Diagnostic testing is critical to the proper care of pets. In recent years, many veterinary practices have contracted with large testing companies for lab work, while others continue to experiment with in-house testing options. To understand how practices are handling diagnostic testing, a recent VHMA Insider’s Insight Management Survey polled veterinary managers to find out if their practices have executed exclusive contracts with outside laboratories. The 207 respondents represent managers, hospital administrators and owners.
The majority of respondents---64 percent-- have exclusive contracts with an outside laboratories. Typically—as reported by 40 percent of these practices—the contract is effective for a period of 4-5 years. One-year contracts are relatively rare.
For insights into why practices opt for exclusive contracts, the survey included a question about benefits. Respondents selected from a list, choosing all applicable benefits. Among the most common benefits selected are: better pricing on lab services (64 percent), receiving equipment (43 percent), discounts off invoices (31 percent) and rebates (30 percent).
Of those receiving discounts on lab services, discounts are concentrated in the 6-11 percent range (16 percent), 12-17 percent range (13 percent), and 18-22 percent range (15 percent). A fortunate 12 percent reported discounts of 40-45 percent.
Surprisingly, 10 percent said that they received no benefits from the exclusive contract.
An open-ended question provided an opportunity for respondents to elaborate on the benefits and drawbacks of the exclusive contract. Among the benefits mentioned are: lab discounts available to staff and veterinarians, discounted equipment purchases, lab supplies and employee lab work, limited annual price increases, great customer service and access to the best available prices.
One respondent explained that an exclusive contract gives a practice leverage because as the contract expires, the laboratory “does not want us switching so we get incentives.”
Those citing drawbacks complained that contract periods are too long and the contract language too confusing. A number of respondents were dissatisfied with the price of lab services, noting that pricing is not competitive and that companies fail to honor original pricing agreement.
Several managers described customer service as subpar because representatives were not providing the expected level of support and attention. One respondent noted that, “It’s worth it until service doesn’t live up to what you expected and then you have very little leverage to improve things.”
A contract is a contract and the legal doctrine caveat emptor holds true—let the buyer beware. An exclusive contract may offer a practice advantages, but before signing on, be clear about the terms and conditions.