Profitability vs. over-servicing

‘You make a living by what you get. You make a life by what you give.’

Winston Churchill

It has been said that a veterinary makes a living by prescribing something that a client needs once a year, and that a millionaire is made by prescribing something their client needs every day. Falling into the former category, I find that there is a fine line between what is essential in veterinary medicine and what is superfluous. As a veterinarian, I probably fall into the category of under-servicing, which is probably no better or worse than over-servicing. My motive is to keep costs down both for my clinic and the client, but when this goes wrong, it is as bad as if I had in the first place simply over-medicated. It requires constant judgement to know what is the best treatment and the best-priced service, one not necessarily the same as the other. I’m good at being in business, but being good in business is another kind of art altogether.

Only recently has the economical importance of the human-animal relationship been acknowledged. Improving animal productivity by strengthening human-animal interactions and environment enrichment can be debated solely on economic merit alone, although the moral merits of it far outweigh mere pecuniary advantage. Direct contact between humans and domesticated animals as well as providing environmental stimulation has shown a direct benefit to reducing the levels of stress indexes in most animal species[i].

There are numerous factors which effects the economic viability of clinical veterinary practice. Graduating with scientific skills and knowledge may be the best preparation for success in veterinary applications but non-veterinary skills are equally important in modern financially-orientated practises. The College of Veterinary Medicine and Biomedical Sciences at Colorado State University has recently undertaken major initiatives to improve training of their students in veterinary practice management and business skills[ii]. While there is ample evidence that the scientific and clinical skills of their graduates remain very high, there is also evidence that additional business skills promoted greater economic success. Marketing has now become a significant component of clinical practise. The pressures of marketing emerged as a result primarily due to the changing role of animals in society, wellness and prevention replacing curative medicine, the expectation of client’s for deeper vet-client relationships, increased client demand for extended or ancillary services (laboratory, radiology, etc.), and diminishing client numbers due to increased numbers of practising veterinarians. To compensate, veterinarians are forced by economic pressures to increase fees, extend services, promote marketing ventures and explore niche markets.

Business analysts have studied many small animal practices and identified areas significantly short-falling in review in the order of hundreds of thousands of dollars each year. Profit areas include maximising returns on laboratory, senior care, dentistry, following-up on long-term medications, and behavioural care. Under-utilised product categories including pet food, flea control, and heartworm preventive[iii]. Highly profitable veterinary practices achieve twice the average level of profits based on targeting these profit areas. This of course makes it more likely to generate conflict between marketing and over-servicing, a dilemma endemic in human medicine[iv]^,[v].

The Australian National Audit Office estimates that medical fraud (over-servicing, unnecessary referrals and ‘kickbacks’ from drug companies) cost the Commonwealth between $52 million and $135 million per year[vi]. It estimated that inappropriate practice could be costing a further $60 million per year. In Australia, medical over-servicing has a direct influence on the quality of medical service. The increase supply of doctors has led to a significant over-servicing problem, resulting in some cases in poorer health outcomes[vii]. It is interesting to note in human medicine, a health service being driven by profit does not necessarily equate with quality health service[viii].

In 2000, the Medical Practice Amendment Act came into effect, giving the New South Wales Medical Board significant new powers in several areas including the performance assessment of medical practitioners, professional conduct involving ‘kick backs’ and over-servicing[ix]. The Act declares that ‘it is an offence for the employer of a registered medical practitioner to direct or incite the practitioner to engage in over-servicing or to engage in conduct that constitutes unsatisfactory professional conduct or professional misconduct. Engaging in over-servicing is to provide a service that is unnecessary, not reasonably required or excessive, or is otherwise prescribed (s116A).’ The ramifications to both medicine and veterinary practise are yet to be felt, but can be anticipated.

It is essential that the veterinary profession is maintained as a strong, vital and independent source of expertise in our community. However, professional liability threatens to endanger this. Legal liability for vets is leading to the development of overly cautious attitudes; services with a greater risk of liability are curtailed and defensive practices adopted[x]. Ultimately, this will result in a less than optimal level of services being provided to the community at greater cost to the detriment of consumers of services and the community generally. At a time when considerable pressure is on professionals to contain the cost of the services they provide, their exposure to unlimited liability may by necessity lead to defensive over-servicing and greater expense.

