With little warning, the COVID-19 pandemic pummeled the veterinary industry and transformed patient care, client relations and staffing. Will we ever return to the “old normal,” or is more upheaval still to come?
Over the past few months — it feels like decades — the world of veterinary practice has been totally disrupted from the medical and business perspectives. Before February, many practicing veterinarians were convinced that corporate consolidators, online merchants, millennials or some other outside influence would be the source of the profession’s greatest upheaval ever seen. And while those forces are still present, who would have anticipated that a 100-nanometer biological entity would have shaken the animal care universe so much? It’s going to be hard to beat COVID-19 for impact.
The tectonic shifts that the veterinary profession is going through include:
- Increasing acceptance and use of telemedicine (all aspects).
- Greater acceptance and use of online pharmacies and food-delivery models.
- Modification of the client experience and workflow to keep the pet owner at a distance but still engaged.
- Increased communication between leadership and teams, between teams and clients, and between doctors and clients.
- A forced but better understanding of cash flow and the need to be financially prepared for a crisis.
- The ability of clients to pay for veterinary care. Many practices aren’t seeing a problem with this, but just watch as unemployment stays high.
- Online education of veterinary and technician students.
- A change in the hiring dynamics. We’re moving away from a hiring market that strongly favors employees.
- Changes in the market for practice purchases and sales.
The COVID-19 crisis forced veterinarians to slay more sacred cows than an abattoir. To ensure that our bovine patients aren’t dying in vain, what is the profession learning, what habits should remain broken and which replacements should become entrenched in the daily routines of veterinary practices?
Let’s explore the nine tectonic shifts.
Listen to Podcast: Renewal and Recovery After COVID-19
Telemedicine isn’t a new concept. Before the pandemic, many practices were slow to integrate it into their routines because they were busy enough without it, they didn’t see the demand from clients, and they weren’t sure how to deal with some of the very real legal, ethical and operational issues related to providing care without seeing a patient in-person.
Nothing has done more for telemedicine’s future than COVID-19. The crisis essentially forced many practices to come to terms with their concerns about telemedicine and how it could be integrated into their practices in a way they would be comfortable with legally, operationally and from a quality of patient care perspective. Expedited by the need to keep people apart, telemedicine provides a means for veterinarians and the health care team to engage with clients using technology, assess a pet’s condition and, when appropriate, determine a treatment plan or encourage a face-to-face visit.
As significant a tool as virtual care can be, it also has proven to be controversial because veterinary practice regulations differ from state to state, and thus the applicability of telemedicine is different from state to state. During the crisis, we have seen some states loosen their rules for the use of telemedicine while others have stuck to their practice act as it was defined.
As we return to normal, telemedicine should become part of the routine in many practices, not as a replacement for in-person care, but to provide another option when it is useful and appropriate. However, the debates both before and during the crisis indicate a continued need for more and more clarity as to who, what, when, where, how and why we should use telemedicine.
2. Online Stores (Pharmacy and Food)
Before the viral apocalypse, many practices created an online pharmacy within their practice but didn’t use it much. They preferred their brick-and-mortar pharmacies because the pharmacies were easy to operate, they were more convenient for clients when medications needed to be dispensed for a sick pet, and they typically provided higher profit margins per unit than an online pharmacy brought. Because of social distancing and stay-at-home orders, practices have moved, if somewhat reluctantly, to greater usage of online stores for prescription and food delivery.
Post-pandemic, greater use of your online pharmacy should be the new normal. The challenge now is to generate sufficient profit from it so that the returns to your practice are the same or more than those generated by your brick-and-mortar pharmacy. Some of this can be done through competitive pricing, but a focus also is needed on increasing the volume to make up for the lower-margin items.
3. A New Client Experience
The curbside, drive-through-window, doc-in-the-box, veterinary-client-patient experience was developed and integrated so quickly that veterinarians used trial and error every day while trying to perfect a new way of “staying close while keeping distance.” In many cases, the client service team, technicians and assistants became more and more integrated with the client experience, and a true team-based model of health care delivery was created to protect the staff, client and patient.
A true team-based health care delivery model is something that should remain, although it’s going to have much more in-person interaction than what we see now. Activities and processes that practices do today should be integrated into the next version of this model.
- The client-service team gathers the patient history and other pet information by phone or online tools. Put together by the doctors and other team members, a defined set of questions for different kinds of cases can improve the accuracy and consistency of data collection.
- Curbside service forced a one-client, one-patient, one-technician, one-doctor relationship. Essentially, the exam room nurse system that has been bantered about for two decades and closely mimics the human nurse practitioner model became the short-term norm. Why change it? Think about maintaining this system, but instead of the client staying in the car, she is greeted at the front door by the case manager, who takes the client and patient through the experience from start to finish.
