In today’s landscape of veterinary practice sales, corporate acquisitions are far outnumbering private sales. One major reason for this is that the dollar amounts of corporate buyout offers greatly exceed those of any associate or other private interest buyers, often yielding a cash windfall to the seller. The associate veterinarians who remain at the practice, though, typically receive no supplementary compensation of any sort, and any previous hopes that an associate may have had of buying the practice are off the table. An argument can be made, then, that these associates accordingly deserve a new signing bonus. This session aims to decide upon an appropriate value for such an associate’s hypothetical signing bonus offer.
In the current arena of veterinary practice sales, it is impossible to ignore the intense interest in practice consolidation by corporate entities, but it should be noted that this trend is not brand new. Corporations have owned veterinary practices for over 30 years, tracing back to when VCA Animal Hospitals first bought a small animal practice in 1987. Other corporate entities eventually caught on, as VCA’s success led to the formation of several regional and national chains, such as Banfield, NVA, and VetCor. Analysts now place the number of corporate veterinary practice groups at over 40 and growing. In just the last three years, though, the landscape has drastically changed. Multi-billion-dollar deals are not unheard of, such as Mars, Inc. purchasing VCA for $7.7 billion in 2017, or the very recent purchase of Compassion First Pet Hospitals by JAB, Ltd. for $1.22 billion. As another factor to consider, private equity firms, which see veterinary practices as relatively safe investments, are now funding many of the acquisitions by corporate groups.
According to the 2017 AVMA Report on the Market for Veterinary Services, the number of small animal veterinary practices in the USA ranges from 28,000 to 32,000. Brakke Consulting estimated in 2017 that about 3,500 practices were owned by corporations. Companies own roughly 10 percent of all general companion animal practices and 40 to 50 percent of all referral practices. John Volk, an analyst with Brakke, explains, “What happens is a larger company comes in and buys up the smaller companies and builds a bigger firm.” This is called “roll-up,” a common business strategy applied to many industries made up of multiple, small, independently-owned companies, and has become the new model for veterinary practice sales.
Contrast that with the traditional model for practice sales, in which an owner sells to one of his or her associate veterinarians, likely groomed from day one to eventually take the reins, or where the owner might sell the practice to another veterinarian who was not employed by that practice. Either way, that is no longer the case for most small animal practices. Owners have now found themselves in a seller’s market, where large corporations will pay top dollar for a thriving practice, with corporate windfall offers typically vastly exceeding those of any associate or other private interest buyers. A windfall is defined as “a piece of unexpected good fortune, typically one that involves receiving a large amount of money,” with synonyms being a bonanza or jackpot, or pennies from heaven. Corporations, now routinely providing such payouts to sellers in nearly unbelievable but carefully calculated offers, are doing so for the following reason: a corporation is ready and able to take a hit on a practice’s purchase price as long as its long-term profitability and growth prospects appear satisfactory. Many veterinarians have made a fortune out of their practices this way, often making two to three times what they would have made by selling to an associate. It can be hard to refuse a corporate buyout when the seller has offered such terms. Plus, a corporation can buy almost immediately, typically with a cashier’s check for the full purchase price in pocket, versus associates for whom the seller will very likely have to finance some or all of the purchase themselves, and for a fraction of the corporate purchase price.
Now we return to the subject of associate veterinarians. Although circumstances differ in each sale, one cannot deny that a significant reason that corporations are offering large cash windfalls is often the presence of the associate veterinarians. Corporations want to buy thriving practices that are operational from day one of purchase, with veterinary and support staff in place. A veterinary practice does not exist without veterinarians, and buyers generally have no intention of replacing associates. Furthermore, associate veterinarians usually do not wish to leave when practice ownership changes hands.
