary businesses.
Work together
Mr Sheridan urged them to work
together to identify the speci c
problems that are affecting pro tability
and to create practical solutions – “The ghtback starts here,” he said.
Opening the meeting, Mr Sheridan
noted a recent study from the US
showing that 61% of practices there
had “average”, “poor” or “negative”
levels of profit.
He believed that the UK figures
were likely to be similar but many
practitioners were unaware of their
true position because they did not have
the tools to measure their economic performance or to benchmark it
against other comparable businesses.
Moreover, the picture was likely
to become even more gloomy as a consequence of factors such as the
declining numbers of pet owners who
visit veterinary practices and a further
growth in the numbers of veterinary
graduates being produced, together
with external forces such as potential
changes to the rules on prescribing and
dispensing veterinary medicines.
The 32 members
of the audience then
divided into working
groups of ve and
six to address a series
of questions on the
causal factors that
have led UK practices
to their current
position, and to try to
identify the elements
of a strategy to
remedy the situation.
To encourage a
candid and non-
partisan approach to
the discussions, it was agreed that accounts of the meeting
would be published under Chatham
House rules – in which opinions are
attributed to the meeting as a whole
rather than to individual participants.
The first task was to identify the
reasons why there is a shortage of
valid, up-to-date benchmarking data for
measuring the financial performance
of practices. It was suggested that the
necessary information was out there
but not readily available, certainly for
most small independent practices.
Larger organisations such as the
major corporate practices did have
this information but concerns over
confidentiality meant that they
were unlikely to reveal the details to
outsiders.
It was noted that more traditional practices would be
equally unwilling to
release commercially
sensitive data.
Valid data
The accountancy firms
providing professional
services to practices
would be able to
generate valid data but this work would
have to be paid for. It
was recognised that
many practice owners would not see
the point if they were happy with their current turnover.
Furthermore, there was no incentive for
producers of the many
practice management
systems on the market
to develop software
that would allow
comparisons with data
from other company’s
products.
This was the
likely reason for the
disappearance of the business analytic service that used to be
run by Fort Dodge Animal Health, as the data were only relevant to practices
using particular PMS technologies.
The major differences in the way that
practices are organised and managed
would also complicate efforts to extract
relevant comparative data, although
there was a suggestion that some
practice owners might exaggerate the extent
to which their own
business was “unique”.
Role for
professional
bodies
It was suggested that
various veterinary
professional bodies,
notably the BVA and
SPVS/VPMA, could
do more to assist practices in gathering
data on key performance indicators
for their own businesses and for the
broader veterinary community.
It was pointed out that DEFRA
produces appropriate data on the financial performance of British
farms by surveying a large group of
enterprises which are rewarded for
their efforts with a detailed analysis of
their own business.
The scheme has been running
for more than 20 years, produces
consistent, reliable data and could be a model that could be copied by the
veterinary sector.
A key issue was the need for
everyone involved to have confidence
in the agency responsible for handling
the data and ensuring that participants
retain their anonymity.
Reasons for low
profitability
The working groups
were then asked to
identify the various
reasons for the low profitability of
veterinary practices.
Undercharging
was considered
to make a major
contribution to the problem and one that could be
relatively easily tackled by appropriate
training and supervision of staff.
There was inadequate understanding
among clinical and support staff of the
importance of appropriate mark-ups
on medicines, food and other products.
Reduce overstaffing
In many cases the financial
performance of the practice could
be greatly improved by reducing
overstaffing, particularly at weekends,
and making more efficient use of the practice’s human and technical
resources.
Practices will often maintain non-
pro table services such as their
own out-of-hours duties and may
be prepared to pay for equipment
that will never provide an adequate
return on the investment, if that is
thought to improve the quality of their
professional service.
Unfavourable comparison
It was noted that veterinary surgeons
compare unfavourably with other
equivalent professions in the amount
of time during the working day
available for chargeable activity.
Typically, clinical staff will only be
earning fees in 60 to 70% of their time,
well below the average for lawyers and
other highly-skilled professionals.
Despite the claims by some members
of the public that veterinary treatment
is too expensive and discouraged
clients from attending the surgery,
it was suggested that failing to carry
out necessary procedures made a
significant contribution to poor
turnover.
Vets are often reluctant to spend
their clients’ money, particularly on
their first visit to the practice, and so
diagnostic procedures that would be
helpful immediately are often delayed.
“Clients are much more likely to
complain about the procedures that
haven’t been done than those that
have,” one practitioner suggested.
Maintaining client
loyalty was a vital
element in improving
the profitability of
practice. Several
speakers noted that
veterinary surgeons
tend to overestimate
the number of
“bonded clients” on
their books. Most
clients of small animal
practices behave no
differently to any
other consumer and will be tempted
to switch their allegiance for a cheaper
service.
Retain allegiance
For example, only about 10% of cat
owners are genuinely bonded to their
practice, while around 50% of the
country’s feline population never see
the inside of a veterinary clinic. So the
key issue was to attract and retain the
allegiance of the remaining 40% of
“floating” clients.
