Editor’s note: make sure to visit EquiManagement.com for six additional articles covering business topics presented at the 2022 AAEP Convention.
The 2022 AAEP Annual Convention Business sessions kicked off with the Business News Hour, co-hosted by Drs. Kelly Zeytoonian, Caitlin Daly and Jean-Yin Tan. With inflation topmost in many people’s minds, they started with a review of current national economic conditions. Tan explained, “Inflation comes from an increase in demand without a matching increase in supply—basically excess money in the system causing a rise in prices and a decrease in purchasing power.”
She continued by reporting that the Consumer Price Index climbed from 0.1% in May 2020 to 8.2% in late November 2022. The last time there was such a big jump was in the 1970s.
Because of inflation in veterinary medicine over the last year, wages have risen to attract and retain good people, with veterinary wages also a part of this trend. Mean weighted starting salary jumped from $90,722 in 2020 to $99,593 in 2021 when considering all veterinary graduates entering full-time employment, she reported.
Supply costs have also risen, she continued. The Producer Price Index reports price changes by industry. Tan shared that there has been a moderate 1.3% increase in veterinary pharmaceutical pricing but a 5.5% increase in biologicals.
Biological drugs, commonly referred to as biologics, are a class of drugs that are produced using a living system, such as a microorganism, plant cell or animal cell. As a result of these increased practice expenses, a 10% increase in pricing was passed on to consumers in 2022 to offset the higher wages and supply costs.
Globally, recession fears are escalating, Tan reported. There are some early signs of an impact on the horse industry.
According to Blue Cross in the UK, there have been 144 requests for rehoming horses this year due to financial reasons, compared to 43 last year and 32 the previous year.
If a recession occurs, she opined, “Thoroughbred practices will have to start tightening their belts, while vets mostly seeing the Western disciplines may be relatively unscathed.”
Her advice for business owners was to raise fees regularly, improve charge capture, review charge codes, increase efficiency and provide value.
Corporatization of Veterinary Practice
Daly shared that “while there may be a recession on the horizon, during the last couple of years practice owners have reaped the benefits of the veterinary sector doing so well during the pandemic. Just as homeowners capitalized on the sale of their home[s] during the COVID real estate frenzy, an increased number of practice owners have chosen to cash out, selling their practices to corporate consolidators for a steep financial gain.”
She reported that in 2021, approximately 1,000 corporate purchases were made. Purchase prices continued to exceed 15 times EBITDA, with some practices selling for up to 20 times EBITDA.
An estimated 25% of all small animal practices are now owned by corporate entities, she said, with nearly 50% of revenues in that sector flowing to corporations.
What was once a trend restricted to small animal practices has accelerated in the equine sector, Daly said. However, the two major corporate consolidators, NVA and Mars Inc., have gained attention from the Federal Trade Commission. It has required both consolidators to divest a number of veterinary practices prior to gaining approval for larger acquisitions. Divesting ownership of these practices reduces a corporate consolidator’s ability to have a large concentration of practices within a particular region, consequently preventing the elimination of local competition.
“With an aging practice owner demographic of which less than 50% of practice owners have a succession plan, it makes sense that 40% of practice owners are considering selling,” she added. “While this may be an easier and less complicated approach for practice owners, corporate consolidation can and does have a negative impact on younger generations of veterinarians, and more importantly the associate veterinarians who contributed to the practice’s overall growth and value.”
Daly stated, “Because equine clients typically bond to their horse’s doctor, rather than the practice, a high-grossing equine veterinarian with a large following of loyal clients can have a significant negative impact on a practice upon their departure.”
She cited a 2017 Forbes article that said more than one-third of employees cite a lack of recognition as a major reason for departure from a company.
“Imagine working hard for years at a practice to help it expand and grow, expecting to become a partner, only to find out that it was sold to a corporate aggregator, leaving you with nothing while the owner walks away with millions. It wouldn’t take but a nanosecond to plant a seed of resentment,” she suggested.
