Due to the pandemic, the 66th Annual Convention of the AAEP was held virtually. With the presentations available on demand, many members were pleased that they did not have to choose between sessions held simultaneously.
Table Topic attendance was higher than ever, with robust and meaningful discussions on the Zoom platform in those sessions. Some of the Business of Practice presentations complemented the Table Topics, while others brought a comprehensive treatment of other critical topics. Note that all of the convention recordings are available to registered attendees until June 30, 2021. If you missed any of these topics, you can go back and watch them on-demand.
Cooperative Emergency Coverage
Drs. Amanda McCleery and Racquel Lindroth facilitated a well-attended Table Topic called “Answering the Call: Providing Equine Emergency Coverage through Cooperative Efforts.” Both of these professionals had been instrumental in setting up such cooperatives to share emergency duty among local colleagues in their respective practice regions. They each shared their experiences and the basic structure of the groups.
McCleery’s emergency cooperative has five veterinarians, some of whom do solely equine work and some who serve all large animals. This was daunting to some of the members, she reported, so at the group’s monthly meetings, education on common emergencies of ruminants and camelids are periodically presented. In addition, these monthly meetings also are utilized as a journal club and for networking and support.
Each of the five members provides emergency service on one regular weekday overnight each week and one weekend per five weeks. The expectation for communication includes an update and sharing of the medical record to the primary care doctor for every patient seen by the morning following the emergency. This follow-up can be by text, email or phone call.
Because her emergency duty occurs so seldom, and is always busy, McCleery hires her technician to be on call and attend emergencies with her, making her much more efficient. In 2018, the emergency coalition took care of all urgent and emergency visits for McCleery’s clients while she was out on maternity leave.
Lindroth created a coalition of five equine practices 12 years ago when she was practicing in Colorado. The practices all shared a common vision, were experienced, responsible and communicated well, she said. Although initially she worried about loss of clients and a negative financial impact, she found that her quality of life improved dramatically, her relationships with colleagues were enhanced, and her client base grew.
A live poll of the attendees during the session asked what the top concerns about establishing an emergency coalition were. The results indicated that client acceptance and excellent patient care were the top concerns.
Sole vs. Corporate vs. LLC Practice
“Sole Proprietorship vs. Corporation vs. LLC” was a popular Table Topic hosted by Drs. Martha Mallicote and Andy Clark. They led off the discussion by defining the different business entity types and said, “If you haven’t created a formal business structure, you are a sole proprietor by default.” The negatives of this structure are the liability risk for all your personal assets, the need to pay taxes on all profits, and the difficulty in raising capital, they said.
An LLC (limited liability company) is a more flexible entity than a corporation, Clark said. Recordkeeping in most states is less complex with an LLC. You can elect to have profits taxed either as an S-Corp or as a sole proprietor, and the owners’ assets are shielded for business liabilities. He said 90% of veterinary practices are set up as LLC businesses.
Corporations have much more complex recordkeeping, Clark noted. An S-Corp is taxed only once on profit and is limited to 100 shareholders, all of whom have voting rights.
A C-Corp is taxed twice, once at the corporate level and once on the shareholder income. This type of business can have common and preferred shares with different voting rights.
In some states, Professional Corporations and Professional Service Corporations are available business entities.
Questions and discussion centered on the corporate aggregation of practices, the business entity form most attractive for bigger practices, and the importance of a buy-sell agreement and partnership agreement in multi-owner practices.
Student Debt Management
Drs. Tony Bartels and Joe Pluhar led a comprehensive Table Topic on “Student Debt Management” that began with both telling their stories of managing their personal educational debt.
To illustrate the differences in risk tolerance, Pluhar used this example: “Some people buy horses with bad front feet but won’t buy a sore-backed horse. It’s the same with managing money.”
Some excellent advice emerged during the session, including a reminder that during this time of 0% interest on federal loans, maintaining your payments can reduce your principal balance markedly.
Bartels thought that the interest moratorium might be extended by the new administration into 2021. (Editor’s note: Check out EquiManagement’s The Business of Practice podcast with Marsha Heinke, DVM, CPA, on “Pandemic Relief for Veterinarians” that was released on January 19.) In addition, he recommended investing money in a robo-advisor investment account to save for future forgiveness taxes if you have undertaken an income-based repayment program. In this type of account, you choose your risk tolerance, and your investments are set up automatically.
