Tattling to the tax man

Jack Carl, DVM, has owned a companion animal veterinary practice for 22 years in a large Midwestern city. He has a reputation for being an honest, capable practitioner with a loyal clientele.

However, Dr. Carl's city and those around him were hit hard by the recent depression. Jobs disappeared and along with them the discretionary income used for elective pet care procedures. Preventive senior diagnostic testing and elective dentistry all but disappeared. Dr. Carl tightened his belt and survived by increasing his practice efficiency. Fortunately, now that the economy is starting to rebound, Dr. Carl and his staff are beginning to see the light of day.

Recently, one of the experienced practice technicians gave Dr. Carl her notice because her husband found a job in another city. Needless to say, Dr. Carl received an abundance of applications from technicians looking for positions. He interviewed and finally decided to hire a technician who had worked for a veterinarian located about 10 minutes away from his practice. His new technician was skilled and quickly became an excellent addition to the clinic. She was not only comfortable in the exam room and surgery suite but was familiar with the business side of veterinary medicine.

Dr. Carl asked his new technician if she had any suggestions that would improve patient healthcare, practice efficiency or both. Because this employee had spent many years in a comparable practice, he believed that her experience could benefit his facility.

She did share one particular suggestion that piqued his interest. It seemed that her former employer had given his clientele a 10 percent fee discount if they paid for their professional services in cash. She told Dr. Carl that the discounted cash payments were not recorded on the hospital ledger and went directly into the doctor's pocket.

The technician thought these procedures were unusual but was told by her previous employer that, to a greater or lesser degree, no business ever reported every single cash transaction. She accepted his explanation and primarily focused on her healthcare responsibilities to her patients.

Dr. Carl was both angry and flabbergasted. He prided himself on being an honest and ethical veterinarian and reported all of the income that came into his practice. During these difficult economic times, Dr. Carl did not think it was fair that a neighboring practitioner was not paying his fair share of taxes on the income he was receiving—this created an unlevel playing field. It was not simply an effort to improve the practice bottom line; it was an illegal act of significant proportions.

Dr. Carl wondered what, if anything, he should do. He had worked very hard to survive in one of the worst recessions in recent years, and now a colleague was conducting business illegally in a manner that had a direct impact on Dr. Carl. Should he look the other way? Should he contact the IRS? He was in a quandary.

Dr. Carl let his anger subside before making any rash decisions. Once he was thinking with a level head, he believed the best thing to do was to attempt to stop his colleague from continuing the illegal practice methods he'd learned of.

Dr. Carl called the offending doctor and told him that it had come to his attention that his 10 percent cash discount offer was in fact a means to collect unreported cash income. Dr. Carl said he would appreciate it if the doctor would stop this practice so all local practitioners would have an equal opportunity to succeed.

His colleague respectfully told him to mind his own business and proceeded to quote the phrase "He who is without sin shall cast the first stone."

Dr. Carl was disappointed and frustrated, but he felt he had wasted enough time on this issue. He decided to move on, continuing his honest ways and knowing there were unscrupulous people in all professions. After all, he told himself, he would never be able to right all the wrongs that crossed his path.

Rosenberg's response

Veterinary clinical practice is a hybrid business model. A veterinary hospital is a medical facility that prioritizes the health and welfare of pet patients, but it's also a for-profit small business that must achieve and maintain a positive bottom line in order to survive. There's no government subsidy and little, if any, third party payment.

Dr. Carl discovered that one of his competitors was stealing from the government to enhance his bottom line. He was doing this by enticing his clientele to make cash payments for services. The combination of these actions caused Dr. Carl to lose clients. The playing field designed by the government, the veterinary community and society was no longer level. Dr. Carl spoke to his colleague and was rebuffed. Unfortunately, Dr. Carl chose to stop any further efforts to correct what was clearly unfair and illegal.

At this point many would say that pursuing this issue would make Dr. Carl a "snitch." Nonsense. This is simply a term for someone who doesn't have the character to stand up for what is moral and honest. Dr. Carl's colleague was benefiting himself and his clients by stealing from the government and secondarily from his fellow veterinarians. He'd had his warning.

I would have informed the IRS of my competitor's illegal activity. I also would not stand behind the cloak of anonymity. This might make me unpopular, but it is the honest, ethical and professional way to deal with subterfuge when it greets you.

Dr. Marc Rosenberg is director of the Voorhees Veterinary Center in Voorhees, N.J. He is a member of the New Jersey Board of Veterinary Medical Examiners.