DVM Newsmaker's Summit: A changing business model

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Dr. Walther: The changes occurring in our business model for the most part are going faster than any of us realize. But what does the future hold? Is solo practice, please excuse the expression, a dead horse? Are the requirements of the practice, both as a professional and as a manager, too much for a single practitioner? What is the proper size for a multi-doctor practice? What practice model will allow us to have time off and take emergency calls? Is it going to be four, five or six? Right now, four to five doctors seem to be the number, but I think that, too, is up for grabs. What place does our profession have for corporate practices? They're growing; they're profitable. They find, as we are finding, a shortage of veterinarians to run them. How will the supply of veterinarians impact them?

Editor's Note: DVM Newsmagazine asked six thought-leaders at CVC East in Baltimore to talk about the most pressing issues facing the veterinary profession. This month, the panel takes on the changing business model. Dr. Jack O. Walther introduces the issue.

About the panelists:

Dr. Bonnie Beaver, Texas A&M University, former president of the American Veterinary Medical Association.

Dr. Gary I. Block, Ocean State Veterinary Specialists in East Greenwich, R.I.; former president of the Rhode Island Veterinary Medical Association.

Dr. Joan Hendricks, dean of the University of Pennsylvania School of Veterinary Medicine.

Dr. Lonnie King, director of strategic innovation for the Centers for Disease Control and Prevention; former dean of Michigan State University College of Veterinary Medicine.

Dr. David Lane, practitioner and consultant in Cardondale, Ill.

Moderator Kerry M. Richard, attorney with Tobin, O'Connor, Ewing and Richard in Washington, D.C.

Dr. Jack O. Walther, practitioner in Lamoille, Nev., and former AVMA president.

Dr. Walther: The changes occurring in our business model for the most part are going faster than any of us realize. But what does the future hold? Is solo practice, please excuse the expression, a dead horse? Are the requirements of the practice, both as a professional and as a manager, too much for a single practitioner? What is the proper size for a multi-doctor practice? What practice model will allow us to have time off and take emergency calls? Is it going to be four, five or six? Right now, four to five doctors seem to be the number, but I think that, too, is up for grabs. What place does our profession have for corporate practices? They're growing; they're profitable. They find, as we are finding, a shortage of veterinarians to run them. How will the supply of veterinarians impact them?

Will multiple practice organizations have a specialty practice and a centrally located emergency clinic?

One of the factors that will govern practice size, and also its economics, is the willingness of young veterinarians to become practice owners. I can tell you in the area where my practices were it is a huge problem. There are four or five really good practices right now, all owned by older veterinarians who would like to sell them. And there aren't buyers. The availability of veterinarians is one of the greatest challenges. I see the shortage, and I can see it getting worse since there isn't an adequate remedy at the moment.

About the reported decline in the number of hours worked per week; is this gender or generational? The latest AVMA/Pfizer study shows that the women veterinarians continue to work fewer hours, but so are some of the men — particularly younger graduates. The Brakke study of 1998 showed that veterinarians are poor business managers, and they outlined eight major business practices veterinarians should improve to ensure the economics of smaller practices. This spawned the formation of the National Commission on Veterinary Economic Issues (NCVEI), which has done a yeoman's job of spreading the word using a methodology that was easy-to-read and a great help in veterinary practice. The latest AVMA/Pfizer study shows that veterinarians have adopted fewer good business practices now than in 1998. While income is up, it's mainly the result of an increase in veterinary fees. But our ability to practice good economical medicine still needs a lot of help, and I think how these practices look in the future will depend a great deal on our abilities as practice managers.

It will also be impacted by government regulations – state, local, federal, state veterinary boards – and all of the things that those of us who are practice owners have to deal with on a daily basis. Government regulations are becoming, in my opinion, more onerous, requiring more time. Again, I think it will have an effect on our ability to practice economic medicine.