He said, “We are not investment professionals; we are veterinarians. So, we should not try to manage our own investments. We are better off using an index fund or robo-advisor.”
Because stock market values have expanded so dramatically in the last year, many investors have seen large increases in their equity accounts.
It is important to keep in mind that these gains are taxable, but equally important to plan for the big tax bill that will be due in 20 years at the time of your debt forgiveness.
Bartels explained that VIN (Veterinary Information Network) has a simulation program to help people decide the best way to proceed in paying their educational debt and to determine the least costly option. This is found at www.vin.com/studentdebtcenter.
It is his opinion that the Pay As You Earn Repayment Plan (PAYE Plan) for a 20-year term might be the best plan for most veterinarians, but you must then invest monthly to earn enough to pay the eventual tax on the forgiven amount. The most important calculation is the total cost of the loan, the facilitators said.
Dr. Martha Mallicote presented an on-demand presentation entitled “Loan Repayment: Programs and Strategies for Equine Vets.” In this comprehensive review of managing educational debt, the speaker reviewed the basics of organizing loans and determining the best repayment strategies.
The first step, she said, was identifying all of the outstanding loans, the loan servicer, any grace period and the interest rate—then determining what monthly payment amount will be possible after graduation, after consideration of your compensation. Utilization of a repayment calculator to assess a repayment strategy is smart, she said. In addition, applying for whichever repayment program you choose must be done several months in advance of the end of your grace period. She recommended choosing automatically deducted payments, which might reduce the interest rate by 0.25%, which can add up quickly.
Loans in repayment or the grace period are eligible for consolidation, Mallicote noted, and although not all types of loans are eligible, most federal loans are. Repayment plans, she explained, can be standard fixed plans or income-driven. There are a variety of income-driven plans, and a borrower must be careful to understand the specifics of each type.
Most importantly, borrowers must plan for the income tax that will come due on any amount that is forgiven in the year the repayment ceases. This can be a large sum all due in a single year, she warned. By carefully analyzing repayment strategies, graduates can plan their approach to this financial challenge.
Mentoring New Grads
“Mentoring New Grads and Introducing Them to a New Practice” was a well-attended Table Topic facilitated by Drs. Kim Harmon and Luke Bass. The facilitators began with a well-prepared summary of what each finds most important in the first six-month period of a new graduate’s time in practice. Setting up expectations, teaching the communication style used with the practice’s clients, having the new graduate commit to his or her goals in writing, selecting cases carefully for the new team member, giving consistent feedback, and having structured learning available on slow days were all listed. The session leaders emphasized that when giving feedback, “every word matters” and that giving encouragement and focusing on “why” are important.
In the second half of the first year in practice, Bass and Harmon suggested asking a new graduate who is struggling, “How can I help you?” and “What do you need?” rather than making assumptions or jumping in.
Mentors can also help the mentee with the planning of next career steps and finding an area of passion in practice. When performance evaluations are given, it was suggested to ask the associate or intern how he or she likes to receive feedback and have that person do a self-evaluation. The meeting to discuss the results should be non-confrontational, with an effort to identify strengths and weaknesses, and ask “What can you learn from your failures?”
A discussion of the need for an equine internship followed an attendee’s question. Both facilitators felt that very few students are ready to enter equine practice after graduation because of limited opportunities for hands-on skill acquisition. The fact that horse clients have often witnessed commonly provided services multiple times by other veterinarians means they will be quick to notice hesitation or lack of a skilled technique. This can cause a lack of trust, which can spread rapidly by word of mouth from client to client. “If they want to work at a high-level equine practice, they should do an internship,” one participant said.
The beauty of a great internship is the ability to learn a wide variety of skills with the help of a mentor and without the judgment of clients, the presenters concluded.
New Graduate Expectations
Drs. Liz Arbittier and Michelle Bessire hosted the Table Topic called “What to Expect as a New Graduate.” Referencing the 2016 AVMA AAEP Equine Economic Impact Study results, they shared that more than 90% of respondents to the study expected new graduates to be able to diagnose and treat a foot abscess and repair simple lacerations. In addition, more than 85% expected competency in working up a colic in the field, performing an ophthalmic exam and diagnosing an uncomplicated lameness with common nerve blocks.
