Procedures, Profit and Paying the Piper

As economic uncertainty becomes ‘the new normal,’ how do practices decide when to invest in new technology…and when to hold on to their pennies?
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We all thought we’d be in better shape by now. Almost five years after the global economic downturn, most North American veterinary practices were expecting recovery. Instead, the economy is in a holding pattern: no longer nose-diving, but not exactly surging back to previous levels, either.

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Fiscal conservatism has gone from being a stopgap strategy to what seems like a permanent reality. The wish lists haven’t gotten any shorter, but very few practices are in a position to spend freely—or bury themselves in debt—in order to acquire all the newest, fastest, shiniest and most innovative developments coming down the pike.

There are still lots of arguments to be made in favor of investing in new technologies, new equipment and new procedures. After all, the sales reps and the brochures make those arguments persuasively: Keep up with your competitors, offer your clients someone no one else has, enjoy unprecedented results, grow your practice, make your life easier. Take your pick of sales pitches. But equine practices just aren’t finding such justifications for new purchases that easy to swallow anymore.

Make Do or Do Without

“We moved into our new facility five years ago, and the economy tanked four and a half years ago,” says Tom Brauer, DVM, Dipl. ACVS, one of three surgeons at the Chino Valley Equine Hospital in Chino Hills, California. “So naturally that has affected our game plan. I think at least the economy has bottomed out now; it’s not getting any worse, but it’s not getting a whole lot better, either.”

Chino Valley Equine Hospital’s clientele is a mix of sport and pleasure horses, with some Thoroughbred racehorses. “We’re finding that a lot of our racehorse clients have downsized their barns, and many ‘pet’ clients got rid of their horses altogether. Our area has also lost a lot of breeding business. Some of the big farms have sold their land to developers and gotten out of it entirely. All of that does influence our buying decisions.

“There are things we had hoped to invest in, that we have held off on. We had planned for an expansion of the number of exam rooms here, and more staff, but with the economy and the contraction of our client base, we haven’t gone forward with that.”

The London Equine Hospital in London, Ontario, has become even more conservative in the wake of a government move in early 2012 to end the successful slots-at-racetracks program, effectively decimating racing across the province. Says Bernd Kretzschmar, DVM, “Ninety-seven percent of my practice is Standardbreds. I had two facilities up until a few years ago, when I sold one and consolidated the practice in the other location. There’s more space here, and an indoor arena to examine horses in all weather, but I have to say I wish we hadn’t made the move, knowing what we know now about the future of racing here.

“We bought an IRAP centrifuge, got set up for platelet-rich plasma and purchased a new fluoroscope and digital radiography equipment. We were the first practices in the area to get set up for IRAP and PRP.

“As a referral hospital, our equipment should be at least as good as the practices down the road. And we also put a lot of money into the facility, including adding a new surgical suite—our dream surgical suite. We were even able to incorporate in-floor heating, which keeps the dust down, thus keeping infection rates down. Then there’s the induction room, the recovery room …”

Kretzschmar is clearly feeling the weight of his debt load. “Lately, I’ve been putting the brakes on expenditures. If a new technology comes along ... well, if it’s surgical, I decide very quickly whether it is worth having. With other stuff, I have become pretty suspicious. Often, I find there’s very little reputable research behind (a new product or technology). They’re just derivative. The companies are spending their money on PR instead of research. Just because something is popular with clients does not mean there’s any evidence, beyond the anecdotal, that it’s effective.

“Honestly, with a lot of these new things, the veterinary community is as much to blame (as the marketing departments). Competition can make us adopt things that don’t hold up under close examination.

“There’s always going to be something new coming along, but many of them fall out of favor within a year. And even with the essentials, like digital radiography … anything with a computer on board is going to be outdated in five years, max. That’s where it gets complicated … our old, non-digital x-ray machine we used for 20 years.”

Overall, practices are pulling in their horns and becoming far more cautious when making buying decisions. If an item can’t be paid for in full, or doesn’t have the potential to pay for itself within a short time frame, it’s far less likely to be purchased.

Many veterinarians are also finding more cost-effective ways to offer services to their clients without a massive financial commitment. At Chino Valley Equine, for example, they refer their clients needing MRI scans to a mobile unit that visits their practice at regular intervals.

Going it Alone
For solo practitioners, fiscal conservatism has become particularly demanding, since their personal and professional debt loads are usually one and the same. Brandy Snedden, DVM, CVA, who left a three-veterinarian practice in Maryland to set herself up as a solo practitioner in central Ohio two years ago, says starting from scratch was tough.

“[Flying Horse Veterinary Practice LLC] is your typical mobile practice,” she says. “I’ve had to be careful with my buying decisions, and I know I’ve lost out on some business, for example, because when I’m doing pre-purchase exams people expect faster (radiographic) results than I can deliver.

“My clients are mostly ‘pleasure- horse’ people with modest incomes. I surveyed them to find out how important it was to them that I get set up for digital radiography, and 50 percent of them were in favor of paying a little more for DR. The other 50 percent preferred that I keep costs down by sticking with my older equipment.

“So the answer isn’t clear-cut. For now, I’m staying with what I have, but the digital equipment hasn’t been ruled out. It’s just on the back burner, probably till next spring when I take on a second practitioner. Power (dental) floats are next on the list, after the DR. I’m waiting for the business to grow.”

Even multi-veterinarian practices are delaying major purchases while they wait for further signs of life from the economy—or they’re exploring less risky options, like buying used equipment or leasing to own.

“We ask a lot of questions before we take the plunge,” says Brauer. “Will it be useful for our clientele? Is it cost-effective? We try not to lease things, so those things we do buy should be able to pay for themselves in a couple of years. Some technologies are more profitable than others.

“We do our due diligence. We’ll go to national meetings and conferences, talk to other practices and other universities. We’re in a crowded area with lots of competition, so our clients have choices, and that does influence our buying decisions. Sometimes the best way to distinguish ourselves is by having something no one else has, but too much repetition of services does nobody any service. We’re trying, more than ever, not to be frivolous
or wasteful.”

“When I do shop,” says Kretzschmar, “I comparison-shop at trade shows and I really zero in on what I’m looking for, and only that. I also search for equipment on the human medicine side, to see if there’s something that’s a better design or less expensive.

“I’ve become very conservative,” he adds. “I tend only to buy when I have the money on hand. There’s really nothing new on my radar that I have to have. Right now my focus is on survival.”

SIDEBAR

Should I Buy It?

What is the total cost of ownership (interest on payments, equipment maintenance, supplies, training for staff, etc.)?

· Does it improve my patients’ outcomes?

· Does it do something that other, less expensive or currently owned equipment does not do, and what can I reasonably charge for that service?

· What is the cost to the practice if I don’t own this equipment (how much business could I lose to other practices?)

· Is there a way to co-own or share this equipment with other practitioners?

· Does it improve our efficiency?

· How quickly will it become obsolete?

· Is there good science behind it?