Wellness Programs Pay Off for Your Practice. Karen E. Felsted, CPA, MS, DVM, CVPM Felsted Veterinary Consultants, Inc.

Transcription

1 Wellness Programs Pay Off for Your Practice Karen E. Felsted, CPA, MS, DVM, CVPM Felsted Veterinary Consultants, Inc. 1

2 Today s Webinar Sponsor

3 Why Visits Are Declining Environmental Factors Recession Fragmentation of veterinary services Internet information Client Factors Don t understand need Sticker shock Feline resistance 2011 Bayer Veterinary Care Usage Study 3

4 Cost of Care Has Increased Fee increases More sophisticated care available Referral hospitals Emergency hospitals Pets are living longer More routine care More likely to develop serious and/or chronic diseases 4

5 Price is an Issue Vets 2011 Bayer Veterinary Care Usage Study 5

6 Would Take Pet to Vet More Often Bayer Veterinary Care Usage Study 6

7 Components of Price Absolute $ charged Value Ability to pay 7

8 Client Requests for Alternative Payment Methods 69% Net Increase 2011 Bayer Veterinary Care Usage Study 8

9 Its Not Just About the Money From % increase in canine flea infestation 12% increase in feline flea infestation 6% increase in canine tick infestation 100% increase in Lyme disease Prevalence of heartworm disease unchanged Banfield Pet Hospital State of Pet Health 2011 Report 9

10 Its Not Just About the Money From % increase in canine DM 16% increase in feline DM Obesity one of top 5 diagnoses of dogs, top 3 for cats Dentistry revenue largely unchanged over past ten years Banfield Pet Hospital State of Pet Health 2011 Report, AAHA Financial & Produc1vity Pulsepoints 10

11 The Last Couple of Years Unique patient visits % % Revenue % % Wide variation in how practices impacted AAHA State of the Industry 2011 Review 11

12 The Last Couple of Years Change in pet population Dogs 0.9% Cats -7.7% Spending on veterinary services per household $300 or less 61% $501 or more 20% APPA National Pet Owners Survey GfK AP-Petside.com Poll October,

13 The Last Couple of Years % of pets whose owners purchased at least 1 dose of HWP Dogs 36% Cats 12% % of pets whose owners purchased at least 1 dose of flea/tick products Dogs 31% Cats 21% AAHA State of the Industry 2011 Review 13

14 Albert Einstein We can t solve problems by using the same kind of thinking we used when we created them. 14

15 Services Most Likely to Increase Visits Competitive product prices Wellness program billed in monthly installments Full year health program spelled out Extended business hours Information about financing programs Online appointment scheduling Pet health records online Drop off appointments Days or times reserved for only cats or only dogs Play area for kids 3% 3% 8% 18% 29% 29% 28% 24% 27% 25% 26% 32% 51% 43% 46% 44% 42% 37% 41% 45% Dog Owners Cat Owners 0% 10% 20% 30% 40% 50% 60% Bayer Veterinary Care Usage Study

16 How Do These Plans Work Annual care plans paid for on a monthly basis Include specific services May include few to many exams Some practices significantly discount services included; others don t May include discounts for services not included in the plan Must increase traffic or spending to be profitable 16

17 Pet Owner Benefits Know what to do to take better care of pet Helps clients with budgeting Spreads some of the cost out over 12 months May get a discount 17

18 Practice Benefits Increases traffic Increases revenue Income spread out over year avoid some seasonality Satisfaction of providing more care More preventative care More diagnostics/early detection Lead to more dentals and other treatment Client loyalty increase trust Competitive advantage? 18

19 How Common are Monthly Payment Wellness Plans? Many practices have bundled service options but monthly payment option (outside of Banfield) not common Puppy/kitten plans 1% Adult 4% Senior 3% 2011 Bayer Veterinary Care Usage Study 19

20 Discounts Cost of service Key Financial Issues Potential revenue increases Doctor compensation What if the pet dies? What if the client stops paying? Relationship to pet insurance/third party payment plans 20

21 Four Kinds of Discounts Four kinds Employee benefits Charitable contributions to the community Random, unplanned discounts Marketing programs 21

22 Discounting Not Automatically a Bad Thing Effective marketing strategy in many businesses Must increase traffic and/or increase spending Discounts used to reward behavior Move appointments from rushed times to slower times Attract patients not seen in last year Increase visits from existing clients Expand use of particular service Encourage clients to spend more 22

23 Myths About Discounts Human doctors don t give discounts Professionals don t give discounts 23

24 Any New Program Will Have Costs Associated With It Preventive care plans Legal costs Marketing costs Staff training costs Program design costs Program management costs Payment processing costs 24

25 Costs Incurred In-clinic Primarily labor Through use of outside company Bill client Bill practice Bill both Combination 25

26 Wellness Plan Costs Costs will be paid by client either way Just like with all other clinic costs Why only use company that directly bills client? Least important part of offering wellness plans Only use labs that directly bill clients for lab work? Pick a company based on the services/ products they provide, not form of payment 26

27 Wellness Plan Usage: Banfield 46% of pets on plan 80-85% renewal rate Annual visits Cats: 1.42 (not on WP) 3.67 (on WP) Dogs: 1.43 (not on WP) 2.86 (on WP) 45% of WP participants on HWP vs. 20% of non WP participants JAVMA 9/15/11 27

28 Wellness Plan Usage: What Other Practices Are Saying 40-45% signups on plans ranging from $380-$620 with 15% discount 10% pay all upfront 7.5% of clients signed up with no marketing beyond a poster in the exam room More than 10% of clients signed up with 80% renewal rate WP clients visiting 2-3x more often 28

