November 15, 2020

Dr. Laura Pollock, a 2013 veterinary graduate from Cornell University, works at a hybrid practice with general, emergency, and specialty doctors. She says it’s a collaborative group of doctors at her clinic, but even then, she’s had some issues when transferring services to other doctors, at least as far as how things are billed.

That’s an issue because the practitioners there are not only paid a base salary but also receive bonuses on the basis of their production each quarter, calculated from the services they provide. Not to mention, Dr. Pollock can be penalized financially for taking time off because her production numbers are based on the number of days in the quarter, not how many she actually worked.

Veterinarians can be compensated in a variety of ways, and Dr. Pollock’s arrangement is not uncommon for practitioners. But some options are better than others, depending on the experience level of the doctors, what kind of practices they work in, and what their priorities are.

JAVMA News talked with a few veterinarians about the pros and cons of existing pay and benefit structures. Some say it’s time for new structures that better attract, develop, and retain associates in an industry that has a higher turnover rate than the national average.

Pay structures

Years ago, veterinarians generally received salaries when they worked as solo practitioners or had partners to share the workload, said Dr. Joy Fuhrman, owner of Arthur Harmony Veterinary Care in Prescott, Arizona. But then more clinics shifted to the model of owner and associate veterinarians.

“Owners found it hard to motivate employees to work and produce the same level of revenue they did,” Dr. Fuhrman said. “Production-based pay was created to motivate them to work harder.”

Production is essentially the fees generated and collected for services when the doctor is formally involved in the delivery of those services. Production-based compensation involves any of the following:

Straight production with no base salary, by which associates are paid on the basis of a percentage of the revenue they produce for the practice.

A guaranteed base salary plus commissions once a certain level of production is reached.

Production-based compensation with a guaranteed base salary, also known as ProSal, which pays associates a guaranteed monthly amount, while the production bonus is reconciled monthly, quarterly, or twice a year. Reconciliation can be with or without negative accrual.

Production-based compensation with negative accrual. A negative accrual occurs when associates have been paid more in a certain time period than their calculated production earnings. In this case, they end up owing the practice money, which is typically deducted from future paychecks.

Coming from experience

After graduating in 2016 from Colorado State University College of Veterinary Medicine & Biomedical Sciences, Dr. Samanthe Lyons joined a private small animal practice that offered ProSal with 20% paid on production monthly, with negative accrual. She was supposed to work 40 hours a week, but it was more like 55 hours—at first because she wasn’t as efficient and later to earn more money. By the time she left, she was earning about 35% more than her base salary.

At her next job, she was paid on salary, which ended up frustrating her because she would look at her production numbers and see she was being severely underpaid. That said, she liked that the clinics’ doctors would collaborate frequently on cases because no one cared who got credit for the case. By then, she wanted to get into management but not own a practice, so she chose to work for corporate-owned clinic in Florida.

She was hired on ProSal with 19% paid on production, including flea and tick product sales. If employees don’t meet their base salary, it can be lowered, but Dr. Lyons said that is very uncommon. Instead, employees are put on a plan to coach them to be more productive to cover the salary they want.

The corporation didn’t offer her negative accrual, which she was glad to learn. The company has also made adjustments to address the problem of employees being penalized for taking time off while working on production. Now, production is calculated based on the number of days worked, not total days in a pay period.

Six months ago, Dr. Lyons was promoted to be the clinic’s chief of staff, which is a salaried position. She can get an annual bonus of 10%-20% on the basis of how the doctors at her clinic perform, financial metrics, employee engagement, and client satisfaction.

In her experience, Dr. Lyons has liked working on ProSal, but she admits it’s not for everyone or every situation.

“I think if you are in a culture where people are production driven, but not to the point of over-diagnosing or preventing other people from taking cases because they’ll lose production, it’s the best option because you’re rewarded for being talented or personable or working your butt off and seeing a client who wants a same-day appointment.”

What seems to be the problem?

Dr. Fuhrman, who helped develop the Colorado VMA’s Power of Ten Leadership Academy program for recent graduates, said she’d frequently hear from participants how much they hated working on production. This led her to do an ad hoc survey in 2018 to better understand how associate veterinarians felt about production-based pay and why they had accepted that compensation format.

