How to Charge Professional Fees(You are worth it!)

Dennis M. McCurnin, D.V.M.Diplomate, ACVS

Louisiana State University

FACTS? Incomes are inadequate.Incomes are inadequate. An increase in fees will lead An increase in fees will lead

to a devastating loss of clients.to a devastating loss of clients. ( DVMs have not adopted the 19 Brakke standard business ( DVMs have not adopted the 19 Brakke standard business

practices: most have increased fees finally)practices: most have increased fees finally)

YOU CAN’T DOUBLE PROFIT BY DOUBLING

PRODUCTION TIME

ON A ONE WAY DEATH ROAD

QUALITY OF SERVICE SHOULD CONTROL FEE

74% of owners would go into debt to 74% of owners would go into debt to provide for petprovide for pet

41% have spent $500 or more41% have spent $500 or more23% have spent $1,000 or more23% have spent $1,000 or more 5% had pet health insurance ( Nat. 2 - 3% )5% had pet health insurance ( Nat. 2 - 3% )

AAHA StudyAAHA Study

WE ARE PAID WHAT WE

BELIEVE WE ARE WORTH

SUCCESS IS A CHOICE

TRUST

When it comes to spending When it comes to spending money on their pet, the single money on their pet, the single most important factor between most important factor between an owner and their veterinarian an owner and their veterinarian is is TRUSTTRUST. . (We rank 3(We rank 3rdrd in US in Gallop pole) in US in Gallop pole)

Gallop Pole, 2009Gallop Pole, 2009

ECONOMIC REPORT

Dr. R. K. House

( NOT ABC’s “House” )Manitoba and Ontario, Canada

DVM ATTITUDE SCALES

Perception Perception of client price sensitivityof client price sensitivity

Degree of Degree of perceivedperceived competitioncompetition

RESULTS

1.1. DVMs charging highest fees DVMs charging highest fees have highest net income; have highest net income; DVMs charging lowest fees DVMs charging lowest fees have lowest net income.have lowest net income.

RESULTS

2. DVMs charging highest 2. DVMs charging highest fees work fees work leastleast hours; hours; DVMs charging lowest DVMs charging lowest fees work fees work mostmost hours. hours.

RESULTS

3. DVMs who 3. DVMs who perceiveperceive clients clients are not price sensitive charge are not price sensitive charge highest fees; DVMs who highest fees; DVMs who perceiveperceive clients are price clients are price sensitive charge lowest fees.sensitive charge lowest fees.

RESULTS

4. Low and high fee 4. Low and high fee practices practices coexistcoexist in the in the same practice areas.same practice areas.

RESULTS

5. DVMs who 5. DVMs who believebelieve the the market is highly competitive market is highly competitive charge lower fees, earn charge lower fees, earn lowest net incomes and work lowest net incomes and work greatest number of hours.greatest number of hours.

VETERINARY INCOME IS DIRECTLY

RELATED TO THE LEVEL OF FEES

THE LEVEL OF FEES ARE THE RESULT OF THE

DVM’s PERCEPTION OF WHAT CLIENTS WILL OR

CAN PAY

DVMs WHO FELT THEIR CLIENTS WERE “VERY

SENSITIVE” TO PRICE MADE

50% LESS INCOME THAN DVMs WITH CLIENTS THAT

WERE “SENSITIVE” OR “NEUTRAL”

DVMs WHO FELT “VERY STRONG” COMPETITION

HAVE INCOME 32% LOWER THAN THOSE WHO FELT

LITTLE INFLUENCE

GROSS INCOME

Fees chargedFees charged Services providedServices provided Number of clientsNumber of clients

FEES = ATTITUDE

SERVICES = PHILOSOPHY

CLIENTS = MARKETING

CONCEPTS OF FEES

Positioning Fees Positioning Fees ( H-M-L )( H-M-L ) 20% need to complain (20 / 80)20% need to complain (20 / 80)

Shopped Fees Shopped Fees Non-Shopped Fees Non-Shopped Fees (1%/Mo.)(1%/Mo.)

