Turn to data when the decisions get tough
Veterinary practices can use data from within the practice and from the industry overall to guide tough business decisions in a challenging economic environment.
Two sessions at the AVMA Veterinary Business and Economic Forum, held virtually Oct. 24-25, covered the use of data. Sheri Gilmartin, a veterinary technician who is vice president of sales and marketing at VetSuccess, presented “Morph Your Insights Into Powerful Foresight: Using Data to Get Ahead of Veterinary Trends,” and a panel discussed “Learning to Make Data-Driven Decisions for Better Business.”
The AVMA has partnered with VetSuccess, a data analytics company, to offer the Veterinary Industry Tracker. The tracker draws on data that is updated daily from thousands of practices to show revenue and visits per practice, year-over-year comparisons, product sales, and much more.
“The past two and a half years have been a bit of a roller coaster across practices, and we want to use the insights that we’re going to share today to take a step back and think about the changes that we need to make long term,” Gilmartin said during her presentation.
As the COVID-19 pandemic enters the endemic stage, veterinary practices face new headwinds. The inflation rate for the United States reached 9.1% for the 12 months ending in June, according to the U.S. Bureau of Labor Statistics. That’s the highest rate since 1981. Also, in the first quarter of 2022, productivity of U.S. workers plunged at a 7.4% annualized rate, the biggest drop since 1947.
As such, the future economic outlook continues to be uncertain. Dana Peterson, chief economist of The Conference Board, told forum attendees earlier in the day that the uncertainty will continue into next year, with the U.S. likely entering a mild recession for the first half of 2023.
Revenue for veterinary practices was up 6.4% year over year as of mid-September, but visits were down 1.7%. The number of new clients was down almost 17% year over year as of the end of August. Gilmartin has heard that some practices are not accepting new clients, which certainly could be contributing to that number.
New patients per practice decreased from 149 in January 2019 to 114 in July 2022, while active patients—patients that had at least one transaction in the past 18 months—increased from 4,433 to 5,125. Lapsing patients—patients whose last transaction was 14 to 18 months previously—increased from 437 to 620.
As of the end of August 2022, practices saw a 10% increase in revenue per patient. The number of line items per invoice has increased, meaning patients are getting more products and services per visit, Gilmartin said.
Visits for product purchases were down 8.1% year over year as of mid-September, while visits for services have been flat. Visits for product purchases represent 27% of total visits. Some product purchases have gone to practices’ online stores, and the rest have gone outside practices.
In 2020 and the first half of 2021, practices raised their prices more than the rate of inflation. However, from the second half of 2021 through the first half of 2022, price increases across practices were lower than rapidly rising inflation.
While input costs have increased, it’s important for practices to be mindful of the affordability of veterinary care. In January 2022, Synchrony Bank released a study of the lifetime cost of care for a cat or dog (PDF), drawing on surveys of 1,200 pet owners and 100 veterinarians. According to the study, 21% of clients said that an unexpected pet-related expense of $251 to $500 caused them stress, and a quarter of clients said the stress-inducing figure was $250 or less.
“Increasing visits is the key to maintaining revenue growth without additional price increases,” Gilmartin said. “We certainly want to grow service visits. We know that that is the lifeblood of practices,” not only ensuring proper care of patients but also providing revenue.
Increasing visits can be challenging for practices that are short staffed and where the team feels overwhelmed and burnt out. However, Gilmartin said, practices can improve efficiency, such as by better leveraging staff members and adopting new technology. The benefits of increasing efficiency were highlighted in an earlier forum presentation by Frederic B. Ouedraogo, PhD, senior economist and associate director of economics in the AVMA Veterinary Economics Division.
Gilmartin said practices also can try to keep product purchases from going elsewhere, such as by leveraging the practice’s online store.
Finally, practices can adopt strategic pricing strategies to reduce pet owners’ financial concerns. Gilmartin recommended the Veterinary Hospital Managers Association’s Value-Based Strategic Pricing Tools and Resources.
Dr. Peter Weinstein, president of Simple Solutions for Vets, led the panel discussion on using data in veterinary practice. He asked the five panelists what it means if the numbers of active clients and patients at a practice go down—and what the practice can do.
Jenni George, co-owner and hospital administrator of Deerfield Veterinary Clinic in Deerfield, New Hampshire, said a decrease in active clients is usually a lagging indicator of something else. Since she has owned her practice, she has found that people are willing to bring in pets even during a recession if they see value in doing so and are treated well. She suggested surveying clients on a regular basis.
Gilmartin, the VetSuccess vice president, said veterinary practices expect to see some attrition as clients move and patients pass away. If a practice is losing patients faster than it is adding them, there might be other things the practice wants to look at. Is the practice down a doctor? Is the reminder system working adequately?
Dr. Ken Brunson, co-owner of Tipp Veterinary Hospital in Tipp City, Ohio, emphasized making clear, consistent recommendations to clients about why they should come in every year. He asked, “Do they see the importance in that? Are they given the same message from every staff member from the front to the back, from the time they check in to the time they check out?”
Among other questions, Dr. Weinstein asked the panelists how much financial information they share with their practice teams.
George has a strong belief in financial transparency. Her receptionists are the best at making sure that the practice gets paid. But if they don’t know that’s an issue, how are they supposed to help?
Gilmartin recommended that practices should share as much financial information as they can because the practice is a team, and the team needs to be aligned on goals.
A version of this article appears in the December 2022 print issue of JAVMA.