KPIs: Keep the “Key” in Key Performance Indicators
Well run veterinary practices leverage data to improve their medical and financial performance. However, the list of KPIs (key performance indicators) that veterinary practices can track is extensive and not all KPIs are equivalent in impact. Data can be a powerful tool if utilized well but can also become an overwhelming detriment if utilized poorly. The best approach to KPIs is to keep the list of metrics that you track short (at least initially), focus on high-impact metrics that maximize the reward-to-effort ratio, and only make one large adjustment at a time so that you can clearly track the response to an operational change. In this author’s opinion there are three KPIs that practice owners can track and improve most easily and translate into impactful improvements to their bottom line: Throughput, wellness compliance, and charge capture.
Throughput
Throughput is a measure of how much of something flows through a system. In the case of veterinary practices, throughput specifically refers to the average number of cases that the practice sees per day. This is the “volume” aspect of your revenue, and average transaction value (ATV) is the “quality” aspect. Those two numbers multiplied together are what creates the top line for your business, so shifting either one upward can have dramatic impact on your practice’s financial performance. Increasing ATV is feasible, but inherently more challenging. This makes throughput the easier “low hanging fruit” to target. Maximizing throughput requires two components: Demand and capacity. Your throughput is bottlenecked by whichever of these two components lags the other, as throughput can only be as wide as the narrowest point of your system.
Demand: This is an area that most veterinary hospitals are not struggling with in the current hot market for veterinary services, but it is possible for a hospital to have more capacity than demand. The most effective way to increase demand is through good marketing. Just like all KPIs are not created equal, neither is all marketing. Good marketing is tailored to your practice and your target audience in both its creative and strategic components in order to maximize the impact per dollar of marketing spend. This is an area where there is a benefit to having a business partner like AVP who has the resources and knowledge to effectively deploy your marketing budget.
Capacity: Having new clients calling to book appointments is great, but not helpful if you don’t have open appointment slots to offer them. The speed at which the medical team can work through cases is usually the throughput bottleneck at most veterinary practices. That said, we need to get an extremely important point clear:
***Overbooking is not the right way to increase throughput!***
This is where many practices and most veterinary corporate groups go wrong. To use a car analogy: If you want to go faster, redlining the engine isn’t a safe or sustainable choice. The answer is to shift up to a higher gear where you can move faster at a lower RPM. This means making sure that you have enough veterinarians to lead your medical team, fully leveraging them with skilled and trained support staff who can be delegated a significant amount of the work, and utilizing an overlapping schedule. In an overlapping schedule, the patient visit is divided into three categories which can be run in parallel: Intake, visit/treatment, and discharge. Only the middle category requires the direct attention of the veterinarian, meaning that intake (receptionist to check in, tech/assistant to take the history and prep the visit) and discharge (discharge instructions and forward booking next visit with technician, check out with receptionist) can be accomplished while the veterinarian is in with their current case. This means that the actual visit length has not been compromised, preserving quality of care and ATV, but allows appointments to flow more efficiently with technician leverage preventing gaps in DVM utilization. Many corporate groups approach throughput with a hammer instead of a scalpel, asking the medical team to work harder to see more cases today without setting them up for success. At AVP we set our teams up to get more done by working smarter, not harder.
Wellness compliance
Wellness compliance is the most obvious intersection of good medicine and good business in veterinary medicine. Good medicine is rooted in preventative care, and most veterinarians do an excellent job of understanding and communicating the benefits of preventative care to clients, but pets on average receive 5x less preventative care than AAHA recommendations so there is a clear gap between what is recommended by veterinarians and what clients are complying with in practice. Not only is routine preventative care important itself, but also every time a patient is in to receive a routine physical exam for preventative care represents an opportunity to identify and intervene early in a medical issue. Preventative screenings result in proactive treatment of medical issue(s) in 14% of adults, 20% of seniors, and 40% of geriatrics. Providing more care, both preventative and interventional, is the right choice for your patients to live longer and healthier lives and provides significant tangible benefit for your practice’s financial performance.
Maximizing wellness compliance can be challenging, but there are some “low hanging fruit” to be targeted. Forward booking a patient’s next wellness visit during discharge from their current visit significantly increases compliance for follow up. Implementing multiple channels through which your client is notified of upcoming and overdue wellness services is crucial, and there are a number of third-party services (apps are great, especially for younger clients!) that veterinarians can choose from to automate reminders and other communications with clients and improve client engagement with their pet’s medical care.
Charge capture
This is a topic so intriguing that we gave it a blog post all to itself! The big takeaway is that uncharged services carry directly to the bottom line and therefore have significant impact. For emphasis: At a practice with 10% profit margin, $1 of additional captured charge has the same bottom-line impact as driving $10 of new revenue. A healthy profit margin can dry up quickly if your team isn’t getting all the work that they do onto the final invoice.
How to benchmark
Data isn't useful without context. KPIs are only useful if you have appropriate benchmarks to compare them against. You’ll want to use both internal and external benchmarking.
Internal: Your own starting KPIs are the benchmark that you should use to track trends and determine whether operational changes are translating into financial results. Just as a healthy baseline CBC/Chemistry provides useful diagnostic context later at an illness visit, figuring out what your baseline practice performance is before making any changes is important in determining whether your efforts are having an impact.
External: This is how you establish your aspirational goals for KPIs. There are several compilations of veterinary industry benchmarks available for practice owners to purchase or obtain through membership in professional groups. Keep in mind that industry averages may not match your practice, and there isn’t a “one size fits all” right way to arrive at a profitable veterinary practice. For example, a practice more focused on individual care may have inherently lower throughput but could have healthy profitability if paired with an appropriately high ATV to offset lower than average throughput. You’ll also need to keep local market factors in mind, as an ATV appropriate for an area with high cost of living/operating will price you out of a rural market. However, when used properly and with the right application of context, industry benchmarks can give you a keen sense of what a well-run practice looks like so that you can identify specific areas for improvement.
Running a small business is challenging and time-consuming. Balancing the work of being a practicing clinician with all the duties of business ownership usually isn’t a recipe for a healthy work-life balance. At AVP we strive to help our partners run their businesses more effectively, focus more of their time and energy on their clinical work, and recapture more time and energy to spend outside of work while still maintaining the financial upside of direct ownership in their practice. Please reach out to me at bill@associatedveterinary.com if you’d like to find out more about who we are and how teaming up with the right partner might be good for you and your business.