Preventive Care and Its Economic Value to Your Practice

The profit of any veterinary practice is revenue minus expenses. While expenses are important to control, most practices do not have many opportunities to cut expenses without reducing staff numbers, wages, or benefits. As a practice manager, the best way to grow your profit is to drive revenue — the number of invoices multiplied by the average invoice — which helps to increase your practice's overall economic value. For my practices, my main focus is to increase the average invoice amount.

Invoices consist of exams, surgeries, product sales, and diagnostics. Exams and surgeries are based on the cases presented to us, which in today's competitive market can be hard to grow. Increasing product sales is also challenging, with online options growing every day. The primary opportunity to grow revenue and profit in our current market is diagnostic testing — in particular, preventive care diagnostics. After all, online services can't perform venipuncture.

Diagnostics and Downstream Revenue

Diagnostic revenue comprises 14% of total practice revenue, according to national averages. Raising this percentage to 25% can add over $100,000 of revenue to a million-dollar practice. This increase is only the tip of the iceberg because of what I call "downstream revenues." The more tests that are done, the more potential for additional sales and services. Every positive fecal test leads to a repeat test and product sales; every abnormality on a chemistry test leads to more testing, more rechecks, and more surgeries. When I add $100,000 of preventive care diagnostics, I see a $200,000-plus increase in overall revenue.

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Preventive care diagnostics are critical in how we can medically manage many different disease processes and save pets' lives. In addition, they are the No. 1 way we can improve the practice's profitability.

Determining Potential Revenue

When talking to the practice's owner(s) and medical leadership team, the first focus needs to be on the medical benefits of early disease detection with preventive care diagnostics. Unless there is a solid scientific basis, you shouldn't change your protocols. But the science and frequency of abnormalities are 100% in line with running diagnostics as part of a routine physical exam. Consider, for example, that at least 1 in 4 healthy dogs will need a followup after blood and fecal screenings.

After the medical benefit is established with the team, you can show them what the financial impact will be to the practice. The formula is very simple:

  • How many wellness visits did you have last year?
  • What is the price and margin of your preventive care diagnostic bundle?
  • Set a target goal of 30% to 50% compliance (percentage of pets that have the preventive care bundle performed at time of visit).
  • Do the math. (Don't forget to double the number for downstream revenues.)

When discussing with your management team the concept of downstream revenue — what happens with an abnormal result — focus on individual situations:

  1. What is the next step for a cat with an elevated SDMA?
  2. What do you do when a fecal test is positive for hookworms?
  3. What is the plan for a dog with a high ALT?

Add up the dollar amount for each scenario listed above to help convince your leadership team that preventive care diagnostics are great for the practice's health as well as the pets'. Downstream revenues associated with routine early detection screening will have significant economic value to your business.

Enhancing Value for the Client

An often overlooked advantage of running testing as part of the exam is that it enhances the value of the preventive care visit. Pets are family members, and one of the biggest drivers of improving their lives is early detection of disease. The earlier veterinarians can determine a problem, the better chance there is of curing the problem or slowing down its progression.

Clients have a lot of choices in veterinary providers, as well as whether they go to a veterinarian at all. It's reassuring to an owner to know that their pet is well, and staying well. A great physical exam along with an internal exam, through diagnostic testing, will help put clients' minds at ease, which can be a powerful motivator for a well visit.

Paving the Way for Compliance

There are many factors that contribute to client compliance, including doctor alignment, team and client education, and presentation of results. It is critical to have a plan — write out the game plan, step by step.

Pricing is a major factor, as routine wellness screen testing is a relatively price-sensitive service. You do not need to mark up these testing bundles by the same amount as your sick patient screening. In my experience, it is very common to overprice these bundles, leading to low compliance, resulting in less revenue from testing and less downstream revenue. (More importantly, it will lead to fewer chances to detect disease early and intervene.) Consider all factors when setting the price: client price sensitivity, your costs, the incidence of abnormalities, and the downstream revenues that result from them. The most successful practice with preventive care diagnostics mark up the test by 50% to 100%.

Change is never easy, but with the new revenue of preventive testing and the ensuing downstream revenues, you will see your profits soar while doing what is best for the pet. It is certainly working for my newest practice, which now has a 70% compliance rate for testing, resulting in a 20% growth in profit.

As you launch preventive care diagnostics as part of your annual examination, you'll start to notice the positive effect on your practice's economic value while simultaneously saving pets' lives.

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Peter Brown, DVM
President, Co-Founder of Cara Veterinary

Peter Brown DVM is President and co-founder of Cara Veterinary, a Northwest based family network of veterinary hospitals. He has spent the last 10 years speaking to veterinarians throughout the world on a variety of topics, ranging from preventive care to wellness plans to the customer journey. With his role at Cara Veterinary, Dr. Brown is able to help shape the future of the veterinary profession.

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