They pointed out that practitioners with greater than 20 years’ practice experience had different expectations than those with less than 20 years’ experience.
The soft skills found to be most important in the survey were communication and people skills, the presenters added.
Other knowledge that the session leaders felt was important for new graduates included antibiotic stewardship, quality of life issues related to euthanasia, neonatal medicines and strategies for dealing with dangerous or unruly horses.
Practice owners attending the Table Topic listed as most important knowing when to call for help, when to say “I don’t know” and how to work up cases on a budget. They also valued new graduates who have the interpersonal skills to work with office staff harmoniously.
Drs. Monty McInturff and Jim Zeliff led a popular Table Topic entitled “How to Set Fees.” The opening advice that the session leaders gave regarding fees was to “pay off high educational debt by being productive and profitable” and to “always value yourself.”
Because margins are shrinking on medications, service fees must increase as costs increase, said Zeliff.
In response to a question about how to keep associates paid well enough that they stay at a practice, McInturff suggested that services be valued properly and priced accordingly. In order to set fees, he suggested that practice owners ask themselves: “Do you know your price point in the market? How do you choose your fees? How often do you increase your prices?”
To assist equine practitioners in making good decisions about their practice fees, results from a fee survey were made available for download, with the mean, median, high and low fees for a wide variety of services listed. This resource will be of significant assistance to many practitioners and is available on-demand on that Table Topic page for those who registered for the 2020 AAEP Convention.
Pregnancy in Practice
A Table Topic called “Pregnancy in Practice,” facilitated by Drs. Laura Javsicas and Sarah Cohen, addressed the many challenges of working while pregnant and navigating maternity leave. Themes for the conversation were the importance of collaboration, use of emergency coalitions and transparency.
Those in attendance were reminded that they have power, should know the laws, and should not make decisions that compromise their health or that of their fetuses/infants. Instead, undertaking negotiations and standing firm on reasonable demands are essential.
Two related Business Session presentations by Dr. Amy Grice outlined “Staying Safe and Comfortable in Practice During Pregnancy” and “Veterinary- Specific Risks in Practice for Pregnant Women.”
One important take-home point was the requirement for practice policies on disability leave to be inclusive of pregnant women. This means if an employee is injured or otherwise unable to work for a medical cause other than pregnancy and is given time away from work with his or her job held open for a period of time, the same treatment must be afforded a pregnant employee. Pregnancy and delivery disability is generally considered to be six weeks for a vaginal birth and eight weeks for a C-section delivery. If an employee who broke his or her leg was allowed to have six weeks off to heal, it is unlawful to not allow the same for the pregnant employee.
Another key fact shared by Grice was the need to be especially careful with radiation exposure of the fetus during the first eight weeks of gestation. The most dangerous time for radiation exposure is following conception (pre-implantation) up to the eighth week of pregnancy, she said. Radiation exposure during your entire gestation should not exceed 500 mrem. Because many women might not know they are pregnant that early, it is important to regularly review the reports from your dosimeter badge to ensure that your equipment and radiation safety techniques are protecting you from excessive exposure, she advised.
In addition, Grice stated that a number of agents used in veterinary medicine are harmful, including waste anesthetic gases, polymethyl methacrylate, diethylstilbestrol (DES), chloramphenicol, misoprostol, cyclosporine, altrenogest (ReguMate) and dinoprost tromethamine (Lutalyse). In addition, there is danger in exposure to chemotherapy, formalin, toxoplasmosis and a host of other zoonotic diseases.
In conclusion, she recommended that veterinarians educate themselves about the specific risks in their workplaces.
Corporate and Legal Matters
Dr. Charlotte Lacroix gave a series of presentations in the session “Navigating Important Corporate and Legal Matters,” speaking about corporate practice sales, negotiating contracts, employee performance coaching and the legal issues with marijuana.
The speaker gave a comprehensive explanation of the landscape of corporate acquisitions in “What You Should Know About Corporate Practice Sales.” She explained that corporate investors appreciate veterinary practices because the veterinary industry has continued to grow and remain profitable, even through multiple recessions. There are also cost savings realized from shared infrastructure once 50 practices are consolidated.
Practice owners are likely to receive a higher price from a corporate consolidator than from an associate or “inside” buyer, and the sale is likely to be completed much faster, she stated.