29 Characteristics of an Average 2 doctors Practice 1,200 active clients per doctor 1.5 pets per client 3,600 pets seen at least once annually in the practice 60% dogs/40% cats About $236 spent annually per pet (not including HWP and F/T products) 29

30 Sample Plans: Basic Basic Cat Basic Dog 2 comprehensive physical exams $85 $85 4 brief exams $132 $132 Core vaccines (assume 2/year) $40 $40 Fecal $22 $22 Hookworm/roundworm deworming $13 $13 FELV/FIV/HWT or Canine 4DX $75 $60 4 nail trims $56 $56 4 anal gland expressions $76 Total $423 $484 Average amount spent now $219 $248 Based on AAHA Veterinary Fee Reference 7 th edition 30

31 Sample Plans: Complete Complete Cat Complete Dog All services included in basic package $423 $484 CBC $42 $42 Chemistry profile with electrolytes $92 $92 Addi1onal fecal $22 $22 Addi1onal hookworm/roundworm deworming Tapeworm deworming $15 $13 $13 Urinalysis $50 $50 Total $657 $703 Average amount spent now $219 $248 Based on AAHA Veterinary Fee Reference 7 th edition 31

32 Monthly Amount Charged Client Basic Plans Basic Cat Basic Dog Total Complete Plan Amounts $423 $484 Monthly amount billed to client 0% discount medical services only+6.5% fee Monthly amount billed to client 10% discount medical services only+6.5% fee Monthly amount billed to client 20% discount medical services only+6.5% fee $37.54 $42.95 $33.79 $38.66 $30.03 $34.36 What is the amount clients will pay on a monthly basis? 32

33 Monthly Amount Charged Client Complete Plans Complete Cat Complete Dog Total Complete Plan Amounts $657 $703 Monthly amount billed to client 0% discount medical services only+6.5% fee Monthly amount billed to client 10% discount medical services only+6.5% fee Monthly amount billed to client 20% discount medical services only+6.5% fee $58.31 $62.39 $52.48 $56.15 $46.65 $49.91 What is the amount clients will pay on a monthly basis? 33

34 Additional Revenue if 10% of Clients Adopt the Basic Plan (Based on Previous Assumptions) Plan Revenue Plan with 0% discount $80,496 Plan with 10% discount $63,950 Plan with 20% discount $47,405 34

35 Additional Revenue if 20% of Clients Adopt the Basic Plan (Based on Previous Assumptions) Plan Revenue Plan with 0% discount $160,992 Plan with 10% discount $127,901 Plan with 20% discount $94,810 35

36 Additional Revenue if 10% of Clients Adopt the Complete Plan (Based on Previous Assumptions) Plan Revenue Plan with 0% discount $161,496 Plan with 10% discount $136,850 Plan with 20% discount $112,205 36

37 Additional Revenue if 20% of Clients Adopt the Complete Plan (Based on Previous Assumptions) Plan Revenue Plan with 0% discount $322,992 Plan with 10% discount $273,701 Plan with 20% discount $224,410 37

38 Estimated Profitability of New Revenue-Complete Plans 10% Adoption/ 20% Discount 20% Adoption/ 10% Discount Revenue $112,205 $273,701 Drugs, supplies, lab, etc. 22,441 54,740 Associate compensation 22,441 54,740 Credit card fees 2,805 6,843 Other internal costs 5,000 5,000 Additional profits $59,518 53% $152,378 56% 38

39 Adapting to Your Own Clinic What % of clients will sign up? What services do you think should be included? What are your fees? On average, how much do clients spend now on annual preventive care? What is the amount clients will pay on a monthly basis? 39

40 Additional Revenue Gain additional clients by offering plans Current clients spend more Higher usage of heartworm preventive To treat illnesses diagnosed because clients visit more Payments spread out 40

41 Additional Revenue Enrollment fee revenue Clients may not use all services If don t use 5% of services, 10% discount becomes 5% 41

42 Doctor Compensation Credit doctor with Enrollment fee/monthly payments Discounted value of services performed for client Non-discounted value of services performed for client Agreed upon amount for services 42

43 What if the Pet Dies? Doesn t happen very often Calculate remaining plan payments vs. retail value of services Practice loss direct costs vs. profit margin Depends on the circumstances and the $$ amount No different than if they had been allowed to charge at the practice 43

44 What if the Client Stops Paying? Doesn t happen very often Practice loss direct costs vs. profit margin Practices that include high $$ services such as dentistry may require a certain number of payments to be made before that service can be used 44

45 What are Practices with Wellness Plans Currently Doing? Monthly payments range from ~$20-$80 Most practices offer a discount for plan services Ranges up to 50% Need to balance the discount with impact it has on additional business Many practices offer a discount on nonplan services (5-20%) 45

46 What are Practices with Wellness Plans Currently Doing? Enrollment fees range from $25-$100 Some offer a discount on HWP (10-15%) Some clients pay up front; most don t (discount for doing so sometimes offered) Clients may not use all services; some estimate as much as 30% not used Multiple pet discounts 46

47 Pet Insurance/Third Party Payment Complementary Different clients will want different options Pet insurance will cover accident/illness 3 rd party payment available for accident/illness or those clients who don t want a wellness plan 47

48 Must Evaluate Program Regularly # of enrollments/re-enrollments New clients vs. current clients Dogs vs. cats In which programs How clients heard about program Which services used Amount of unused services 48

49 Must Evaluate Program Regularly Spending by plan users vs. non-plan users Spending outside of plan HWP, flea and tick products Other Client satisfaction surveys Success stories Medical Financial 49

50 Pick a Reputable Company VIN News Service 11/10/11 Loan broker accused of bilking veterinarians now sells wellness plans Reports of late and no payments 50

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52 Questions? Karen E. Felsted, CPA, MS, DVM, CVPM Felsted Veterinary Consultants Inc