What could possibly be wrong with that?
A Guest Blog with Andy Clark, DVM, MBA
For decades, two of the greatest challenges we face in equine practice have been our reliance on selling drugs to generate the revenue necessary to sustain the practice of the practice and our failure to collect fees at time of service.
The origins both of these challenges faced by equine practitioners lie in the history of the development of the practice of veterinary medicine. Veterinarians in the early days, beginning in the late 1800’s treated horses that were an integral part of an agricultural economy. Most horses were either involved in farming operations or transportation of agricultural products. The clients had a reasonably high level of experience with livestock in general and horses specifically. The differentiator between veterinarian and client seems to have been in access to ‘medicine’ and medical equipment. Because clients were reluctant or even unwilling to pay a vet for “intangibles” such as knowledge, wisdom and advice, veterinarians were pressed into a business model in which they relied on drug mark up to make a living. They gave away their knowledge, wisdom and advice and charged for medicine and for using equipment the horse owner didn’t have (tooth floats, Obstetrical instruments, surgical instruments etc)
Once those late 19th century clients were trained that the vet service was free and the drugs cost money, clients balked each time vets tried to re train them to pay for professional services and less for drugs. The path of least resistance for everyone was to continue the old model, charge more for drugs and little or nothing for professional service. That business model endured through the 20th century and now into the 21st century. Now in 2010, many equine vets continue to lose money on professional services and try to make it up on drugs.
It was probably always a bad business model but it definitely is now! Now that internet access is so common in our society and internet pharmacies are abundant, clients can easily learn exactly what their veterinarian pays for products. They do some rudimentary arithmetic and assume their veterinarian is gouging them. Often the client challenges the vet about the drug markup. The clients usually winds up paying the internet price for the drugs. The veterinarians wind up struggling to generate enough revenue to cover the overhead of their practice because they “can’t” charge appropriately for professional services.
Our challenge lies in education; demonstrating to owners the value of the knowledge, wisdom and experience they receive. Once clients understand that those services have a dollar value that is fair and reasonable to be charged for them, veterinarians can get out from under reliance on drug markup to pay the overhead.
As far as billing for services instead of presenting an invoice at time of service, that’s a bad business model too. Its roots are in the agricultural history mentioned earlier. Vets worked for farmers who grew livestock or crops. The feed man, grocery store owner, farrier, vet etc, all received payment in the fall after the crop was sold. All those other folks have migrated to payment to time of service over time. The vets are still working on a 19th century business model. After over a century, many large animal owners view vet service on credit as an entitlement and will fire the vet and get a new one if the vet attempts to bill at time of service.
In some areas of North America, vets have successfully moved to payment at time of service. Coincidentally, many of those same vets are charging for professional services and working on a much lower markup on drugs to compete with internet pharmacy prices. It may be that group of vets have developed a healthier business model and will be the leaders in their industry.
Andrew R Clark, DVM, MBA is the Chief Executive Officer of Hagyard Equine Medical Institute in Lexington, Kentucky. Founded in 1876, Hagyard is a 134 year old equine practice with over 60 veterinarians. Hagyard is the second oldest business in Lexington.
Dr Clark earned his Doctorate Degree in Veterinary Medicine from the University of California at Davis. Following 21 years in equine practice, an injury ended his career as an equine practitioner. Dr. Clark returned to school for his MBA. He is an Honors Graduate from St. Mary’s College of California, Graduate School of Business and Economics, Masters in Business Administration program.
Prior to accepting the CEO position in 2005, Dr Clark owned and operated an equine practice management consulting firm. In addition to consulting work, he has been very active speaking to international, national and regional Association Meetings and AAEP student chapter members.
Through Hagyard Consulting Group, Dr. Clark continues to provide business solutions, strategies, and development for equine practitioners in 12 states. He also facilitates two Veterinary Management Groups. Each group is made up of 20 veterinarians from the US and Canada who meet twice annually to learn management techniques to use in their practices.
Dr Clark is a trustee for the AVMA Professional Liability Insurance Trust. The trust manages the Liability Insurance program for 82,000 members.