Restructuring FeesRestructuring Fees

DENTISTRIES

Level 1 = White teeth/red gumsLevel 1 = White teeth/red gums

Level 2 = Brown teeth/red gumsLevel 2 = Brown teeth/red gums

Level 3 = Heavy tarterLevel 3 = Heavy tarter

Level 4 = Infection/extractionsLevel 4 = Infection/extractions

HOSPITALIZATION

Level 1 = O.D./B.I.D.Level 1 = O.D./B.I.D.

Level 2 = T.I.D./Q.I.D.Level 2 = T.I.D./Q.I.D.

Level 3 = I.V./Post Op.Level 3 = I.V./Post Op.

Level 4 = I.C.U. CasesLevel 4 = I.C.U. Cases

HOW TO SET FEES1. Fee shopping (local)1. Fee shopping (local)2. Fee survey- NCVEI2. Fee survey- NCVEI3. Time – salary ( salaries .x )3. Time – salary ( salaries .x )4. Buy a fee schedule (Ex. fee)4. Buy a fee schedule (Ex. fee)5. Pet insurance claims book5. Pet insurance claims book6. Postage stamp theory .44 c 6. Postage stamp theory .44 c 7. Cost accounting 7. Cost accounting

How To Set Fees NCVEI NCVEI – Pricing Model -38 Tools– Pricing Model -38 Tools On line January, 2002, and can be used with either On line January, 2002, and can be used with either

hard data or your best estimate. Now contains over hard data or your best estimate. Now contains over 14,000 practices ( 39,000 DVMs ). Equine, Food 14,000 practices ( 39,000 DVMs ). Equine, Food Animal, and Mixed are included. Staff / Animal, and Mixed are included. Staff / communications data, Pet Insurance, and Pet Food communications data, Pet Insurance, and Pet Food data are also being collected. data are also being collected.

Web-site Web-site WWW.NCVEI.ORG

OFFICE CALL FEE = FIXED COST OF DOING

BUSINESS

OFFICE CALL =

TOTAL FIXED COST/MONTHTOTAL CLIENT VISITS/MONTH

FIXED COST OF O.C. + PROFIT

= OFFICE CALL FEE

$21,000 / 600 = $35.00(PROFIT = 25%)

.25% X $35 = $8.75$35.00 + $8.75 =

$43.75

OFFICE CALL IS THE ENTRANCE

(COMPETITION)

DRUG SALES – PHARMACYTABLE OF PROFIT

Net ProfitNet Profit MultiplierMultiplier

20.0%20.0% (250%)(250%)

25.0%25.0% (200%)(200%)

33.3%33.3% (150%)(150%)

50.0%50.0% (100%)(100%)

COMPUTERSEstimates (Hospitalized Cases)Estimates (Hospitalized Cases)Fee capture ( 25% loss )Fee capture ( 25% loss )Final invoice (in detail)Final invoice (in detail)Internal marketingInternal marketingPatient recalls (compliance)Patient recalls (compliance)Fee Range ( $500 – $700 )Fee Range ( $500 – $700 )

SPECIAL EXAMS

Medical Progress Exam ( 10 Medical Progress Exam ( 10 min )min )

( recheck? )( recheck? ) In-hospital Exam / consultationIn-hospital Exam / consultation

Phone consultationPhone consultation

FEE MUST COVER ALL COSTS PLUS PROFIT AND YET BE COMPETITIVE( FOR SHOPPED ITEMS ONLY )

INFLATION EFFECT( 10% / year )

VA

LU

E

TIME

Fees

Inflation

CPI

I CAN’T AFFORD IT!

1.1. Alternative Alternative (Plan (Plan A,B,C)A,B,C)

2. Payment plan 2. Payment plan (care/credit)(care/credit)

3. Staging care3. Staging care4. Pet insurance (< 3 %)4. Pet insurance (< 3 %)

5. Euthanasia5. Euthanasia

DISCOUNTS FEE 100 90 80 110 120FEE 100 90 80 110 120

Costs 80 80 80 80 80Costs 80 80 80 80 80

Profit 20 10 0 30 40Profit 20 10 0 30 40

(For every 10% increase in fees the demand (For every 10% increase in fees the demand decreases by 4%)decreases by 4%)