She said that according to calculations from a blog from Veterinary Business Advisors, “a 10-year associate who produces $700,000 per year on average for a veterinary practice grossing $2.1 million per year could (and should) receive a bonus of $150,000 when the practice sells for $3.5 million. That still leaves the practice owner with well over $3 million in his/her own pocket but acknowledges the associate’s contribution.”
Building Successful Teams
Zeytoonian shifted gears to practice and people management. She shared the advice given by Jennifer Robison in a recent article: Don’t focus on what you can’t know—focus on what you can do. Specifically, she said, “communicate often and clearly, develop your managers, and support well-being.”
She then shared her favorite options for communicating with the team: “Regular staff meetings; use of Slack for daily communications that are searchable (more easily than a group text message); and the team favorite, a coffee break and one-on-one check-in.”
She recommended the book Radical Candor by Kim Scott and the software service 15five to facilitate communication and reviews with employees.
Additionally, Zeytoonian said that establishing and respecting your own boundaries and those of your team helps to maintain a practice culture of mutual respect and balance. She added that “many practices are adopting the ‘right to disconnect’ concept that is a proposed human right regarding the ability of people to disconnect from work and primarily not to engage in work-related electronic communications such as e-mails or messages during non-work hours.”
Efficiency and Profitability
To increase efficiency and profitability, Daly recommended using a veterinary technician. She said that veterinarians without staff are diverting their time and attention away from true revenue-generating opportunities to tasks that gross little to nothing at all.
“Utilizing even just one technician per doctor is proven to increase the salaries of veterinarians,” she stated.
Equine technicians can be leveraged by having them perform procedures such as sheath cleanings, bandage changes, blood draws, catheter placement, anesthetic monitoring, shockwave and lasertreatments, and radiograph acquisition. Technicians can also be utilized for invoicing, medical record dictation and client communication. This can drastically reduce the amount of non-billable hours for a veterinarian.
She concluded, “If you’re thinking about hiring another veterinarian, but you don’t have a technician, you may want to consider that a valuable technician can better fill the gap until a growing practice is ready or able to hire a new veterinarian.”
News in the Industry
Tan reported some new developments in the equine industry, including a joint venture between Rutgers Medical School and Cornell to develop a genomic hybrid capture assay that can detect Borrelia burgdorferiin a horse’s spinal fluid that could not be detected using antibody tests or PCR.
In addition, it is now possible to recycle the plastic from an Equihaler by signing up online to get prepaid shipping labels, she said.
EquiTrace has now partnered with Bio-Thermo microchips, which measure temperature within seconds. This can automate temperature charting and health records. This tool could be particularly useful in the racing industry.
The 2022 Thoroughbred sales industry had record-breaking results in 2022, Daly reported. At the August Saratoga sale, a total of 143 yearlings were sold for a sale-record gross of more than $66 million, up 21% from last year’s total. Fourteen yearlings were sold for a price greater than $1 million. The top colt fetched $2.3 million, and the top filly followed closely behind at $2 million. The September 2022 Keeneland sales were the highest-grossing auction in Keeneland’s history. Total sales reached over $405 million, with 30 yearlings sold for $1 million or more, the most since the 2007 September Keeneland Sale.
In other racing industry news, Zeytoonian shared that a veterinarian and a trainer pled guilty to charges of distribution of adulterated and misbranded drugs with the intent to defraud and mislead. These are just two individuals of two dozen charged in a large-scale horse doping scheme investigated by the FBI and FDA.
Meanwhile, in California, an equine veterinarian’s license was revoked by the veterinary medical board due to the disconnect between a small animal-centric recordkeeping law and the challenges of ambulatory equine medicine. The AAEP urged the California Veterinary Medical Board to reconsider its laws in light of the differences for equine practitioners.
“Although the veterinarian’s license has been reinstated and the board is opening up to discussions surrounding the laws specific to equine medicine, all equine practitioners should practice exemplary record-keeping, medication dispensing and VCPR establishment, whether we practice in California or not,” she recommended.
Well-being has been at the forefront of efforts to help veterinarians, as well as human medical providers. The U.S. Surgeon General’s Advisory Report on healthcare worker burnout was published in 2022 and is available at https://www.hhs.gov/surgeongeneral/priorities/health-worker-burnout/index.html.
