Examining struggling practices: How the recession has affected these real-life practices
It's scary to think that your hospital could succumb to the recession, but for these two real-life practitioners, that nightmare could become a reality. Few veterinary practices have been completely immune from the recession, and specialty practices have been hit especially hard. Clients are taking their pets to general practices less often, leaving fewer opportunities for referrals, and they're opting for fewer specialty services.
Tom McFerson, CPA, ABV, a partner with Gatto McFerson in Santa Monica, Calif., presents the cases of Dr. Susan Burns*, whose emergency clinic has seen revenue plummet; and Dr. David Larson, whose small animal practice is in danger of going under. Both have been rocked financially, and must now refocus their efforts—or risk losing their practices.
*Names have been changed.Case study no. 1
Emergency clinic faces more competition
Dr. Susan Burns owns an emergency clinic in a highly populated area. The practice has been in business for more than a decade, used to face virtually no competition, and built an excellent relationship with its neighboring small animal practices and referral base.
ABOUT THE PRACTICE
> The clinic works hard to provide top customer service and communicate well with referring doctors.
> Prices are on the high side.
> The facility is newly remodeled, with state-of-the-art medical and computer equipment.
> The practice had been enjoying annual revenue growth of at least 10 percent over the last five years.
> Dr. Burns noticed a precipitous drop in revenue at the beginning of the year.
WHAT CAUSED THE DROP?
> Three of Dr. Burns' top 10 referring practices began offering extended hours during the week. In the past, a pet owner might call one of these practices at 7 p.m. and get a message that referred him or her to the emergency clinic. Now these practices are still open, and team members encourage the pet owner to come in.
> Four other smaller referring practices in the area began taking emergencies during the evening. These doctors are now taking calls even in the wee hours, and they decide whether they want to take the case or refer it elsewhere.
> Pet owners have been opting not to proceed with high-risk procedures because of the costs involved. Before the recession, most clients would spend whatever it took to save their pet. Now they're making tough financial choices.
WHAT DOES IT MEAN?
> Since January, the practice's gross revenue has declined almost 15 percent.
> Friction has developed between the emergency clinic and many of the referring veterinarians. Dr. Burns likens it to a shrinking water hole in the desert: More and more animals are trying to drink from a smaller pond.
> For the first time in the practice's history, Dr. Burns was forced to lay off several employees, including an associate. Her own personal income is down 45 percent since January.
> Staff morale has taken a beating. Not only is job security an issue, but a sense of dread hangs in the air. Also, far too often, clients bring in their pet days too late or choose not to proceed with a procedure that could save the pet's life. This means more euthanasia, which, for a staff of true pet lovers, is taking an emotional toll.
Dr. Burns is hopeful that her business will slowly regain its footing. June was the closest the practice had come to matching 2008 numbers since the year began. Her staff is now lean and focused on improving customer service and patching up relations with her referral base.