By Malinda Osborne
To be successful, private veterinary practices need to not only provide great service to clients, but also be run according to basic financial concepts, particularly in this stormy economy.
This was the message from Dr. Karen E. Felsted, chief executive officer of the National Commission on Veterinary Economic Issues, who gave a talk Saturday titled "NCVEI: Trends—Are We Weathering the Economy?"
"Really, I can't say how the veterinary profession is affected with a general statement. While veterinarians do provide much-needed services, their success and profitability depends solely on how well the practice is run and if it uses best practices in financial matters," said the former veterinarian and certified public accountant.
A comparison of averages from 2007 and 2008 practice data collected by the NCVEI shows that revenue has grown by 4 percent, the number of transactions has decreased by 1 percent, and the average transaction charge has increased by 5 percent.
Most increases in revenue have come from greater transaction charges, whether increases in fees or the number of services provided to clients, Dr. Felsted said.
That information corroborates statistics from the American Animal Hospital Association, which indicate that from 2004 to 2006, 76 percent of all fees increased above the rate of inflation. That increase includes significant increases in fees for hospitalization, anesthesia, treatment procedures, and surgery. From 2006 to 2008, 63 percent of fees increased above the rate of inflation, although most of those fee increases were not statistically significant.
"So from 2004 to 2006, prices went up a lot and then they kind of remained flat after that. They held steady, but they didn't go down either," Dr. Felsted said.
She continued, "Revenue is going up, transactions are flat, and what's driving revenue growth is average transaction costs. We've expanded services that we've provided for clients, too. So, how sustainable is this?"
Dr. Felsted emphasized that growth in fees must be accompanied by increased value.
"Real economic growth must come from better medical care, growth in clients, improved productivity, and efficiency. Costs resulting from lack of efficiency and productivity are simply being passed onto clients," Dr. Felsted said.
NCVEI statistics show 62 percent of practice owners don't use financial concepts to manage their businesses. These include concepts as simple as using a budget and looking at key performance indicators such as staffing ratios.
"Raising fees is easy, and they needed to happen, but what's happened is that's the only way of increasing earnings. We raised fees a lot but we didn't do a better job of running our business better," she added.