For veterinarians who prefer to simply practice medicine rather than manage a practice, selling all or part of the business and remaining as a team member can be attractive. Sometimes the capital available to purchase new equipment or revamp a facility is the top advantage. In equine practice, practice owners might be ready to retire, but they have not identified an associate or group of associates to purchase the business, she added. Disadvantages to a corporate buy center on the impacts to clients, staff and associate veterinarians. It can be difficult to navigate a smooth transition. Change is always hard, and some employees might not stay.
In her talk on “Issues to Negotiate in Contracts Seen in Practice,” LaCroix explained the different types of bargaining (distributive and integrative), negotiation styles (competing, avoiding, collaborating, accommodating and compromising) and tips for negotiations.
She stated that many people fear negotiations because they might not have a solid position yet or they fear looking foolish or making mistakes. In addition, they might want others to like them and not view them negatively or they might be averse to conflict, feel vulnerable, and/or be uncomfortable with money.
For best results, she recommended determining the other party’s interests, embracing compromise, being fair and reasonable, and being prepared.
Dr. Mike Pownall spoke about the use of client surveys in his talk “Use of the Net Promoter Score Survey to Improve Business Growth, Profitability and Client Loyalty.” The basic idea of the Net Promoter Score (NPS) is that only one question is needed to determine client loyalty: “How likely is it that you would recommend this practice/business/product/ service to a friend or colleague?” he explained.
The NPS is measured with a response of 0 to 10, with 0 being “not very likely” and 10 being “very likely.” When looking at results, three categories arise: Promoters, Passives and Detractors. Promoters, Pownall said, give a score of 9 or 10 and exhibit the behaviors of a very loyal client. Passives give a score of 7 or 8 and are ambivalent. Detractors score with a 0-6 and might be actively giving poor reviews, arguing over prices and seeking a new provider.
By adding an open-ended question asking why the respondent answered the way he or she did, a company can glean a great deal of helpful information that can help the practice provide better service, he noted.
In the speaker’s practice, use of the NPS has been ongoing for more than 10 years. Receiving high scores on the NPS indicates a high level of loyalty from clients and generally means that profits will be sustainable and robust, even in the face of an economic downturn or increased competition, he stated. This can provide confidence and comfort during uncertain times.
Hospital Design for Controlling Infectious Disease
The presentation “Review of Hospital Design Techniques for Controlling Infectious Disease” by Dr. Lucas Pantheon and architect Heather Lewis, AIA, NCARB, was a thorough and exacting treatment of this very important topic. By understanding the three major modes of transmission of disease—fomite, oral and aerosol—architects can design veterinary facilities that minimize nosocomial infections, Pantheon explained. During the pandemic, humans are at risk from contact with each other, with distancing and hand washing being critical. (Editor’s note: Check out EquiManagement’s The Business of Practice podcast on “Creating Healthier Practice Spaces” with Lewis, which was published on March 16.)
For eliminating fomites, cleaning surfaces and hand washing are essential. Hand washing only happens when sinks are readily available in multiple locations, Lewis said. She recommended touchless sinks as the best option. Consideration of the flow of people and patients through the facility is also needed, with a special emphasis on the flow of “dirty” patients, equipment and supplies. As an example, she said that in laundry management, it helps to have color-coded laundry baskets to separate dirty from clean. The same thought must go into the flow of surgical instruments and other equipment.
To prevent fecal-oral transmission, floors must be sealed and surfaces must be easily cleaned and disinfected without the capacity for harboring pathogens. Hose bibs hung high will keep hoses from being dragged from clean into dirty areas and back, Lewis noted. She prefers poured urethane and seamless joints for floors, and said that carpet is the worst choice for office areas due to its high absorption of soil.
The best strategies for reducing airborne transmission include separate tools and equipment for each stall in an isolation unit, using physical distancing of patients, installing exhaust systems and using lots of natural air flow.
In order to accomplish these objectives, facilities must be built with multiple sinks and hose bibs, and with a sharp eye to containing disease through smart design choices. Veterinarians familiar with biosecurity should work with architects to achieve these goals, the speakers concluded.
Practice Financial Health
Marsha Heinke, DVM, CPA, a well-known veterinarian accountant, gave two presentations focused on utilizing data to create practice financial health.