Zeytoonian advised that a myriad of tools to drive change in healthcare settings are available through the U.S. Public Health Services website addressing healthcare worker burnout. She stated that burnout is not an individual mental health diagnosis, but a workplace issue that calls for systems-oriented, organizational-level solutions.
She shared that the AAEP has launched The Healthy Practice Member Assistance Program, an AAEP-sponsored benefit that offers the support and resources needed to address personal or work-related challenges and concerns. The services are confidential and free to AAEP members and their household family members. It includes counseling, legal services, financial planning advice and online resources covering a variety of topics.
In addition, Daly added, 988 was introduced as the new suicide and crisis hotline number in 2022. One can call or text 988 at any time and be immediately connected to a trained counselor. Nearly 90% of callers get what they need on the phone, while the remaining callers are connected to additional support and care.
Even if we never need 988 ourselves, veterinarians might find it helpful to have at hand when involved with a client experiencing a mental health crisis.
Diversity, Equity and Inclusion
Tan shared information about diversity, equity and inclusion, including the formation of different task forces, commissions and committees across veterinary medicine. Those groups include the new DEI committee formed by the AAEP in 2022.
Regarding diversity, the AVMA reported in 2021 that 90% of the veterinary profession is white. AVMA noted concern for the profession since owners prefer to have the option to take their animals to people who look like and relate to them, which often results in improved communication, greater client compliance, and creates greater economic and social sustainability, she stated.
In equine veterinary medicine, 95% of equine veterinarians are white, compared to the general U.S. population, which is only 60% white, and horse trainers, who are 84% white.
Reasons for lack of diversity in the large animal field, Tan said, included that underrepresented minority applicants had less animal/veterinary experience and spent less time directly with veterinarians before applying. She added that application ranking for admission relies heavily on GPA, standardized test scores and hours of experience, which favors white and affluent applicants.
Continuing with facts about equity, Tan shared that a 2021 study from Cornell showed that among veterinarians who earn more than $200,000 per year, women earn on average $100,000 less than men. The study concluded that men earn more income at lower levels of experience than women and make progressively larger jumps in salary with every year of practice.
Veterinary-specific data on a combined racial and gender wage gap is not available, but among people with master’s degrees, Black women are paid just 64% of the wage of a white or non-Hispanic man, she said.
In response to high attrition and poor attraction rates, the AAEP Board met with a group of practice owners and key opinion leaders in Texas earlier this spring, reported Zeytoonian. The group discussed the primary causes of these issues and formed the AAEP Commission on Equine Veterinary Sustainability.
The commission is comprised of five subcommittees developed around the key areas affecting the sustainability of equine practice, as identified in previous research. Each subcommittee has co-chairs, an officer liaison and 12-15 members. The commission is governed by a steering committee that consists of the AAEP officers and the chairs of each subcommittee. The charge of each subcommittee is to develop actionable tools that support the change needed in equine medicine to improve our numbers.
“As a society, the pandemic has really changed employees’ outlooks on their career and life goals,” said Zeytoonian.
New graduates want to find a job that offers them balance and the opportunity to feel like they are connecting with and contributing in a positive way to society. But, she said, “While the culture of a practice and many of the intangible benefits are high priority, rising student loan debt and inflation are causing new grads to change their tune and refocus on starting salaries.”
Daly added that the AVMA has documented a predilection for students with higher debt load choosing private practice over public practice due to higher starting salaries. The data, coming from two decades of AVMA’s annual surveys of graduating students (2001–2021), suggests that debt level is associated with new graduates’ career choices, she said.
“The higher a student’s debt, the more likely they will choose a job with a higher starting salary,” said Daly. “We will continue to have an attraction issue if we don’t get our starting salaries more aligned with small animal private practice.”
Although graduates entering equine medicine still report salaries at least $20,000 less than their small animal counterparts, a recent unpublished survey administered on private equine veterinary Facebook groups by Dr. Amy Grice received anonymous responses from 388 equine associates. They had average salaries of $88,000 for 2017-21 graduates, said Zeytoonian.