Here’s another reason why associate veterinarians are typically off the playing field. The typical associate sometimes cannot afford to be a practice owner. This often stems from the mass amount of veterinary student debt that they have accumulated and may be paying off for many years. According to results from the AVMA’s 2015 annual survey of senior veterinary students, of those students who graduated from the 28 US colleges and schools of veterinary medicine, 89% had educational debt at the time of graduation, with average debt for veterinary students being $142,394. Approximately 68% of the 2015 graduates had debt between $50,000 and $221,000, with 5% having debt greater than $300,000.
These are staggering figures, but what may be even more disturbing is the discrepancy in associate veterinary wage increases versus their debt. The current debt load of veterinarians is rising by $4,900 per year while average salaries are only rising by $700 per year. In 2017, $76,130 was the average salary for a veterinarian, while the mean debt was $141,000. This rising debt-to-income level is unsustainable and is one of the major factors making this profession less attractive than in the past. In fact, a recent Merck veterinary wellbeing study showed that only 41% of veterinarians overall and only 24% of veterinarians younger than 34 years old would recommend pursuing a career in veterinary medicine, citing that student debt coupled with low income was the top concern contributing to emotional stress. Furthermore, between standard and extended loan repayment plans, veterinarians on the average spend 15 to 20 years paying off their student debt. Hence, it is increasingly difficult for an associate to qualify for lending from a bank in order to compete with a corporation on a purchase price, with very little chance for the associate to be able to match the cash windfall offered by a corporation.
In this current climate, it is easy to see why so many practices are sold to corporations. But, while the seller receives the cash windfall for the sale, the remaining associates typically receive no supplementary compensation of any sort—the same associates who often helped to build the practice and who are integral for its revenue, often contributing 30% or more to the overall practice gross. This begs the question, then: Is it not fair for the associate veterinarians to share the windfall?
As stated, the corporation is buying a thriving practice, one not possible to operate at a similar capacity in the absence of associates. So, as an industry, should we not be sharing some of the profit from sales with the associates whom are so integral to the sale itself? Upon practice sale closure, associates are terminated by the original employer and then typically rehired by the new owner. An argument can be made that the associate accordingly deserves a new signing bonus, as they are technically a new hire and should be incentivized towards employment.
In order to decide upon an appropriate value for an associate’s hypothetical signing bonus offer, one could develop a calculation based on actual numbers. The prototype calculation herein requires basic information regarding time and revenue, including the following factors: the number of years the associate has worked for the practice (a minimum of five years of employment), the number of years the seller has owned the practice, the associate’s average gross revenue over the last five years, and the practice’s current gross revenue. With this information, we establish the Employee Leverage Factor (ELF), a figure which, when applied to the purchase price, yields the appropriate signing bonus. The calculation is as follows:
If, for example, an employee has been working for ten years at a practice that has been under current ownership for 35 years, and over those last ten years the employee has been bringing in an average of $700k while the practice brings in $2.1M, the equation would follow as such:
If the practice sold for $4.5M:
In this example, the seller still nets $3,620,000.00, cash in hand, over 1.7 times the gross of the practice.
Thus, we have established a fair and reproducible calculation of an offer that reflects the associate’s contribution to the “windfall” price received by the seller. The calculation should only apply in the case of a major windfall, in our estimates at least 1.5 x gross revenue and all cash. The calculation could be adjusted as the seller sees fit but, as it stands, it is a fair representation of contribution. It is based on the associate’s average gross revenue over five years, and also only applies if the associate has worked at least five years. So, if they have worked 5.5 years, but did not gross nearly as much in the first two years, those initial lower numbers are factored in. For example, if that associate had an average gross of $400k:
If the associate had worked for ten years, as in the first example, it is justified that the signing bonus offer is greater because that associate likely helped significantly more in building the practice, contributed more to the practice’s gross revenue, and thus made the package more appealing to the corporate buyer.
But, should there be a factor that weighs the windfall itself? The previous examples are based on a flat payout in a high windfall. But, if the windfall is of a lesser amount, then the associate’s share should be weighted as less, accordingly. If we use a maximum sale price as 3x the practice gross, we can incorporate a factor that includes the actual sale price over max gross, thus weighing the windfall.
