Today's Veterinary Business

OCT 2018

Today’s Veterinary Business provides information and resources designed to help veterinarians and office management improve the financial performance of their practices, allowing them to increase the level of patient care and client service.

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63 October/November 2018 • TODAYSVETERINARYBUSINESS.COM can never achieve a profit margin of 20 percent or a COGS of 21 per- cent. They'll blame their numbers on their rural location, practice size or client demographics. While I recognize that different hospital models will have different KPIs, I challenge us to look at KPIs for our model and, if we're not measuring up, to look for ways to improve. Maybe a 10 percent profit margin will never become 20 per- cent, but a move to 15 percent will mean big things for the hospital, staff and owner. P&L KPIs are a product of other benchmarks we can use. Again, recognize that practice models and business philosophies are different. For example, a high-volume practice might have a much lower ADT (average doctor transaction) than a low-volume, "high-touch" hospital, but the practice could have a similar profit margin as long as the patient volume makes up for the lower transactions. Similarly, even though the average practice brings in 24 new clients a month per FTE, a practice with high client turnover or a low bonding rate might need many more. For an average small animal gen- eral practice focusing on "quality medicine," I typically reference data from the American Animal Hospital Association's Financial and Produc- tivity Pulsepoints: • Annual revenue per full-time equivalent DVM: $530,805 to $574,639. • Average doctor transaction (ADT): $154 • Average client transaction (ACT): $134 • Active clients per year per FTE DVM: 1,837 Benchmarks give us something to compare to and maybe strive for, but not every hospital will have the same numbers given their specific model and location. I've yet to see a practice that didn't improve its KPIs when the decision was made to practice thorough medicine, lever- age the team and consciously man- age expenses. Instead of looking at benchmarks as a competition or ignoring them because "we can't do that here," embrace them as an in- vitation to identify how to improve patient care, the client experience, the team leverage and manage- ment's overall effectiveness. Practice Information Management Software My consulting team uses PIMS to review metrics like active clients, client retention and medical ratios. I noticed a decline in new client numbers at one hospital, and my team reported a similar trend at many of our client hospitals. This led us to leverage a client-reten- tion report comparing the number of active clients, the number of new clients, and the percentages of clients lost and retained for different periods. In our case, we shoot for a tenure of at least 6.3 years based on the formula "current year active client number minus current year new client number divided by previous year active client number equals client retention rate." 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