- What also became the norm during the pandemic is taking payment by phone or via a Wi-Fi-connected credit card processor. This is being handled by the technician in many cases. In the new post-pandemic model, payment in the car or over the phone can be morphed into payment in the exam room and handled by the case manager.
One client, one pet, one tech, one doctor means fewer fumbles, fewer miscommunications and more relationship building. Don’t change the curbside check-in. Rather, update it and move it inside.
4. Better Leadership and Better Communication
The only way to thrive in a crisis is with strong leadership and even stronger communication. We’ve seen a bell-shaped communication curve in practices that ranges from practically none to way too much. The most successful practices, or those that will retain their teams and profits, have a leadership model focused on transparent, focused and honest communications that occur at least daily and ideally more often. Whether they do morning huddles, rounds, meetings or afternoon timeouts, the practices that keep their teams together meet, talk things out and morph to the needs of the hour, day and week.
The novel coronavirus situation demonstrated the need for servant leadership. Servant leaders are listeners. Comments about veterinarians being too cavalier and putting their teams at risk of COVID-19 infection were mixed with comments about leaders routinely doing a “checkup from the neck up” to assess staff comfort with what the practices were doing. In the future, the servant leader approach will more clearly define practice success.
As clear as communication is to staff, it is also necessary to more clearly communicate the changes to clients. Compared to the model that was clearly defined by years of usage, today’s practices have had to upgrade their communication at all levels — telephone, website, social media, text and email.
When the dust clears, the enhanced leadership and communication skills being honed during this challenging period must be carried forward as the new normal. Staff and client expectations will demand communication be at a higher level than previously accepted. It will truly be communicate or close.
5. Cash Flow
Until we are solidly in a recovery phase, practices must focus on survival and then, as we emerge, on how not to be in such a bad financial position again when the next recession or black-swan event appears.
Cash is king. The focus has to be on preserving or increasing cash whether that means maintaining or increasing revenue or cutting expenses. Fortunately, veterinary practices considered essential businesses during the pandemic are much better positioned for survival than restaurants and many other small, local businesses.
Practices need to continue to do as much work as is possible within the context of:
- Federal and state legal requirements.
- Recommendations from the American Veterinary Medical Association and other groups.
- A reasonable definition of essential services. This should be based on what is needed to alleviate animal pain and suffering or keep a pet from deteriorating or dying as well as public health concerns, the preservation of personal protective equipment, and services needed by front-line responders.
- Protecting clients and employees.
- Ethics and common sense.
Besides providing typical services, practices need to focus on what new services can be provided to sustain or increase revenue. Consider, for example, telemedicine, pet pickups and drop-offs, and the delivery of medication and food.
Obviously, focusing on expenses and cash outflow is equally important. Keep monitoring your financial situation and talking to your lenders and landlord about debt deferment and rent deferment. Most practice owners understand that now is not the time to make large capital purchases or renovate and expand a hospital. Don’t be too quick to move forward with those even if you see a great deal — conserve your cash. If you’re thinking about layoffs and furloughs, first consider a hiring freeze, postponement of raises or a voluntary reduction in hours.
Regardless of the status of your reserve fund or line of credit, consider applying for one of the relief loan programs. Your preference should be that least some of the amount borrowed is forgivable, but having cash to fall back on to keep your business alive is important either way. Things are changing so quickly that it’s hard to know what programs will be available at the time of publication, so start with the U.S. Small Business Administration and keep up with what’s going on with state or other federal programs.
Remember as well to modify your profit expectations. Right now, staying open, keeping people working and breaking even is a win. Practices with a solid reserve fund, higher levels of profitability and cash flow, and little debt will survive the pandemic and the economic upheaval more easily.
As you start to rethink your business model, review the services you quit providing during the pandemic. If your revenue and net income grew during the pandemic without boarding and grooming (or at least didn’t decline too much), what does that tell you? Are these services you want to continue? Think about simplifying the options for clients and how changes could affect your staffing needs, your pharmacy inventory, your hours of operation and your required physical space.
To repeat: Focus on cash flow. Cash flow is not the same as net income. Net income does not include the principle portion of debt payments and other outflows of cash that aren’t posted as expenses on your P&L statements. Practices can simultaneously have very strong net income and negative cash flow. If you aren’t regularly getting and reviewing a statement of cash flows, start now. This is the single most critical document you can look at as we navigate the pandemic and recovery. Businesses die because they run out of cash, not for any other reason. The new normal for all practice leaders must be to understand your financial statements the same way you understand a pet’s laboratory report or radiographs.
Decision-making should not be a Magic 8-Ball answer of “Cannot predict now.” Decision-making should be based upon facts. If the COVID-19 crisis teaches us anything, it’s we need to have a better handle on the dashboard that tells us how our practice is doing and to know what the numbers mean, what influences the numbers, and what to do if the numbers are out of whack.
