While compassion and good intentions may result in happy clients, discounting for veterinary services can take a toll on your clinic’s finances. So, how do you manage this balance? Louise Baxter reports
Australian veterinary practices only average between seven per cent and 12 per cent profitability, compared to 25 per cent for high-performing workplaces, according to a 2011 report from the University of New South Wales. And that’s a big difference.
One of the main reasons is the ‘emotion factor’. When dealing with clients in crisis wanting the best for their beloved pet, it’s tempting to want to soften the blow with shaved bills, frequent discounting or simply foregoing charges for supplementary services. But unfortunately, this short-term solution can add up quickly if repeated for every patient.
Dr Adam Russell, director of Veterinary Practice Partners, says while the animals and clients will always be paramount, it’s important to be clear about financial realities. “All vets at their core do veterinary medicine not for the money, but for the actual treating of pets. As a result, they feel very torn when broaching the topic of money because their interests and the interests of the client are to make the pet better. The vet forms a strong bond with a client in the consulting room,” Dr Russell says.
“Where there’s a bit of a divergence is with money. That’s part of the reason why vets often feel insecure or second-guess themselves when it comes to knowing how to charge for their services.”
A veterinarian is not just an animal’s general doctor; they’re also specialists and need to pay for the purchase and maintenance of related medical equipment and facilities, medications, surgical procedures, and trained and experienced staff. Without the subsidies afforded to human healthcare, such as Medicare and the Pharmaceutical Benefits Scheme, the costs of veterinary services cannot be fairly compared to the cost of a GP visit and cannot be absorbed by a practice. Unfortunately, by reducing consultation fees and waiving charges, you’re making your clinic do just that.
Avoid drawing conclusions
As veterinary services are billed directly to the client, there’s potential to be swayed by emotions and assumptions that payment could be a ‘burden’. However, it’s essential to hold firm with fee structures and only offer discounts or waived charges in exceptional circumstances—or as a goodwill gesture for a long-standing client, at your discretion. Pre-emptive judgements can result in unnecessary exemptions that affect the practice’s profitability.
“Suggest a list of priorities to the client up-front of what needs to be treated, give costs associated with that and allow the client to choose.”—Dr Adam Russell, director, Veterinary Practice Partners
“A lot of the time, the situation of cost being an issue may arise once or twice a day, and within the service industry that’s pretty normal. I think we as vets take it a little bit to heart, so maybe anticipate there’s going to be a problem when there in fact isn’t,” Dr Russell says.
“Also, what you can do is suggest a list of priorities to the client up-front of what needs to be treated, give costs associated with that and allow the client to choose. A lot of times we tend to jump to that mid-point, or imagine if it was our pet and want to help.”
After the initial consultation, provide your client with an itemised list of services and costs so they can make an informed decision about what they are willing and able to proceed with.
Often clients don’t even know they’ve received a discount or shaved bill, unless they’re told, so the gesture can be superfluous. Unexpected concessions can also send a message that you can afford to do the work for less than your set fees, which actually undermines them. Before offering this, ask yourself if the client would come to the practice without the discount. The answer should be yes.
Check for missed charges
Whether a result of human error or a vet waiving a service fee, missed charges can add up to a significant loss of income if not carefully monitored. They can often arise from poor internal communication, a busy schedule or a lack of staff training.
Prevention and planning is the best way to approach this issue. Be clear with your reception staff, practitioners and management team about your billing policy and the importance of adding all service charges to a bill, no matter how small, unless otherwise advised. After all, it is a business like any other and must be treated in the same firm way to ensure profitability remains stable and sustainable.
“A misunderstanding with vets is about how profitable a vet clinic is going to be.”—Dr Adam Russell, director, Veterinary Practice Partners
If you’re concerned your business may have incurred losses due to missed or waived charges, a periodic audit of patient files (a sample of 30 to 40 should give you a fair idea) can be useful to track patterns and potential oversights. You could also ask your office staff to keep an eye out for missed charges from veterinarians and follow up about the specific situation.
Discounts can hurt other vets
If you have a clinic with several veterinarians, and only one offers discounts, clients may be inclined to see the practitioner who offers cheaper services. This naturally creates an uneven playing field, may cause unfair pressure on other vets to reduce costs to stay competitive, and undermines the fee structure of the practice. This is why a clear written policy is important from the start for both staff and clients.
Calculate your costs
“A bit of a misunderstanding with vets is about how profitable a vet clinic is going to be and how much it actually costs to run a practice,” says Dr Russell. “You may perceive that wages make up the majority of the costs but they might make up 50 per cent, and then there’s factoring in medications and so on.”
The Australian Veterinary Association provides resources for practice management, which will help to give you a defined guide before launching your clinic, and keep it running smoothly.
BOQ Specialist offers tailored financial advice for veterinarians that can save you having to retrospectively solve profitability problems—from managing cash flow and choosing the right accounting software, to preparing for unexpected expenses—ensuring you keep your clinic in good shape to continue your good work.