Over the course of the past decade, damages claims and litigation against professionals have increased dramatically. This is mainly due to the fact that professionals often possess the most obvious source of assets against which a plaintiff may recover, namely the professional indemnity (PI) insurance of the firm and its assets, together with the personal assets of the individual professionals. As a consequence, PI insurance premiums and deductibles have risen markedly, whilst at the same time commercial insurers have increasingly withdrawn from the PI market, particularly at the higher end where such cover is just not available at the levels required. Given the rising cost and declining availability of PI insurance, under the present system there is simply no guarantee that assets will exist to satisfy successful awards against professionals.

The human medical market place has a number of built-in obstacles to achieving efficiency and quality care. Among these problems are: 

Ø         a lack of consumer understanding and information about the medical product, partly due to technological advances and partly due to medical dominance whereby doctors control all the information

Ø         total professional control over treatment - patients are at the whim of doctors in terms of time for consultancy, type of treatment etc

Ø         uninsurable risks - like being chronically ill, old or handicapped

Ø         misallocated supply of services[xi]^,[xii].  

The consequences of this for patients are stressful as well as intervening in the curative process. In human medicine, the sheer size of the budgets now available for medical care has proved attractive to entrepreneurs within medicine to corporatise health care, to expand the private hospital sector, and increased financial support for industries supplying goods and services to the health care industry[xiii]. As we have seen, the increasing privatisation of health care has led to many consumer problems - high costs, poor quality, and over-servicing. Medicine for profit is thus problematic. Professionalisation in medicine has so far only raised the status and wealth of doctors in the private sector of health care.

Over-servicing has been a constant concern by regulatory bodies within the veterinary profession. Section 41(2) and section 46 of the Australian Veterinary Surgeons Act 1987 describes over prescribing or over-servicing for financial benefit as a breach of ethical or professional standards. The commercial pressures in veterinary medicine along with the emerging complexity of the business world will make practicing in tomorrow’s world very challenging. It will take more than just learning the technical side of our profession to make it work. It will take leadership and a high degree of professionalism from all practitioners. An example is the emergence of the Internet as a source of veterinary information now not only for vets but to clients as well. Future clients are likely to demand a strong hand in diagnosis and treatment planning. And with modern culture moving to a more instant gratification standard (e.g. Nike’s slogan, ‘Want it? Buy it!’), clients may not cope with traditional methods of treatment. Clients will be coming to us after having researched available therapies, probable diagnoses, and treatment models (product specifications) in hand. They will be used to getting their demands as a consumer met, and our conversion to commodity status has already begun[xiv]. Dissatisfied with one veterinarian, they are more likely to seek another. The result is that competent, ethical practice becomes ever more difficult. This has already begun to happen with law practices and human medicine and there is nothing inherently immunising about veterinary practice in this regard.

Being broke is temporary, being poor is eternal

‘Thinking is the hardest work there is. That is why so few people engage in it.’

                                                                    Henry Ford

Most of us have heard the saying, ‘birds of a feather flock together.’ The same is true for people, whether they are flocking together for wealth, as artists or musicians or tennis players. Like attracts like. Robert Kiyosaki, author of Rich Dad, Poor Dad, remarks that ‘if you want to become rich, you need to network with those who are rich or who can help you become rich.’ There are many ways to become rich; by marrying into money, by being a crook, by being greedy, by living cheap, by sheer hard work, by being smart, gifted or talented, by being lucky (e.g. Tattslotto), by inheritance, or by building your own business.

Can business schools teach us how to run a business? If we look at the entrepreneurs of the twentieth-century, most are dropouts from reputable MBA courses. This includes Bill Gates, Steve Jobs, Ted Turner, Henry Ford  What they all emphasise is that the ability to sell is the number one skill in business. And the ability to sell requires emotional intelligence. Warren Buffet, America’s richest investor says, ‘a person that cannot manage their emotions cannot manage money.’

In the direct mail business, if a company mails out one million pieces of mail and gets back a 2% response, that is often considered very successful. All the great people of history are great at selling. And the more rejections they receive, the better they are at selling.  What is important is what we are trying to sell; whether it is condominiums, disposable condoms, peace, sanity or war. The choice determines the fruits of this labour of love. Thinking that being intelligent is enough to make your business successful is in error. Leadership skills and communication skills are far more important assets. Fear and greed are what drive business and are what can make it either successful or not. Being too cautious for fear of failing is as bad as being too greedy for quantity of clients at the expense of quality of care.