The seller still nets $3,000,375.00 after receiving a lesser windfall for the sale.
A large share of the windfall could be enough to make the associate take the money and run, leaving the practice high and dry. To offset those odds, the signing bonus could be offered instead as a retention bonus, with part of the sum paid up front to the associate and the remainder paid over the agreed length of employment. Or, keeping in mind the high amount of student debt that most associates have, the calculated bonus can in whole or partially be assigned towards debt payoff. Thus, sharing the windfall would secure loyalty and stability for the future of both the associate veterinarian and the practice itself, meriting strong consideration.
The signing bonus offer would come out of the purchase price, and hence may not appeal to the seller. But we must remember that the long-term associates who would benefit from this process are the same ones who helped to build the practice to its current capacity, potentially contributed a high percentage to the practice’s gross revenue, and made the package more appealing to the corporate buyer, thus contributing to the windfall itself.
Without such a bonus, the associate otherwise gets nothing out of the deal. In their eyes, their future with the corporation is uncertain. They may have a new or broader non-compete agreement. They may not have wanted to work for a corporation at all. Furthermore, when they inevitably find out the size of the seller’s windfall, they may feel cheated after putting so much time and effort into the practice and getting no reward. This negative outlook may be compounded tremendously if they had otherwise hoped to someday buy or buy into practice ownership, with this disappointment added on top of the debt and stress they are likely already under. We also cannot disregard the real and unfortunate rise in the suicide rate among veterinarians in the face of issues such as emotional stress, debt, and compassion fatigue. That is the world in which the associate veterinarian lives in. We must therefore ask ourselves, is it moral as an industry to not include our associates in the windfall from corporate sales?
While the corporate consolidation trend will inevitably slow down, it is currently encompassing the world of veterinary practice sales, far and wide. As industry leaders, we must bear in mind the circumstances of many of our peers as associate veterinarians and the effects that our decisions to sell to corporate entities may have on them. The concept and application of sharing the windfall via the associate veterinarian signing bonus would secure a high degree of financial and thus psychological stability in the associate. Furthermore, it would create security for the future of the practice itself through the loyalty it instills in the associate, ensuring that they feel appreciated as the assets that they truly are.
Pay Raise Requests: How to Make Them and How to Respond
Kellie G. Olah, SPHR, CVPM
Veterinary practices, like many other businesses, often award pay raises in connection with an annual employee review. It’s a logical time to do so since that’s when employers provide performance-related feedback to their employees.
As an employee, you may feel that you deserve a raise, even though it’s outside of the normal timeframe for your practice to award one—perhaps, for example, you’ve taken on extra duties during the pandemic. If so, how should you approach your supervisor? As a manager, how should you respond to such a request? This article takes a look at both sides of the equation.
Employees: Preparing to Ask
If you’ve decided to ask for a raise at a time when one typically isn’t awarded, then it’s important to be prepared. Make a list of accomplishments you’ve achieved, quantifying them whenever possible, and writing down how these accomplishments have benefited the practice. In other words, what is the business value of what you’ve done? If you’ve won any awards, received a letter of praise from a manager or customer, or otherwise gotten concrete evidence of your performance, gather that information together for when you ask for a raise.
It can help to have data on hand about the average wages of a person who is doing your job in your geographical area. Where does your paycheck fit in? If yours is less than the average amount, it may be easier to build your case for a raise than if yours already matches or exceeds that figure—but you can still share information about why you feel you’re worth the dollar figure you’re requesting if you feel your case is strong enough.
Ask to privately meet with the appropriate manager and practice how you’ll present your request. During the meeting, make it clear that you’re asking for a raise that goes beyond the one you’d typically receive during your annual performance review.
Be prepared for a range of responses from your manager and know how you would respond to each of them. If, as one example, your manager says that they would love to give you a raise, but it just isn’t financially feasible right now, ask what you would need to do to earn that raise and a date when this topic can be revisited.