Helping Students with Debt
Lincoln Memorial University is taking a new approach to reducing debt, which will debut a shorter schooling requirement focusing on those wanting to enter into the equine veterinary sector.
Starting in 2023, students will receive 2.5 years of undergraduate education followed by the customary four-year veterinary doctorate program, said Zeytoonian. Students who maintain the minimum GPA requirements will save an average of 1.5 years of study and its associated student debt.
Daly added that increased efforts to help students currently in veterinary school are emerging. Decade One, a program dedicated to the success and vitality of young equine practitioners, has launched a spinoff program aimed at helping the aspiring equine practitioner called Starting Gate.
“The goal of Starting Gate is to provide veterinary students with the personal development skills and business education to not only become a successful equine veterinarian, but an individual who has the confidence and knowledge to create a career and life tailored to their unique needs and aspirations,” explained Daly. “Students from across the country will learn and bond together during their journey through vet school, leaving them with a strong peer support and networking system in place upon graduation.”
In closing, the Business New Hour newscasters championed the changes that are occurring across the equine veterinary industry that will keep the career strong into the future. The presenters expressed confidence that the world’s horses will continue to receive excellent care by equine veterinarians in the generations to come.
Strategies for Managing Accounts Receivable
Because accounts receivable can have a big impact on practices’ financial health, several presentations concentrated on this issue. Dr. Robert Magnus discussed “Accounts Receivable—Culture, Process and Impact.”
He shared that even a robustly growing practice will struggle with cash flow if the accounts receivable (AR) are high. Cash is necessary to pay bills, invest in equipment and hire staff, he said. He challenged the attendees to take action upon going home.
Magnus told a story about meeting with the owners of a practice where the veterinarians considered 80% of the biggest offenders in paying their bills to be “great accounts.” The practice owners didn’t want to call them to ask them to pay.
“If you are passionate about the horse, you’ll always be busy. And you deserve to work for people willing to pay you,” Magnus said. One of the biggest cultural changes that practices need, he shared, is to have a process that includes creating invoices within 24 hours, having one staff member in charge of AR, and having clear financial policies.
Developing a process of due diligence, with monthly aging of AR for each doctor and monthly average days of AR, will allow a list to be prepared for calls to clients with outstanding balances. These calls should be made by the doctor who did the work. Tying doctor compensation to collected revenue can assist in creating a culture where getting paid is a priority. In addition, creating a monetary incentive for a staff member to collect old balances can be very successful.
Magnus continued by explaining the cash flow gap that occurs when a practice purchases pharmaceuticals and medical supplies for which payment is due at 30 days, but the invoices for the services which are performed using those supplies are not paid for 60-90 days. Because cash flow is such an important aspect of a valuation, he said, high AR also can negatively affect value.
Next, utilizing examples of practices with high AR, Magnus recommended steps that all practices can take to deal with AR. Action items he suggested included weekly attention by the practice manager to AR, monthly tracking of average days of AR utilizing a practice-owner dashboard, and engaging all doctors in the effort to minimize overdue accounts.
In conclusion, he recommended that new clients sign a client agreement and be required to have a credit card on file. For clients who consistently pay poorly, he suggested asking for a retainer in order to continue providing services. Because having good cash flow is so important to having a healthy business, controlling AR is essential, he stated.
Payment at Time of Service
The next speaker in the account receivable (AR) session, Dr. Wendy Krebs, made a strong argument for instituting a payment at the time of service (PATOS) policy.
She emphasized that veterinary staff and doctors deserve increased compensation. Having the cash flow to meet payroll requires minimum accounts receivable.
PATOS creates increased cash flow, increased practice value and more accurate invoices without missed charges, she said. In her opinion, the most important metric for accounts receivable is Days Sales Outstanding, or DSO. By calculating the DSO, one can know how many days of revenue production are tied up in accounts receivable.
Days Sales Outstanding is calculated by multiplying the average accounts receivable in a time period (such as a month or a year) by the number of days in the time period, then dividing by the total gross revenue for the period. The result is the number of days of revenue for which the practice had not been paid.
