Is your examination fee costing you clients?

Practicing veterinary medicine in 2012 was like walking into a headwind. Sure, you were making progress but it seemed harder than ever before. The newfound client resistance to go to their veterinarian has a lot of veterinarians second guessing many of their management decisions. One common question is, “is my examination fee too high?” It is a good question considering the examination is one of the most common fees in the hospital.

Veterinarians and staff encounter the examination fee several times a day. However, just because you are intimately aware of the fee, it does not mean that your clients are as well. It might be burned into your brain, but most clients will not notice it and if they do, they will forget it soon enough. For example, you may remember what you wore yesterday and what you wore the day before, but what did you wear ten days ago? This is a simple enough question right? It is the same with clients and the examination fee.

If the examination fee was a determining factor for clients deciding who to go to, the number of clients should go up as the examination fee is decreased. A classic demand curve for examination fees would show the number of active clients per veterinarian going down as the examination fee increased, but data from the CVMA 2012 Practice Owners Economic Survey (1) show that we do not have this downward sloping demand curve. Instead, we have a flat demand curve suggesting clients are not using the examination fee in choosing a veterinarian.

There is no relationship between the examination fee and active clients per full-time equivalent veterinarian (Figure 1). An active client is defined as a client who has been to the practice in the past year for medical or non-medical services and full-time equivalent refers to 1750 hours per year. In Canada, active clients per full-time equivalent veterinarian ranged from just under 200 to 2000. Within that range there was a fairly narrow band of examination fees ranging from $45 to just over $80. Examination fees were normalized for the cost-of-living in each province. The predominant range of values (62%) falls between $63 and $76. Most practices fall within that $13 range. How significant is that $13?

Figure 1.

Active clients versus examination fee.

The average companion animal veterinarian in Canada had 909 clients per FTE in 2012. This translates into 1019 pets which receive one examination each, which is 1019 annual examinations. If we assume that 1 in 8 clients takes their pet in for illness, we can add in additional sick animal examinations, thus raising the number of examinations/DVM/year to 1133.

If the average veterinarian is performing 1133 examinations per year, that $13 range for examinations turns into $14 729 in found or lost revenue depending on the side on which you are standing. Let’s assume your examination fee matches the national average ($66 after adjusting for the cost-of-living) and you want to drop your fee by 10% ($6.60) to get more clients in the door. The revenue shortfall ($7949) equates to 134 examinations, which means you would need 134 more examinations or (15% more) to get back the revenue lost from lowering the examination fee by 10%. Even if you could get 15% more clients and got all the revenue back you would still be worse off because you are netting less per client with the lower examination fee. To get back the lost net income, you would have to increase examinations by 42%.

If you decided to increase your examination fee by 10% to $72.60, you could survive on 23% fewer examinations and still break even on your net income from examination fees.

Another issue to consider before lowering examination fees is how far the examination fee goes in carrying the costs of the hospital. Quite simply, if you only did examinations day in and day out you would go broke. Even at $72.60 per examination (10% above the national average), the average veterinarian performing 3 examinations per hour would only earn $217 per hour — well below the national average. The examination fee alone cannot carry the costs of running a veterinary hospital. In order to cover all costs, examination fees would have to increase by more than 30%.

The fee guide in each province takes this weak revenue contribution from examination fees into account. The examination fee remains discounted and other fees that are valued more by clients and veterinarians are increased to offset the loss. “The examination fee sets the tone for the whole fee guide,” is a commonly used phrase.

Over the past several years, economic pressures have created an environment in which the examination fee along with the vaccine fee has only increased by the rate of inflation. In each province, committees have been holding back on the examination fee to take into account the sensitivities of the people who have to use it — veterinarians and staff. If you are considering discounting your examination fee then it is within your right but keep in mind you are double dipping on the discount. The fee is already discounted.

I have the privilege of visiting hundreds of hospitals across the country and I see the books of hospitals which charge high examination fees and the books of those which charge low examination fees. All things considered, the higher the examination fee, the more financially successful the hospital.