“Essentially, a majority of veterinarians didn’t know there were other options. They thought that was how all practices paid,” Dr. Fuhrman said. “They all had been negatively impacted in some way by production-based pay through taking time off,” such as not earning their production bonus because they went on vacation or paying the clinic back because they went on maternity leave and had negative accrual.

“In addition to that, a toxic culture would arise in the practice, with competition between associates fighting over more lucrative clients or who was scheduled first. There was even a reluctance to welcome a new veterinarian because they wanted the revenue to themselves,” she said.

Associates also saw their earnings impacted by things they didn’t have control over, such as clinic hours, staffing levels, or whether a competitor opened down the street.

Dr. Wendy Hauser is a former clinic owner who is now a veterinary consultant and the American Animal Hospital Association delegate in the AVMA House of Delegates. She tried a number of compensation systems when she was an owner, including ProSal. Back then, she had associates look at their transactions every day and initial that they were correct because if a charge went under the wrong doctor, she wouldn’t necessarily know that.

Associates at other practices had told Dr. Hauser about being ripped off by their bosses. They would see a charge wasn’t calculated correctly and could prove it, but they weren’t heard.

“That leaves a horrible taste in their mouth,” she said.

Another pain point she encountered with production-based pay was associates who wouldn’t do anything more than see patients.

“If they are paid on production, then why should they?” Dr. Hauser said. “It’s highly transactional, not relational. There’s no financial benefit for associates to put in any time to help train staff members or mentor new veterinarians or take an active role in the clinic’s business interests.”

Finally, she’s seen how folks paid on production are at the mercy of the business decisions that the hospital owner makes. For example, initial responses to the COVID-19 pandemic meant placing limitations on elective surgeries and other procedures, which tied associates’ hands as far as their ability to earn money.

“And think about the flooding and other natural disasters at hospitals that’s happened in recent years,” Dr. Hauser said. “There was no obligation for the hospitals to pay associates (when hospitals had to close). It’s a risky time to be on production. Now, many hospitals have gone ahead and paid the associates’ average production, but that’s not guaranteed.”

A better way to pay?

Dr. Fuhrman said she’s starting to see a shift away from production-based compensation by employers.

According to the 2019 AVMA Senior Survey, among those who had accepted a full-time position, 60.4% said they would receive a guaranteed salary with no option for a production bonus, 37.2% said they would receive a base salary with a production bonus, 0.9% would be paid solely on a production basis, and 1.5% were uncertain.

Comparatively, in the 2018 AVMA Senior Survey, among those who accepted a full-time position, 57% were getting a straight salary, 38.7% were getting ProSal, 0.5% were getting paid fully on production, and 3.8% were uncertain.

But is there an alternative?

“Any reasonable compensation starts off with a salary at a reasonable livable wage that reflects the market as well as having to repay debt,” Dr. Fuhrman said. “Starting there is the first step. Then the practice needs to ask what motivates employees. Only there can you design a bonus program.”

She continued: “It’s really very specific to each employee. It is difficult for a practice to design a single bonus plan for every employee. A new graduate with $300,000 in debt probably wants extra money, but a young mom would value time off or health care benefits.”

In an article two years ago in Today's Veterinary Business, Drs. Fuhrman and Hauser wrote about a compensation plan they developed with a salary plus a merit-based bonus plan.

“Rather than incentivizing veterinarians on their production alone, employ both a collective hospital-based revenue growth component and a merit-based bonus structure that rewards doctors based on goals that encourage professional and practice development,” they wrote.

“Within this model, veterinarians receive a living wage. The opportunity to earn additional income is based on a bonus structure that promotes the productivity and efficiency of the entire team by identifying categories, or buckets, that are defined by the hospital to align with organizational goals. The veterinarians and hospital leadership work together to define which goals are in each bucket, individualizing these objectives to what will motivate each associate.”

The buckets include business, community, financial, professional growth, and team development, but are limited only by imagination, Dr. Hauser said. Allowing employees to pick goals that motivate them makes them active participants in their development, resulting in increased personal growth and workplace engagement.

Advantages to the hospital include developing veterinarians who become invested in the clinic’s success and potentially take on ownership.

If an associate isn’t producing as much as an owner may expect, this is where mentorship and coaching come into play, Dr. Hauser said, and making sure they are the right person in the right role.

