News & Events
CVMA Practice Diagnostic Report: Evidence Based Management
March 27, 2018
Technology and communication advances made cutting-edge laboratory testing ubiquitous in North American veterinary hospitals. The availability and affordability of both in-house laboratory equipment and referral labs helped to level the playing field between smaller single doctor practices and large multidoctor referral hospitals. The result is a healthier pet population through better evidence-based medicine.
The CVMA Practice Diagnostic Report extends this opportunity to financial matters. Increased availability of financial benchmarks provided in the Practice Diagnostic Report helps improve individual practices’ and the veterinary profession’s economic health. CVMA members who complete the Practice Owners Economic Survey have access to complimentary benchmarking on revenue, expenses, hours worked, fees, and staff. The report calculates their financial metrics and compares them to the average and top-performing hospitals in their provinces. New in 2016, the Practice Diagnostic Report compared year-to-year trends for individual hospitals that have submitted 2 consecutive years of data.
Successful managers know that evidence-based management is essential to the financial success of practice; measure, manage, and measure again to track improvement. The CVMA Practice Diagnostic Report is the quintessential tool to help veterinarians measure and manage their practice.
In isolation, annual or monthly revenue has limited applicability. Comparing one month to the same month of the previous year shows growth, but without benchmarks, veterinarians don’t know how revenue growth compares to their colleagues. For example, you could have 5% growth in revenues, which you think is great, until you find out the average practice in the province grew by 10% over the same time. Similarly, your annual revenues could have topped one million dollars last year but when you find out the average hospital earned $1.5 million with the same number of veterinarians, you realize there is room for improvement.
Revenue mix is another important practice benchmark to measure their effort’s effectiveness to promote a specific area. For example, if a hospital prides itself on nutrition, they could expect diet sales contributing a higher than average revenue share. If, according to their Practice Diagnostic Report, their diet sales contribute less than the benchmark, they have work to do.
The Practice Diagnostic Report provides benchmarks on clients per veterinarian, revenue per client, client visits per year and, for practices that provide consistent client data for 2 consecutive years, client retention. Client benchmarks can be used to develop and track production targets. For example, practices that have fewer clients per veterinarian need higher revenue per client to hit revenue targets, and can expect to see higher visits per client to account for higher than average diet sales.
There is no “right way” to staff a veterinary hospital. Some see success with a slower pace and less staff per veterinarian, while others thrive with higher staff per doctor. The Practice Diagnostic Report can show if your staff strategy is working by examining the staff numbers per doctor as well staff wages as a gross revenue percentage. If staff wages as a gross revenue percentage are higher than average, the staff strategy may not be working and the practice owner can look to the staff per doctor benchmarks to fine tune or develop an entirely new staff strategy.
Expenses as a percent of gross revenue
The Practice Diagnostic Report’s cornerstone is the expense analysis. Expenses as a gross percentage are compared to the average and previous year, highlighting areas where there may be potential cost savings by reining in expenses. Many practice owners reported they cancelled yellow pages, reduced office supply costs, and started managing inventory better once they saw their expenses were higher than average.
One of the most important revenue determinants is veterinary fees. The Practice Diagnostic Report shows veterinarians how their fees compare to the average and their province’s fee guide. A year over year comparison is also provided with an analysis showing how incomes could improve with fee increases.
Practice Value Estimate
Based on information from the Practice Owners Economic Survey and financial statements, the Practice Value Estimate provides a practice value estimate based on cash flow. Presented as a gross revenue percentage, the Practice Value Estimate incorporates revenue, expenses and veterinary production. Some veterinarians see the figure as an annual financial grade. If the Practice Value Estimate has gone up then the practice is in better shape than the previous year.
The Practice Owners Economic Survey is designed for the “average” veterinarian. If you have questions about the survey or need help getting your practice management software information, contact Darren Osborne or Terra Shastri at the Ontario Veterinary Medical Association (OVMA) to get help from experts: call 800-670-1702 or fax 877-482-5941 or e-mail (dosborne@ovma. org) (email@example.com).
The CVMA Practice Owners Economic Survey, the Individual Practice Diagnostic Report and the Practice Value Estimate are free for CVMA members. (by Darren Osborne, MA)
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