It was noted that in the corporate
practices, which are generally
proving much more pro table than
independent clinics, loyalty schemes
offering a range of member benefits
are the fastest growing element in their
turnover. So it was essential for all
veterinary businesses to consider this
option, colleagues were told.
Rapid turnover of staff is known to
be costly for any veterinary business
and will be disappointing for those
clients who want to develop a bond
with their practice. Bad management
has been identified as the main reason
why employees decide to leave a job
and so the working groups were asked
to explore the consequences of poor
leadership.
A manager of a large hospital
practice pointed out that poor
management leads to poor recruitment
choices. This can be extremely
dangerous as all businesses will need
talented and well-motivated staff if
they hope to thrive.
Indeed, one experienced observer
argued that any significant changes in
the financial performance of a practice
can usually be correlated closely with
staff factors, such as key clinicians
either joining or leaving the business.
Lack of support
Bad management is likely to have a
particularly strong impact on new
graduates and lack of
support from more
senior colleagues
is often cited as
the reason why so
many leave their first job within the first six months.
The
Royal College had
hoped to tackle this
issue through the
introduction of the “professional development phase”, but
there was no evidence that this has had
any effect on the number of practices
which offer inadequate support by, for
example, leaving newly qualified staff
to their own devices from their first
day at work.
All practices should have proper
induction protocols in place for any
new member of staff, but particularly
new graduates. If incoming staff are
treated properly they will usually be
happy to stay, and so it is worthwhile spending time and effort in preparing
them for their new role when the costs
of recruitment and the penalties of
high turnover are so high, one group
commented.
Colleagues should be aware of the
difference between leadership and
management, said another. Corporate
practices can provide a management
structure for their organisation but
often find it difficult to provide local
leadership.
Meanwhile, independent practices
may have the
leadership but lack
the management skills needed to
thrive. Coaching or
mentoring skills are
an important part of
good management and
are unlikely to develop
without both effort
and training.
Having completed a
diagnosis of the cause
of these financial ills,
the working groups
were asked to look for
possible treatments.
One key step would
be to ensure that new graduates
entering the profession are aware of
the importance of running an effective
business if they are to fulfil their duties
to their clients.
Laying the groundwork
Turning a budding clinician into an
effective businessman or woman would
need both time and training but it is
important to lay the groundwork early.
Discussions then returned to the
problem of practice owners having
inadequate information needed to
support good business decisions. It
was suggested that practices need a
common resource of information
on what clients want and what the
industry is doing to service those
needs.
While recognising the huge
commercial sensitivities in sharing
business information, it was felt that
there would be shared advantages for
the sector in knowing more about its
customers.
One speaker noted that market
research may be costly but it can
have a positive influence on business
strategy. It has been used by corporate veterinary practices to justify ambitious
plans for increasing the numbers of
branches. Speakers warned that owners
of traditional practices should stop
viewing corporates as the “bad guys”
and be willing to adopt the strategies
that have contributed to their success.
Seek inspiration
Veterinarians should also look outside
the animal health eld for inspiration.
Long ago, the optical industry
experienced the same structural changes now affecting
the veterinary market.
That industry has
been able to increase
the size of its market by fostering
an interest in good
optical health.
Veterinary services
are currently viewed
as a “distress
purchase” in that
they deal principally
with clinical disease.
So practices need to develop a better
understanding among
their clients of what they can do to improve the overall
quality of life for a pet animal.
Experience in other industries
also suggests that the problems in a
business will often stem from having
inadequate protocols in place, rather
than the wrong staff.
When considering what initiatives
can be taken to improve a practice’s
performance, speakers highlighted
the value of the Investors in People
scheme.
Participation in the scheme would
encourage a practice to examine many
of the areas – protocols, strategy, team
work, motivation, etc. – that had been
highlighted already in the discussions.
Drop-off in compliance
Another important issue to address is
the drop-off in compliance by clients
with the instructions that they are given
in the consulting room. Individual
practitioners need to monitor the way
that they offer advice to clients to
ensure that it is clearly understandable
and to check that those clients have
been able to follow the instructions.
It was noted, for example, that many
cat owners experience great difficulties in administering medicines
to their pets and often feel
let down by the lack of
support from practices in
dealing with the problem.
In the final group
session, participants were
asked to consider whether
there was a need for a
new organisation to take
responsibility for addressing
the issues identified during the discussions. A number
of contributors felt that a
new body was not necessary
as the existing organisations
such as the BVA and SPVS
were already attempting to
deal with many of these
issues.
Those organisations
had a pivotal role in
helping their members to
develop those non-clinical
skills in communications,
business management, mentoring, etc.,
which would undoubtedly improve
the economic performance of their
practices.
Limited resources
It was recognised, however, that
their efforts were often constrained
by having only limited financial and
manpower resources and that as the
issues facing the profession are not
con ned to the UK it might be more effective for problems to be addressed
by a working group able to involve
expertise and resources on a global
scale.
The meeting proposed setting up
a small steering group – including representatives of the major
stakeholder organisations – to review
the discussions which had taken
place during the day and to prepare a
preliminary report for further action
by, if possible, the end of July.