“I’m not saying everyone should pay this way. I’m saying it deserves consideration, and it is certainly worth revisiting why and how you are paying associates,” she said.

Petco’s plan

Dr. Whitney Miller recalls her first boss recounting how she went into labor while performing a surgery. She finished the surgery, then went to the hospital to give birth. Two weeks later, she was back at work.

“I couldn’t walk without a limp after two weeks,” said Dr. Miller, who recently had her third child and was able to take six weeks of paid parental leave from her job at Petco. “From what I’ve heard from classmates and colleagues who have had children since vet school, most had unpaid leave options or reduced pay. They constantly have to walk a fine balance of trying to take as much time as they can to recover from birth and bond with their baby, but they can’t afford to take six weeks.”

Dr. Miller is now head of veterinary medicine at Petco. Currently, the company operates 100 full-service veterinary hospitals, including 18 Petco-branded hospitals as well as hospitals under the brands Thrive, Vetcare, and GVP. Most are less than a year old and have started with two to three doctors.

Dr. Miller and her team were tasked with coming up with a pay structure that would not only entice veterinarians to join Petco, but also make them want to stay.

“While everyone focuses on recruitment, there are six jobs for every vet. We are a high-demand profession. Retention is just as important,” Dr. Miller said.

According to AAHA’s “Compensation and Benefits Ninth Edition,” which came out this year, the annual turnover rates among full-time employees was 16% for associate veterinarians, 24.3% for veterinary technicians, and 10.3% for practice managers. The national average for turnover in the U.S. is reported at 15%, lower than the 23% average practice-level turnover in veterinary practices.

For Dr. Miller’s team, one idea immediately came to mind: no negative accrual or having to pay salary back before receiving any bonuses.

“We wanted to see how to get those negatives out of the incentive plan,” Dr. Miller said. “We also don’t want vets to feel like salespeople. What should be driving you is what you think is the best care for your patients.”

Dr. Miller said Petco offers competitive base salaries for veterinarians. On top of that, the company offers a production-based incentive plan under which veterinarians earn 3% of every dollar of revenue they bring into the practice.

In addition, practitioners have a quarterly stretch goal for revenue, and they receive 15% of revenue brought in over the goal. “That could be a little or lot extra. It not only helps drive growth but also the best care while incentivizing docs knocking it out of the park,” Dr. Miller said.

The company also has a small team incentive to reward veterinarians, veterinary technicians, and support staff members for working collaboratively.

“We honestly started from scratch to see if we could build something great for the profession,” Dr. Miller said. “Getting paid for every dollar felt like a good place. For high performers, we provide additional incentive. And honestly, the one thing we didn’t want to lose sight of was rewarding the entire team. Not only does it drive additional compensation for the team, but it also works for cohesion.”

Veterinarians at Petco are also allowed flexible schedules, meaning they can move from full time to part time or relief work or vice versa as needed. Plus, they have open time off, which means putting no cap on the number of vacation or sick days an employee can take off per year.

“That’s basically unheard of in the veterinary industry, though there still have to be guardrails. But saying you can take only so many days and trying to restrict time off for vets who need to recharge, that’s not helping in the time of COVID,” Dr. Miller said.

A word of advice

Dr. Pollock, who is an emergency veterinarian, works for a practice in New York state bought by VCA Animal Hospitals several years ago. All of the doctors were initially offered just the ProSal option with negative accrual at the time of the acquisition.

“We actually kind of got together and said this is not an acceptable thing,” Dr. Pollock said. “We all negotiated for the quarterly ProSal option with no negative accrual and increased the percentage they offered us” to a 22% bonus on production.

Her advice for new graduates is to be on salary initially.

“That first year, you’re not going to be that efficient. You have to learn how to be a doctor, work with staff, and learn the medical records system,” Dr. Pollock said. “When you are ready, you can use your production numbers to figure out what you’ll be worth to the employer and use that to your advantage when negotiating.”

She also advocates having a lawyer familiar with the veterinary industry review the job contract before accepting an offer.

Once veterinarians have more experience, Dr. Pollock said it’s not appropriate to do ProSal unless they have easy access to their production numbers so they can make sure what’s being calculated is accurate.

And, above all else, “Contracts are not permanent. They may auto-renew, but they can always be renegotiated,” Dr. Pollock said.

An earlier version of this article misstated the title of Today’s Veterinary Business.