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Insiders' Insight KPI - January 2023

By VHMA Admin posted 01-12-2023 21:26

  

Revenue growth continued to decline in December 2022 with VHMA practice growth at 1.6% and non-VHMA practice growth at a negative 0.1% for an overall average of 0.2% from December 2021 to December 2022. Revenue growth in December was much less than in most months of 2022. Growth for 2022 as a whole was 5.4% for VHMA practices and 4.3% for non-VHMA practices. The number of workdays in December 2022 and December 2021 was the same.

Revenue per unique patient in VHMA practices increased by 7.6% in December 2022 compared to the same month in 2021, however, patient visit numbers actually declined by 6.2%, thus driving reducing total revenue growth to just the 1.6% noted above. The increase in revenue per unique patient is most likely due primarily to fee increases with some degree of greater acceptance of medical recommendations by pet owners. New client numbers continue to decline. One thing to remember is that most of the data captured here are from “traditional” veterinary hospital models; it does not include data from alternate care models such as mobile vaccine clinics, pop-up clinics seen in pet stores or other retail locations, and the newer de novo practice types. We don’t know if the decline seen here is across all practice types or if there is some movement of pet owners from more traditional to alternate care providers of veterinary services.

Growth for 2022 was respectable although not as high as some practices have become accustomed to. However, as we have noted several times previously, growth may not be as easy to obtain as we move forward in a very uncertain economy and a difficult hiring market. 

Last month we talked about strategic planning as a tool to make sure 2023 gets off to a good start. Quality data is critical to quality planning. We know that veterinarians and their team members take great pains to make sure that the numbers they get from diagnostic testing are accurate; if they aren’t, then any subsequent decisions made about the pet’s care likely won’t be right either. But what about the numbers used to manage the practice? The concept is the same—garbage in, garbage out—if the management numbers aren’t right, the management decisions won’t be right either.

The numbers needed to manage a hospital well typically come primarily from the accounting system and the practice management information system (PIMS) software. The word “system” can mean a couple of things—either the tasks, activities, tools, and resources used to accomplish something; for example, the preparation of an income statement or the software itself.

There are a number of things practices need to do to reduce the garbage in the information they receive:

  • Set up the systems in a clearly defined, logical way
  • Select good quality, easy-to-use software to aid in the collection and manipulation of data
  • Hire employees with the appropriate skills and knowledge to perform the tasks necessary to achieve the above goals
  • Put controls into place to identify and prevent errors and misappropriation of assets

While practicing medicine isn’t simple, veterinary practices as businesses are fairly simple; therefore, the systems needed to collect and analyze information don’t have to be overly complicated either. Flowcharting a system can be very helpful in making sure all tasks and controls are included. The accounting system generally has several subsystems—those related to collecting payments, paying bills, and payroll. 

At each step, there will specific tasks that must be included and various controls that will help in insuring the accuracy of the information and preventing the misappropriation of assets. The various tasks should be documented in a procedure manual so that employees have a resource to consult when needed.

Using a veterinary-specific chart of accounts is essential to categorizing revenue and expenses in a meaningful way for later analysis and comparison to published benchmarks.

Most practices already use some kind of accounting software because of the increased accuracy, efficiency, and productivity it offers. There are a number of good quality software programs for small businesses with QuickBooks likely the most popular in veterinary practices.

If you don’t have a computerized accounting system or are considering changing or upgrading, these are some of the issues to consider:

  • Cost—how much, one-time fee vs. recurring billing
  • Who will use the software?
  • What do you need it to do? Some of the common tasks were listed above but also consider your specific desires—what works well for you with what you are doing now?  What are the pain points?  What information do you want that you can’t get?
  • Platform—Windows vs. Mac, desktop vs. cloud
  • Online banking and credit card download availability
  • Invoicing, accounts receivable and inventory—the vast majority of practices have a veterinary practice management system through which these functions are done; however, if the practice doesn’t, these activities are often available through an accounting package
  • Ease of usage of common functions such as data entry, bill paying, and accounts payable
  • Availability and flexibility of the reporting function
  • Availability of payroll processing and time-tracking (if needed)
  • Multi-user capabilities
  • Security/audit trail functions
  • Budgeting capabilities

A well-thought-out setup of the PIMS is also critical in order to get useful information for management purposes regarding new clients, active clients, transactions, doctor revenue, and transactions and revenue by category.

Good quality software won’t help the practice unless it is set up and operated by good-quality employees. Selecting the right team is number one on everyone’s wish list. Creating an efficient, productive, and polished team starts with the interview process; 80% of employee turnover is attributed to poor hiring. Key techniques leading to effective hiring include understanding the unique employee qualities needed by the practice, behavioral interviewing, and how to make the final selection.

In order to hire the right people, the practice hiring process must be systematic and disciplined.  Key steps include:

  • Define the skills and traits valued by the practice and needed for the job
  • Determine what the pay scale needs to be to get the right people
  • Conduct structured, in-depth interviews (telephone screens, in-person, working)
  • Verify outside information (references, previous employers, degrees, licenses/certifications)
  • Make a careful hiring decision based on the skills and traits needed for the job

Systems also need internal controls at various points to make sure the software and the team are functioning as desired. One of the most critical controls is a segregation of duties so that one person does not perform all of the financial tasks and that employees who do have financial responsibilities are rotated so they don’t do the same tasks every time. There are many other controls that should be a part of a typical veterinary accounting system; we’ll talk about this next month.

 Download Insiders' Insights - KPI, January 2023 Report

 VHMA Members can access the dashboard to drill down by region, species, and practice size filters, access the interactive KPI dashboard

Data review and commentary is provided by Karen E. Felsted, CPA, MS, DVM, CVPM, CVA of PantheraT Veterinary Management Consulting, www.PantheraT.com.




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