The Practice Wellness Exam ™

42.7 percent of all statistics are made up on the spot.
-Stephen Wright

The economics of veterinary practice have dramatically changed over the last decade. The days of opening the doors, paying your bills and having enough to pay yourself and your staff have disappeared. Increasing competition from external forces and static pet ownership has forced a change in business tactics. Veterinarians need to begin treating their practices as they would any of their patients. Frequent comprehensive examinations, testing and preventive care are all standards of care for any patient. Why would the practice be any different?
The check up involves a thorough examination of many key indicators of optimum delivery of high quality patient care, vigorous growth and healthy function of internal systems. Statistical evaluation provides a measuring stick to benchmark the health of the patient. Are your internal controls effective? Does your staff training reap the rewards you had anticipated? Is your practice thriving and profitable? Often owners only realize the troubles after the health of the patient- their practice- has deteriorated and may not be salvageable. These numbers are akin to lab tests. You would worry if your doctor made decisions about your long term health and tried to treat conditions without any tests. Yet every day owners and managers significantly alter practice philosophy, protocols and make life or death decisions about the fiscal health of the practice without these tests!

Key Staffing Ratios
Labor cost is the single greatest expense to a veterinary practice. Pay too little and the practice is unable to attract and retain high quality candidates. Staff turnover becomes a hidden expense and client and patient care suffer. Pay too much and the long term profitability of the practice deteriorates. How do you achieve a balance? Optimal utilization of professional, para-professional and support staff leverage the practice’s most valuable asset-its people.
The ability to allow doctors to diagnose, prescribe and do surgery is the ultimate goal when staffing today’s veterinary hospital. Doctor efficiency quantifies the production of the professional staff. Are the practice’s doctors being used efficiently? Low doctor efficiency implies an improper delivery system. Support staff is not being utilized to its maximum. Doctors are performing duties that could more effectively be performed by other members of the staff. The growth of the practice will be limited and profitability will suffer. Technician and Staff efficiency highlight how well these para-professionals are contributing to the revenue generation and service delivery. When technicians are utilized efficiently client contact time and education are keystones of efficient practices. Compliance will increase. Medical service delivery is enhanced and patient care is optimal. These practices may have higher lay staff costs, but turnover is low and morale is higher. A greater sense of professionalism pervades the practice.

Practice Growth
Most practice owners lie awake dreaming about staggering growth. New clients and pets are pouring in the door. Referrals are soaring. Life is good! However, growth can come at a price. If protocols and staffing are not in place to service this increased flow the long term health of the practice can suffer. Red line the RPM’s of a poorly maintained engine for too long and serious consequences can result. A fine tuned staff, facility and management team can sustain that speed for longer periods. But even Indy race cars are forced to take pit stops to refuel and change tires. Practices need that pit stop. Staff training, recurring evaluation of the health of the practice and testing are needed to monitor the growth.
Client and patient growth is calculated in reference to the practice size. 100 new clients a month can sound like a laudable number, but not for an eight doctor practice. This is a patient who starting to show early signs of disease. Take that same number for a three doctor practice and the future is rosy! Volume growth is another number that can mislead. What are the regional economics? Are you in Las Vegas or Detroit? 10% percent invoice increase in an area with a net population loss is expanding significantly. See how volume growth can be offset by regional demographics? What price increases have been instituted? Many modern veterinary practices are growing only through inflation. Price increases are driving gross revenues; invoice numbers are often down. These can be foreboding indicators about the health of the practice.

Efficiency of Medical Delivery
How well does a given practice maximize the revenue delivery portion of the building? Attention is often given to ancillary services and square footage, but the bread and butter of a practice is the exam room. Facility Efficiency highlights how well services and product are being delivered. How does a two million dollar a year practice with 8 exam rooms stack up to a 1.8 million a year practice with three? How do you think the delivery system differs?
Sales Efficiency factors regional economics and average transactions. Apples-to-apples are essential when discussing raw dollars in many regions. A practice in Manhattan has a varied demographic from small town USA. That does not mean a comparison can’t be drawn. The delivery of the service-product mix can be adjusted and parallels can be drawn. Many high performing practices wish to develop a culture of efficient delivery. This increases profitability and maximizes utilization of resources.

Internal Controls
The management culture is difficult to evaluate. How well are staff protocols being implemented? Do inventory controls effectively manage cash flow? Is shrinkage a problem? These are questions that many practices wonder and are hesitant to evaluate. Drug Costs are one of the major expenses in these practices. High costs as a percent of gross highlight a management breakdown. Ordering systems or shrinkage may lead to a practice hemorrhaging profitability. Pricing or compensation strategies may be negatively impacting profitability. Laboratory and Facility Costs taken together can exceed ten percent of some hospitals. If excessive, contracts should be evaluated and possibly renegotiated. Many practices find themselves over leveraged on facility expenses. How often do owners or managers evaluate service contracts for maintenance? Comparison shopped insurance? Did the dreams of the owner lead to overbuilding? These are all symptoms of poor efficiency and profitability. Statistical analysis can highlight some overlooked areas of cost control and expose one more symptom of an unhealthy patient.
Service Penetration
Subtle indicators of deterioration of service and product delivery often are overlooked in the hustle and bustle of practice. These are minor symptoms of an impending crisis. Price sensitive items like vaccines and elective sterilizations can gradually slide. High net, education intensive procedures like dentistry could be underutilized. What are the practice’s pain protocols? Does an opportunity for growth exist? Is the highest level of care being offered? Are zoonotic diseases being effective screened for? Many practices will subjectively consider their performance in many of these areas to be adequate. But when considered from year to year or benchmarked against practices of a similar size are they measuring up? Every item can highlight an opportunity for improvement. Analysis of these service items are like checking the weight, blood pressure and temperature of the patient. Gradual increases in one or more is a move in the right direction and a concrete way to quantify the success of the management and consulting team. Decreases in frequency can often be overlooked and signals a problem that demands immediate attention.
There is nary a person who enjoys statistical analysis. However, any program’s success needs to be measured. Subjective opinions are essential but a hard and fast method of evaluating a practice’s trajectory and internal controls is essential. Numbers provide a common language and yardstick for quantifying the efforts of the management team. Long term practice health is the common goal. These tests are vital in preventive care for the veterinary hospital.