Medical Insurance(Medical coverage HMO, PPO, etc. )

Dental Insurance

Pet Insurance( Indemnity Insurance )

Pet Insurance

AAHA study on Pet Insurance. (11 Comp ) AAHA study on Pet Insurance. (11 Comp ) Trends Magazine, Mar/Apr, 2007 Trends Magazine, Mar/Apr, 2007

2002 $80 M insurance – 2012 $1.1 B2002 $80 M insurance – 2012 $1.1 B 2 – 3 % population have Pet Insurance2 – 3 % population have Pet Insurance 73% of survey said “ lead to better care ”73% of survey said “ lead to better care ” 100% of DVMs reported restricted care 100% of DVMs reported restricted care

due to costsdue to costs Average cost for average dog is about Average cost for average dog is about

$48* / Month. *$48* / Month. *(VetEcon Aug. 2010)(VetEcon Aug. 2010)

CREDIT WITH CONTROL IS OK!

1. Application1. Application

2. Billing fee $3-5.002. Billing fee $3-5.003. Monthly interest 1.5% 3. Monthly interest 1.5%

((Credit increases purchases by 33%)Credit increases purchases by 33%)

4. Deposit - Initial Payment4. Deposit - Initial Payment

MANAGING CREDIT

Avg. American has only $300 available Avg. American has only $300 available credit on their credit cards ($500 in Check)credit on their credit cards ($500 in Check)

Bad checks- - Low check numbersBad checks- - Low check numbers NCVEI 22% more revenue w/ creditNCVEI 22% more revenue w/ credit Credit level: 2 -3 DVM’s 0.42% loss;Credit level: 2 -3 DVM’s 0.42% loss;

AR = 2.0 – 3.0% of gross*AR = 2.0 – 3.0% of gross*

* Idexx * Idexx

WHEN YOU “GIVE” A SERVICE TO THE CLIENT, WRITE IT DOWN AND THEN REDUCE THE FEE--

WILL DO MORE TO INCREASE INCOME

THAN A FEE INCREASE!

20-25% loss in mostwell managed practices(Solution: Travel sheet)

TRAVEL SHEET Used on all in-hospital casesUsed on all in-hospital cases Completed primarily by staffCompleted primarily by staff Check-off system without feesCheck-off system without fees Turned-in every other day to data Turned-in every other day to data

entry person ( Receptionist )entry person ( Receptionist ) May also be used on some day May also be used on some day

patients that have multiple servicespatients that have multiple services Travel sheet resource: Dr Ron Whitford Travel sheet resource: Dr Ron Whitford

STAFF MUST UNDERSTAND THE FEES

AND BE SUPPORTIVE

INCENTIVE PAY

Small Animal 18-22% of GrossSmall Animal 18-22% of Gross Large Animal 25-35%Large Animal 25-35% Specialty Practice 25-40%Specialty Practice 25-40% Emergency Practice 23-30%Emergency Practice 23-30% Benefits: Benefits: The higher the % the lower the The higher the % the lower the

benefits. Typical in C.A. is (20% + $6-8K in B.)benefits. Typical in C.A. is (20% + $6-8K in B.)

Total salaries should be less than Total salaries should be less than 43%43% of gross of gross

CLIENT COMMUNICATIONS

Study results suggest that clients expect to Study results suggest that clients expect to have conversations with their DVM about have conversations with their DVM about the costs of care. The use of a treatment the costs of care. The use of a treatment plan early in the care would alleviate some plan early in the care would alleviate some of the monetary challenges involved in the of the monetary challenges involved in the delivery of quality services.delivery of quality services.

JAVMA: 231-10, 2007JAVMA: 231-10, 2007

Human Animal Bond

Study suggests care decisions were made Study suggests care decisions were made based on their attachment to the pet rather based on their attachment to the pet rather than income level and based on their than income level and based on their understanding of the importance and value understanding of the importance and value of the recommendation. of the recommendation.

Owners preferred to purchase products Owners preferred to purchase products from full-service practices rather than from full-service practices rather than internet sites, mail and low-cost clinics. internet sites, mail and low-cost clinics.

JAVMA 232:4, 2008JAVMA 232:4, 2008

Questions?