Dr. Lane: Coming from a private sector, the problem we have in this profession is that most veterinarians have become more competitive than collegial. The practice of veterinary medicine is an inch deep and a mile wide, and it's very difficult for veterinarians to comprehend this concept because we don't really have strategic alliances in place in order to see the big picture and thus more favorably compete — considering the economics of scale that larger American businesses have, for the most part, enjoyed with consolidation. If we're going to be an inch deep and a mile wide, then we've got to find a way to form strategic alliances. How are we going to transfer ownership to the next generation if the young graduates do not want to be practice owners? I know one veterinary graduate who doesn't even care about student debt. The feeling is that if I die, the debt goes away. I'm just going to pay the minimum, and whenever it's gone, well, it's gone.

Student debt is probably driving some of the income economics because we have to charge more in order to pay for young graduates who have student debt.

What we really need to do is find a way to transfer ownership to the next generation. One way that we can do that in rural areas is to form alliances for emergency work. A lot of veterinarians won't come to work for a small animal practice because they have to do emergency work, so they stay in the suburban beltways. It's a huge problem for the rest of us finding people to come in and work in our practices. Transferring ownership is going to rely on finding a way to transfer a very unique hospital to another hospital owner, and one way we can do that is for practices to merge. The problem is that of merging two often very unique facilities, and bringing two Type-A owner personalities together under one business roof. Merging them is very, very difficult. One solution would be to share things or create affiliations where two, three or 10 private practitioners can get together to solve issues like personnel, insurance, all those things legally under the umbrella of this affiliation. The individual practice would remain separate and unique, and could supply money into that affiliation on a pro-rated basis. When one of the practice owners dies or wants to retire, it goes into the pool of affiliates. The ownership is transferred automatically through a buy/sell agreement through insurance.

Dr. King: One of the questions that came up in the KPMG study was: Are there too many veterinarians or too many veterinary practices? The study suggested that in purely economic terms, there were too many veterinarians; however, they also stated that we don't live in a pure economic world, thus our inefficiencies were actually driving the need for more veterinarians in the workplace. The study did make it clear that, in their opinion, there were too many veterinary practices, especially in some geographic areas. Veterinary practices are often poor business models because they don't share equipment, personnel and services, and often duplicate efforts and equipment leading to inefficiencies and costly duplication. The second point is from a student's perspective. There seems to be an existing tension today between practitioners who have been out of school for some time and who are often practice owners and new graduates who may not be interested in purchasing the practices or working long hours. I believe the tension comes from different perspectives and views regarding how a professional should balance his or her work/life. It almost becomes a clash of cultures and does show a difference in how generations look at this delicate balance. I don't believe that this is right or wrong, but rather a genuine difference. I don't think, however, that the KPMG study really factored in the reality that new grads are very likely, for a number of reasons, to work as many hours over a lifetime. Therefore, this fact will add to the pressure to produce more veterinarians and not less.

Dr. Hendricks: I do agree it is a generational issue largely. My husband teaches high school. Whoever he sees, we get in four years. The good news is they're reading and writing better, but the willingness to work as a positive value doesn't bode well.

As far as the business issue in general, we've had the pleasure of having some students who were extremely active and started the Veterinary Business Management Association (VBMA), and they got a number of programs at veterinary schools across the nation.

Across the street from the veterinary school is Penn's Wharton business school, which kind of sits with its arms folded and makes tons of money. I have reached out to them to see if they could provide some insight on an entire profession that has shifted its gender from overwhelming male dominated when I joined 30 years ago to female dominated. I thought they would find it fascinating to study and would perhaps join the academic process in thinking through scenario planning. I have yet to have them bite. It's a group that is accustomed to thinking about business planning, and I'm continuing to try to work with them. Maybe we can get some help at some point.