Thank you, Peter Drucker, more now than ever before. He said, “If you can’t measure it, you can’t manage it.”
6. Affordable Care
This issue, while not new, might blow up again if unemployment escalates. Not all practices saw a decline in revenue several weeks into the pandemic, but some of that was due to the luck of the draw — hospitals located in areas with fewer COVID-19 cases or whose clients were still employed and paying more attention to their pets, thus necessitating more veterinary care.
However, many practices did see declines in revenue. As we found in 2008, when the Great Recession shook things up, veterinary practices aren’t completely recession-proof. As we come out of the stay-at-home period, what will your client’s financial situation be? As unemployment soars and credit availability shrinks, how will pet owners afford veterinary care?
Be prepared to talk to your clients about medically appropriate alternatives to the gold standard of treatment. Keep your prices, particularly those that are easily price-shopped, competitive, and actively communicate the payment options you offer.
7. Student Education
As much as veterinary practices had to change, the veterinary education model, which was even more set in granite, had to rapidly and dramatically transform to deliver veterinary education at a distance. Almost overnight, lectures were Zoomed to hundreds of students who remained on campus or headed home. Fortunately, the digital natives in veterinary schools easily acclimated. Projecting lectures onto their living room walls or watching them on iPhones or laptops was not a challenge. Could this be a business model for veterinary schools of the future?
The greatest pain point was the lack of access to clinical-skills labs and other integrally important hands-on teaching and training. The didactic or even problem-based education is only a small portion of what transforms a veterinary student into a veterinarian.
The pain of the graduates who after so many long years of education, training and testing will not walk across a stage and be handed their diplomas in front of proud parents, family and friends is tragic. The fact that they are getting a veterinary degree at all is epic.
As the COVID-19 crisis pushed practices to move faster on telemedicine, it should push veterinary educators to move faster on changing how students learn. What can be done to teach a new generation of veterinary students using a language that they appreciate and understand? Can some online classes remain online? By doing all this, can they reduce the cost of education to a more sustainable level?
8. The Job Market
As we entered the 2020s, veterinary practices all over the nation were looking for associates, licensed technicians and other skilled and unskilled staff members at levels never seen before. More veterinary medicine and technician schools were either opening or increasing class sizes to accommodate the demand.
And then, an 8.0-magnitude earthquake shook the concrete foundation of practice models. Veterinarians and other team members were laid off or furloughed.
Retooled business models, either current or future, might require fewer staff members. Practices learned quickly to make their hospitals work efficiently as team members called in sick, went into isolation or took care of children at home. Significant changes in business models and the size and number of practices might deliver some equilibrium to the employee supply-and-demand curves.
9. Practice Sales
If we had a crystal ball, what would it say about the future of practice purchases by consolidators or individuals? Again, entering 2020, practice purchases were going strong. Both corporate consolidators and private individuals were eager to invest in veterinary hospitals. Multiples were high.
With the pandemic, some consolidators shut down acquisitions and paused deals, but many others moved forward, albeit cautiously. Individuals still closed on transactions during the pandemic, but the market was definitely riskier. Buyers of all kinds almost certainly will be more careful about the practices they are willing to buy — ones doing OK but not great might be harder to sell.
The multiples paid by consolidators likely will drop given that concerns were raised about a price bubble even before the pandemic. Could practice prices start to drop enough to make them again more available to private DVMs looking to become entrepreneurs?
Since many of the consolidators are part of venture capital groups whose portfolios took a huge hit, might we start to see a consolidation of consolidators? It’s happening in Europe and Australia. Less buyer competition would certainly put downward pressure on prices.
Is It Safe to Go Outside?
With a pandemic and severe economic trouble hitting the veterinary profession, never has such a disruption battered the status quo. People, finances, operations, safety, peace of mind, trust — everything is impacted. The uncertainty is a killer.
We will survive the crisis and return to “normal,” although probably a changed normal. How we handle the crisis will set the direction for the USS Veterinary Medicine as it sails into the unknown. They might be difficult to see at times, but many good changes have come about. As we move forward, we need to take the good and make it better.
This is not the time to climb back into your fur-lined rut. It’s time to take the lead and define a better future for your practice, your team, your clients, your patients, and most importantly, your profession and yourself.
Dr. Peter Weinstein owns PAW Consulting and is the executive director of the Southern California Veterinary Medical Association. He serves as chair of the American Veterinary Medical Association’s Veterinary Economics Strategy Committee. Dr. Karen E. Felsted is the founder of PantheraT Veterinary Management Consulting. She spent three years as CEO of the National Commission on Veterinary Economic Issues.