Rising costs pose new barriers to care


National Report - Prices are rising across the board, from food to gas. What do these escalating costs mean to veterinarians?

NATIONAL REPORT — The last time you stopped by your local grocery store, you may have noticed that the cost of food is skyrocketing. Depending on where you live, gas prices are expected to top $4 to $5. Even $7 per gallon estimates are being tossed around for the summer of 2011. And the cost of medical care is an economic minefield all its own.

What will these escalating costs mean to veterinarians?

Cost of living on the rise

Perhaps James F. Wilson, DVM, JD, consultant and founder of Yardley, Pa.-based Priority Veterinary Management Consultants says it best: "The battle will not be easy."

For one, price-conscious pet-owning consumers are already shopping prices on vaccinations, spays and neuters, says Peter Weinstein, DVM, MBA, a practice-management consultant and executive director of the Southern California Veterinary Medical Association.

"They're strictly looking at cost when it comes to these services. There's a commoditization of prices going on," he adds.

"How can veterinarians compete with low-cost spay/neuter and vaccination clinics? Yet, if we don't compete, do we run the risk of losing the client visit and relationship to these commodity providers?"

Lorraine Monheiser List, CPA, CVA, consultant with Summit Veterinary Advisors in Littleton, Colo., says that even as costs rise, "historically veterinarians are not stellar about reacting as quickly as they should, which creates time lag for fee adjustment."

Yet, as Weinstein notes, "Although you would love to reflect those costs back to clients as a cost of doing business, cost of veterinary care has become a bit of a barrier to clients."

In fact, the recent Bayer Veterinary Care Usage Study released in February shows that veterinarians are in the middle of a kind of economic balancing act between rising costs and client acceptance of fees.

While veterinarians have much to consider before tacking on a few extra dollars to services in this recessionary climate, the client's perspective has shifted as well.

"If we evaluate prior economic meltdowns," Weinstein says, "less thought went into decision-making regarding pet care. You gave clients a treatment plan, shared the cost of the plan, and got the job done. Now there's much more scrutiny on behalf of the client in the form of, 'Do we really need to do all of this?' Pet owners unfortunately have to decide where discretionary income is going. Today's pet owners are even waiting longer to see if pets will get better on their own."

Weinstein says the underlying message of a quote he recalls, "No change, no change," has powerful impact on the future of the veterinary profession. "This profession is going to have to start to accommodate to the economic environment and needs of the client."

Veterinary care study findings

Consultant Tracy Dowdy, CVPM, who recently attended VetPartners' annual meeting in Las Vegas and serves on the organizaton's executive board, says the recent Bayer Veterinary Care Usage Study underscores important areas for veterinarians to consider. The survey findings were presented recently by Karen Felsted, CEO of NCVEI; and John Volk, senior consultant at Brakke Consulting, Inc. at the North American Veterinary Conference in Orlando and the Western Veterinary Conference in Las Vegas.

"Veterinary patient visits are down, partly because pet owners don't see the need to spend money on veterinary care," Dowdy says. "There's a disconnect between vaccines and exams. With the new vaccination protocols, clients, who are not seeing veterinarians for vaccines necessarily, don't see the value of coming in for just a physical exam. Yet, here's an opportunity for veterinarians to create awareness about the need for physical exams."

The Internet also tends to keep more clients out of the exam room, according to Dowdy. "Pet owners are Googling information about their pets—instead of picking up the phone with the veterinarian. As a result, the animal goes without treatment," Dowdy says.

Business strategies

To manage rising costs, practices "need to do a better job of educating clients," List advises. "Although we say we have every reason to raise prices, what we haven't done is justify price adjustments to the client, including the benefits of what they're paying for."

As an example, List questions whether pet owners understand the need for a basic annual exam of a cat or dog. "Do we explain what we're doing as we're performing the exam? We need to explain the value of what we're doing."

Along these lines, Weinstein says it's important to understand that people also perceive time as value. "If survey indications are true that client visits are down, veterinarians would have more time during the day to spend with clients. Use that time to educate clients more. In the past we were so busy rushing from exam room to exam room, we didn't always give clients time that they were paying for."

The veterinary care survey findings also suggest that veterinarians need to work harder on price strategy to devise special pricing to get people in the door, Dowdy adds.

Some routine veterinary services provided such as vaccines and wellness are now handled through shelters and rescue groups, according to Dowdy. "Veterinarians are not getting those services like they were in recent years. It's fragmented, which means they've got to become more competitive with their products."

"There is no simple solution," Weinstein explains. "Veterinarians must offer high value, service, relationship building, education of clients, effective and efficient use of staff and dollar."

Beyond the exam room

Outside of the exam room, List says another business strategy consideration is explaining the benefits of pet insurance, which she says, "makes a lot of sense. Most clients don't understand pet insurance because they don't know how to evaluate it. There are enough quirks to each insurance plan."

Additionally, practices must be upfront about payment options when pet owners arrive at the practice. Discuss third-party financing options, List recommends. "Be clear on payment terms. Too many practices have substantial accounts receivable. Morally, it says much about veterinarians that they are inclined to do work first and then get paid. But it's not wise from a business standpoint."

"I know of no other way to supplement our revenue-deficient profession other than by encouraging our clients to budget in advance for the well and sick care their pets need and will require as they age with their owners. Lending money after they need it clearly helps, thank you CareCredit, but this may not always work when they no longer can qualify for loans," adds Wilson.

Such wellness plans were cited in the Bayer Veterinary Care Usage Study, according to Dowdy, who says pet owners appear to desire wellness plans where they would pay a monthly fee for certain unlimited services. Pet owners would have a basic amount extracted off their credit cards every month and get free exams and or other services included as part of that monthly plan.

Wilson contends one approach veterinarians should avoid to combat higher costs is raising fees. "For too many years now, the focus on improving income for veterinary professionals has been on raising fees so that they are closer to the value of the services we deliver. We have picked the low hanging fruit in this profits-driven valley and, coupled with the never-ending Great Recession, now need to change direction.

"With commodity prices for the basics such as food and energy rising, and global competition for them growing, the veterinary profession now must focus on using technology and staff education in manners that allow practices to deliver our services and products more efficiently," he adds.

Ms. Skernivitz is a freelance journalist in Cleveland.

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