In the first, “Healthy Practice Measures for Solo and Multi-Doctor Practices,” Heinke compared the importance of aggregated data (benchmarks) and a particular practice’s data, noting that following the trends within your practice is most useful. However, reliable, accurate and consistent data is required, she added. By using accurate accounting nomenclature, clear communication with accounting professionals becomes easier, and the use of graphical representation of financial data can increase understanding within practices, she explained.
The methodic collection of data with accurate recording, followed by data sorting and timely summarization, requires trained staff. That can be simplified by adhering to a system of data collection by utilizing a detailed chart of accounts; making sure the practice has determined its mission, vision and values; avoiding analysis paralysis; be coming familiar with benchmarks; and making connections between “x” and “o” data.
“X” data is experiential data that arises from emotions and experiences. Heinke said “x” data can be numerically measured through methods such as the Net Promoter Score (covered above by Pownall).
“O” data is operational and flows from various financial analyses of practice performance. Key Performance Indicators (KPI) are “bird’s-eye metrics that allow us to understand what’s going on in our practice,” she said. They are specifically chosen for goal accountability. Examples are profitability, cash flow, revenue, client growth and retention.
Heinke discussed the difference between EBITDA and operating profit, explaining that adjustments for closely held businesses are necessary. These adjustments include normalizing owner compensation, lease of real estate, extraordinary one-time expenses, earned interest and other non-operational income. She also explained that the type of business entity of a practice will change the tax strategy, and it is important to note the difference between tax strategies and management strategies.
Because practices with high debt might have poor cash flow, Heinke suggested utilizing the cash flow statement to track where the money goes. This is the financial statement where one can see payments on debts such as loans or leases, as well as distributions of profit to owners. She also recommended utilizing two to three years’ worth of profit and loss statements to create an annual budget in a spreadsheet format in order to be able to perform some “what if ” analyses.
In addition, by performing a breakeven analysis, one can create a daily target for gross revenues, using the assumption that variable costs tend to increase at the same percentage rate as revenues do.
Another analysis she recommended was client growth and retention. By quantifying the number of new clients and those still present after two years, one can get a sense of the bond the clients have to the practice. Loyalty is known to increase profitability. “All analysis should support profitability,” she said in closing, suggesting that practice owners look for trouble spots in real-time rather than with lagging indicators.
“Strategies for Improving Practice Financial Health Using KPIs,” Heinke’s second presentation, continued the theme of using “in-house” data to drive improvement.
Because equine practice benchmarks are often based on scant data, and those practices can be very different in market and scope, KPIs are often a better choice for gauging achievement, she said. In addition, she emphasized the importance of starting with the essential principles in practice health, namely a defined business purpose and strategy; written mission, vision and values; strong ethics; and risk mitigation of legal and regulatory vulnerabilities. Once these are in place, timely data collection can be actionable.
Heinke then discussed the Balanced Scorecard developed in the 1990s and published by Kaplan and Norton in the Harvard Business Review. This model organizes a business into four equally important themes. Each focused area is defined by crucial success factors that are measurable and can be the basis for actionable KPI. She subsequently modified the model for veterinary practices, calling it the Veterinary Practice Scorecard (VPS).
The four foci in the VPS are the patient/internal processes perspective, the client perspective, the employee engagement perspective and the financial perspective, she said. By stating objectives for each aspect and determining metrics to measure and incentivize progress, goals can be more readily attained.
Heinke suggested creating spreadsheet KPI models that are updated monthly and include a trailing 12-month total. This trend line is useful for recognizing positive or negative trends quickly so they can be rapidly addressed.
There are many available business intelligence applications built on the Balanced Scorecard model. Although they might be more complex than most practices need, they are available in the marketplace. However, one can create effective data analysis tools in Excel that will give good intelligence about the practice performance.
In closing, Heinke reminded the audience that successful use of KPIs for practice improvement requires consistency, dedication and effective decisions with thoughtful change management. By having clear strategic objectives and appropriately focused KPIs, a practice can make improvements in performance with management changes based on facts, she concluded.
Why Vets Are Leaving Equine Practice
“Why Veterinarians are Leaving Equine Practice” was presented by Grice. Utilizing a survey of practitioners posted on various Facebook veterinary sites, reasons for considering leaving and actually leaving equine practice were explored. This survey was previously published in EquiManagement magazine and can be found here.