COVID-19: financial considerations for veterinary practice owners and managers
As veterinary practices continually adjust clinic protocols in the face of COVID-19, they must also manage costs differently, abide by new employment laws, and keep staff calm and informed. Here’s what you need to know.
“All of us feel very overwhelmed at this point,” sympathized Marsha L. Heinke, DVM, EA, CPA, CVPM, owner of accounting and consulting firm Veterinary Practice Made Perfect, as she began a webinar on financial matters veterinary practice owners and managers should be focusing on during the COVID-19 pandemic. It may seem like your hospital has a plan at one moment of the day, but even an hour later things change drastically. “It’s like drinking from a firehose during a tsunami,” Dr. Heinke said.
Even with the unpredictability of the pandemic and its effects on daily life, the lifesaving services provided by veterinary hospitals are invaluable to clients and their pets. Presenting on behalf of the Veterinary Hospital Managers Association on March 31, Dr. Heinke provided guidance on money management, employee communication and updated laws to help navigate these uncharted waters.
Abiding by new restrictions
Dr. Heinke explained that there is no blanket answer regarding which legislative bodies hospitals should reference at this time. Currently, many municipalities and states have regulations that are different, and sometimes stricter, than those of the federal government. Understanding the new regulations as they pertain to where your practice operates is one of the challenges decision-makers have to face.
“Generally, you want to start at the local community level and work your way up from there,” Dr. Heinke said. “If the community is silent on the matter, then go to the next authority, which might be the state government.”
In addition to staying current on new mandates, utilize the business experts in your quiver, Dr. Heinke advised. “It is very important to work closely with professional advisors, but understand that they are also overwhelmed trying to digest all of the changing information,” she said.
Addressing employee and client concerns
With layoffs and furloughs becoming a reality for many businesses, employees should know how their job will be impacted and the temporary changes the hospital may make.
Management needs to remain aware of timely updates and relay that information as it pertains to the practice, such as orders about essential and nonessential workers. “You owe it to your employees to let them know what is happening and what your plans are for the practice,” Dr. Heinke explained.
She also stressed the importance of remaining positive and taking a solutions-based approach to communication. Provide clear direction for how staff should interact with clients, explain proper sanitation protocols to limit exposure and review additional measures being taken to ensure the safety of staff, clients and patients. It is also vital to encourage questions and dialogue. “Remember that everyone is impacted personally and professionally,” she added.
Updated workforce regulations
While the government and different agencies are encouraging flexibility in sick leave and paid time-off policies, the temporary laws enacted on April 2 may impact your decisions on those policies, Dr. Heinke said. Paid FMLA leave and emergency paid sick leave are available to be used in addition to a hospital’s existing paid time-off policies, and some types of leave may run concurrently. Practices may not alter their policies to restrict time off in light of the new laws, she warned.
Additionally, hospital management must understand state and federal unemployment requirements. This includes reduced hours and wages, furloughs, layoffs and terminations. “You also want to be paying attention to unemployment insurance and disability benefits if you are in a state, such as New Jersey, that requires those,” Dr. Heinke explained. You have to think about how state and federal policies integrate with current hospital policies and updated laws.
Many hospitals are reducing hours, while some employees are choosing not to come into the office but may telework. Do you continue to pay the full salary? Are there Department of Labor (DOL) standards that apply? Following are some of the key aspects Dr. Heinke said to consider:
- Review existing contracts to see if any applicable details are outlined.
- The DOL requires that, to maintain exempt status, employees receive their full guaranteed salary for any week in which work is performed.
- Some states’ laws require additional payment obligations.
- If setting a new, temporary salary for an employee, it must be at or above federal and state minimums. The federal minimum is currently $648 per week, but many states have higher minimums.
- Do not repeatedly reclassify employees as exempt and nonexempt. This could make it possible for salaried employees to put in claims for unpaid overtime hours they previously worked.
- Evaluate which benefits your hospital is going to continue to pay for and which may be curtailed.
For nonexempt workers, Dr. Heinke encouraged reducing hours rather than reducing pay rates, but in instances where pay is reduced, hospitals must maintain the minimum applicable federal and state rates. Reduced hourly wages cannot be retroactive, and employees must be given notice.
Regardless of what measures hospitals decide to take, Dr. Heinke said now is not the time to become lax about record keeping. For instance, continue to require a doctor’s note from employees who have been diagnosed with COVID-19. “The reality is, you’re going to need that documentation in your files,” she said. If employees take advantage of the new paid sick leave laws, the hospital will be eligible for payroll tax credits to offset those costs but will need proper proof.
Now more than ever, anyone with cash flow oversight responsibilities needs a clear understanding of the daily break-even point and recent profit-and-loss statements. “You are going to need to be brutal about what you can reasonably cut that you don’t need but are paying for,” Dr. Heinke said.
Remain in contact with vendors and discuss possible payment deferments. If your practice is facing a cash flow shortage, Dr. Heinke said, it is important to prioritize what needs to be paid first, taking into consideration interest rates and penalties. It may also be time to explore other funding sources, she suggested. These include using existing lines of credit, practice owners temporarily forgoing compensation and owners contributing personal funds to maintain the practice.
Assess the loans that might be available through federal COVID-19 relief packages. “Many veterinary hospitals are seeing that this is necessary,” she explained. The CARES (Coronavirus Aid, Relief, and Economic Security) Act will provide small businesses with access to $350 billion in loans, a portion of which will be forgivable. Similarly, Paycheck Protection Program loans through the Small Business Administration are available to businesses with fewer than 500 employees.
While so much continues to change and hospitals must routinely readapt, Dr. Heinke predicted that the veterinary profession will fare well when restrictions are lifted. “We are going to look different, but perhaps much better in certain ways,” she said.
Amanda Carrozza is a freelance writer and editor in New Jersey.