The best-kept practice management secret is the rabies ratio.
The best-kept practice management secret is the rabies ratio.
The secret to quality medicine and practice growth is providing and tracking services per patient. One can try to gauge this by determining expected use of veterinary services by any 1,000 patients in the practice.
For each 1,000 pets, how many have diabetes, thyroid disease, pancreatitis or other chronic conditions?
These conditions can be tracked using rabies ratios.
First introduced 15 years ago, the rabies ratio is a key assessor of annual services per patient, not per patient visit. ACT tracks charges per visit.
One can count up the number of different patients seen each year, but the number of rabies vaccines given in a three-year state is a constant, and it is a readily available number within each practice.
It is much easier to use the number of rabies vaccines given verses identification of the number of individual patients within a given practice.
The idea being that if 1,000 dogs and cats are vaccinated in a given practice, then that practice can consider those patients active.
ACT is the favorite metric to gauge the health of today's veterinary practice, but it can be misleading.
Consider this: With 10 visits per day with an ACT of $100, a practice should gross $250,000; 20 visits per day is $500,000, and 40 per day is $1 million.
But this spiral cannot continue because demographics demonstrate a finite number of clients and pets.
Certainly, improved productivity is essential, but the reality is that the client pool is not expanding to the degree necessary to support the broad-based trend of 10, 20 and 40 visits per day per veterinarian.
The profession has used ACT as a key index for decades; yet problems continue to plague the ACT assessment. For example, if a doctor is treating a patient with a nasty eye, maybe the first visit is $300 with three follow-up visits of say, $100 each. The ACT for the four visits is $150. If we stuck to two visits, the ACT would be $200.
Although the ACT is higher with just two visits, the eye patient is better served with four visits.
The revenue generated for the four-visit scenario is higher at $600, and this is the heart of the rabies ratio. More is gained by expanding the veterinary services offerings per patient than trying to run up the number of individual patients seen.
We must, using an old cliché, think outside the box. In the box is the ACT. Outside the box are rabies ratios, or the linking of annual services to each patient.
Every industry has key indexing touchstone numbers.
In the airline industry, the number is cost per passenger mile, and Southwest Airlines remains profitable as it has kept the costs per passenger mile down.
Upscale restaurant management looks at seatings per evening as a ratio. For example, 40 seatings at 20 tables (40 to 20) equals two. Restaurants try to hit a three on average nights; they will get four on special occasions, such as Valentine's Day.
Retail stores calculate sales per square foot. A mall might have $400 per-square-foot, but wildly successful malls run closer to $600.
Fast-food restaurants look at service times. Speed up the drive-through service time 15 seconds per customer, and store profits climb 2 percent.
Dairy Queen franchises use 1 pound of meat products to generate 4 gallons of soft-serve sales. Sell more low-profit burgers to sell more high-profit ice cream.
In veterinary practices, a key indexing touchstone should be the rabies ratio.
To calculate the rabies ratio for one's practice, divide the gross veterinary revenues by the total number of rabies vaccine patients in the practice this year.
For example, $500,000 (total gross) divided by 1,000 rabies vaccines gives the rabies ratio of $500.
Or, divide $500,000 by the number of individual patients seen this year — 1,000 — to get the rabies ratio of $500.
Regional variation exists to some degree with rabies ratios as well as ACT. In Averageville, USA, $300 is the rabies ratio for a typical middle-market practice. (Remember, this does not include the ancillary services of boarding, grooming and over-the-counter sales.)
For purposes of this column, we will lump practices into four groups: wellness and housecall, middle market, boarded generalists and specialty practices.
Rabies ratios for these groups generally are:
Monitoring rabies ratios helps increase the services delivered per patient.
The medical benefit occurs when we diagnose a condition that might have gone unnoticed, such as cauda equina syndrome, myopathies, endocrine disease, etc. We also might notice surgical opportunities.
Central and key to expanding services for patients is learning new skills and recognizing those clinical issues that we currently overlook. Each of us has special interests, which means we also have weaknesses to overcome.
To improve one's rabies ratio, consider the following six steps:
Suggestion: Rhea Morgan's "Handbook of Small Animal Practice" lists each disorder with a differential list; all we need is to get close, and the differential gets us there. The longer the differential, the more accurate the allocation of diagnostics.
And of course, the ultimate goal is to track the rabies ratio each month to see how the six steps are working. You should have a mechanism to track the increases in patients seen and revenue per patient.
Additionally, ancillary sales might perk up. One item that has risen through rabies-ratio analysis is the knowledge that for each $2 of specific veterinary services, one can generate $1 of ancillary sales.
Ancillary sales are boarding, grooming and over-the-counter sales. Not all of us desire ancillary sales, but for those who? do, this 2:1 ratio is good to keep in mind while seeing patients, and it gives us another metric to watch grow during this process.
This true story involves a practice that had an ACT of $100 with a rabies ratio of $100. It was purchased for $650,000. After 48 months of focusing on better medicine, the services per animal rose to generate $4 million. The rabies ratio rose to $600 while the ACT stayed at $100.
Dr. Michael Riegger is the chief medical officer at Northwest Animal Clinic Hospital and Specialty Practice. Contact him at www.northwestanimalclinic.com, Riegger@aol.com, telephone and fax (505) 898-0407. Find him on AVMA's NOAH as the practice management moderator. Order his books "Management for Results" and "More Management for Results" by calling (505) 898-1491.