Dr. Block: One of things that I read in a DVM Newsmagazine survey was that 50 percent of female new graduates wanted to either own a practice or wanted a stake in a practice. I guess one of my questions is: How does that compare to male new graduates? Is this problem as big a problem as we think it is? The second thing that I bring to the table since we're talking about changing business models is I don't if anyone saw the article in DVM Newsmagazine highlighted the fact that a veterinary practice's staff in Pennsylvania unionized. I've wondered what the potential impact would be of unionization in our profession for both support staff and potentially veterinarians.

Dr. Beaver: As it was pointed out, a number of veterinary school students are forming business clubs. There's certainly an interest, and they are starting to express interest in an area I think is really going to take off. It's a hot idea right now. Quality of life concern is definitely a generational issue that has been shown in a number of studies. I think one thing that's also been pointed out in some of these studies is that the primary responsibility for raising the children still falls on the mother. As long as we become a more female-oriented profession, we're going to find that there's going to be more interest by veterinarians in part-time, as opposed to full-time, work especially while children are young. We certainly see that in association work. The closer to home the association is, the more active women veterinarians tend to be. But when the children enter high school or college or beyond, they become more active at the state and national levels. The studies are showing that generation Xers and the generation just before are now actually becoming more interested in owning practices because they've been watching their parents suffer through fiascos like Enron. Currently we hear a lot about new veterinarians not wanting to own practices, but a lot of that is actually a reflection of a generational trend. The recent graduates don't but as this next group comes up, we're going to see increased interest in owning practices. There are certainly a number of legal issues starting to pop up, and I think the legal issues may also dictate a lot of what we see relative to practice ownership and whether practices merge or stay solo. That's going to become an even larger concern within the profession as time passes. As young veterinarians graduate and become employees, there's a stronger tendency to want to work from 8 to 5.

As educators and mentors, we all play a roll in ensuring that these younger colleagues view themselves as professionals and not just somebody holding down a job.

Ms. Richard: I am going to jump in on a couple points because so many legal issues have been presented. But in addition to that I will tell you that my father is a veterinarian. Having just sold his practice in this past year, he is a very interesting statistic in my mind because after having been a solo practitioner for 45 years, he sold his practice to one of the relief veterinarians working for him for about six years. Maybe right out of school these people aren't sure what they want to do, or they think they don't want to be practice owners, but after a few years of getting experience under their belts and working in different practices, a lot of those people who initially say they don't want to own a practice are coming back and changing their minds and moving into ownership.

My father is obviously one example; I am familiar with a number of other examples of the same thing happening. I am also familiar with a bunch of temporary veterinarians getting together and starting their own practices. So the model is absolutely changing. We don't have the first-year veterinarian associate who's going to work for three years and then buy in slowly over five any longer. That's not very common any more, but there is definitely a future in private practice ownership of veterinary medicine.

People are just going to be more creative and look in different places to find their perspective buyers. It's not going to be as traditional as it used to be.

Dr. Lane asked me to comment on how I feel about mergers and pooling affiliations. I find the more complex you make it, the less fun it is for everybody. So I am not a big fan of very complex sharing arrangements and buy/sell agreements and things like that. With that said, I just put together a big equine group of four different practices merging together in Ohio. I think they will do wonderfully together having pooled their resources. So with the right personalities, it can work. I think that as we go forward, the big issues will be recognizing new associates have large debts they have to pay off before they're in a position to buy into anything. They can earn in at an earlier age if they're interested in that, but they need the education to know that those options are available. Older practice owners need to open up their minds to something besides a traditional transfer by sale which is what we have been used to.

Dr. King: Every veterinarian in this room has had, or will, have approximately 100,000 hours of service to dedicate across their professional lives. We all will make decisions about how much time to distribute to our professional, personal, family, philanthropic, and, continous learning areas of life. I believe that our newest veterinarians are thinking about this allocation differently. I have also found that our students are interested in developing a strong business acumen and learning non-technical skills that might ensure their future success both in a business sense and in a client/patient sense. Being a good business person and a good practitioner are not inconsistent goals. At the same time, being a good business person doesn't necessarily translate to just working longer hours.

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