Krebs recommended calculating DSO on a monthly basis.
To move to payment at time of service. Krebs recommended five steps.
- First, have staff members take responsibility and create a goal with a reward for them.
- Second, establish expectations for clients with a client agreement. For established clients, she suggested offering PATOS as a convenience, but she recommended requiring it for all new clients.
- Third, using technology to save credit cards in a compliant manner is essential. She suggested that fees be raised to account for the increased expense of merchant fees.
- Fourth, Krebs insisted that invoices must be completed the same day as the service is provided. She encouraged utilizing software templates and bundles.
- Fifth, she suggested eliminating any internal financing for clients. “Let the banks do the banking,” she said.
In closing, Krebs said that the key factor in improving a practice’s profitability and increasing the ability to appropriately compensate veterinarians is to reduce accounts receivable. The most effective way to do so is to implement payment at time of service.
Accounts Receivable in Ambulatory Practice
Dr. Linda Hagerman’s presentation, “How to Decrease Accounts Receivable in Ambulatory Practice,” reiterated the message that payment at the time of service is essential for practice health. She said receiving prompt payment should be an important part of every practice’s culture.
Hagerman recommended providing estimates and reminding clients of the practice’s payment policies at the time of scheduling before each visit. This will set client expectations. By getting approval for the estimate prior to the visit, clients are not surprised or confused.
The speaker recommended offering payment through multiple methods such as CareCredit, PayPal, credit cards and online options. If an invoice becomes overdue, she recommended contacting the debtor frequently by phone or text. If that is unsuccessful, take the person to small claims court to get a judgment.
She said it is risky to take checks from first-time clients. Use credit card readers in the field. Hagerman said practices should pay commission to associates only if payment is received within 30 days. Practices should be sure to have clients sign a legal document if any payment plan is offered.
In closing, Hagerman suggested that being known as an “expensive” practice can help clients prepare for payment. Being selective in taking on clients can protect the practice. Most importantly, measuring and monitoring accounts receivable should be undertaken regularly.
Keep Good Medical Records
The AVMA Professional Liability Trust recently reported an increase in claims for all species and for license defense. There also has been a 13% increase in professional liability claims, the highest ever recorded, stated Dr. Cynthia MacKenzie in the introduction of her presentation, “Review of Good Record Keeping: Will Your Documentation Defend You?”
With many states introducing online submission of complaints from clients against veterinarians, there is increased risk, she said. Poor medical records have resulted in the biggest fines. Equine claims have grown 15% year over year and have the highest monetary payouts.
MacKenzie explained that the purpose of medical records is to allow any veterinarian to understand what has transpired previously with a patient. That should include documentation of examinations, treatment and communication. The documentation should provide for continuity of care.
In addition, consent forms, anesthesia logs, surgery reports, boarding sheets, recommendations that were accepted or declined by clients, lab results and estimate sheets should all be retained in the patient medical record. They must be accurate, clear and timely (within 24-48 hours), MacKenzie stated. Documents also must be legible and easy to follow.
Declined estimates are important to retain, as well as communication of all kinds.
“Quality of care is considered to be on par with the quality of the medical record,” she said.
Medical records are legal documents and are required by the law of each state’s practice act. These acts change frequently, so it behooves one to understand the requirements for records, she added. From a defense standpoint, “if it isn’t written down, it didn’t happen,” she cautioned.
Licensing boards and attorneys prefer a subjective objective assessment plan (SOAP) format and expect any amendments to the records to be date- and time-stamped. There should also be a justification for the amendment.
MacKenzie noted that equine practitioners’ medical records are historically less satisfactory in meeting the requirements of licensing boards. She encouraged doctors to focus more attention on keeping complete records.
MacKenzie concluded that in the heightened regulatory environment in recent years, equine practitioners need to be aware of all the medical, legal, regulatory and ethical reasons for producing and maintaining excellent medical records in practice. They must carefully meet the expected standards. She said anything less could have expensive consequences.