Employers: How to Respond
As a manager, you may be taken aback when an employee asks for a raise during a time when your practice doesn’t typically give them. Perhaps you have the authority to make the decision or maybe you need to discuss it with a human resources manager. Whether you are surprised or not—and whether you have the authority to decide or not—the savvy response is typically the same. Ask for more information and avoid reacting immediately. Listen carefully and take down notes. Once you feel that you have enough information, it’s perfectly fine to ask to schedule a follow up conversion. In either case, thank the employee for bringing this information to your attention and remain pleasantly professional and neutral.
Then it’s time to evaluate the case that the employee has built for this request, as well as to talk to other people in the practice who would have input into this decision-making process. What is your practice’s policy, in general, on giving raises? If you don’t have a policy already created, how have such requests been handled in the past? Is your practice’s philosophy that you only give raises during a certain time of year or do you consider each request on its own merits?
Compare that person’s wages both internally and externally, and doublecheck data they’ve given you. This involves looking at where this employee falls on the practice’s payroll. Do they receive a wage that’s comparable with other people performing the same work and who have been at the practice for a similar amount of time?
It also involves verifying what this employee might receive at other practices in the same geographic area. Also consider how important it would be to retain this person at your practice.
In some instances, the answer may be clear. The person may not have demonstrated a good case to get a raise or their job position may not warrant a higher pay rate. Or it may be that the employee asking for the raise successfully took on a big special project but doesn’t necessarily perform at a higher rate, overall. In that case, a one-time bonus or extra time off could be a good compromise.
If, though, this employee has made a good case for a raise, it can make sense to pitch the idea to others in the practice who would need to approve the pay increase. In a sense, you’d be preparing for the ask in the same way that the employee did with you. During this conversation, you can also focus on the high costs of recruiting and training new employees, with a focus on not being penny wise but pound foolish.
Sometimes, the situation can get more complex. These can include the following:
An employee threatens to quit if not given a raise
You do give one employee an off cycle raise; other employees hear about it and they want one, too
A star employee gets an offer from another practice
In the first scenario, an employee might literally threaten to quit (“If I don’t get this raise, I’ll need to leave”) or it may be implied (“The new practice in town pays more and they’re hiring”). If this happens, the process—at least at first—can be the same. Listen carefully to your employee’s request and then set up a follow up conversation, which gives you time to think about how to respond. Consider the merits of the employee’s request, as before.
This time, though, you may also want to consider whether this employee uses the “I’ll quit” card in general, as leverage, or if this may be a genuine statement from the employee—meaning that, if they don’t get a raise, they’ll financially need to find a job elsewhere. Does that change your decision?
Will this situation trigger a revision of your policies about raises, perhaps limiting them to a certain time annually? No matter what you decide, assume that other employees will hear about it, regardless of any company policies that require salaries to remain confidential. How will you handle the situation when other employees ask to also get a raise? There is no one size fits all solution. The idea, here, is to look beyond the specific request being made by a specific employee. Instead, place this employee’s request into an overall context of the practice and make decisions that make sense for all employees.
In the third scenario—one where an employee gets another job offer—was that employee job hunting or did the offer come, unsolicited? If your employees are being recruited, it may confirm to you that you have a great team without necessarily indicating that those employees are unhappy. In other cases, employees may be putting out feelers to see what they’re worth in the job market—and, in other situations, those employees may be dissatisfied in their current position.
If an employee asks if you would match an offer from another practice, it can help to determine if they really want to stay. If they are unhappy with aspects of your practice, they may well leave the next time they get a job offer. If they do want to stay, how valuable are they to your practice? How difficult would they be to replace? If you do give that particular employee a raise, what impact would that have on other employees? Again, no one right answer exists.
Sidebar: How to Deny a Raise Request
Sometimes, you’ll need to turn down a raise request from an employee. If so, set up a private meeting and then tactfully yet honestly get to the point. If there is a performance issue, share some specifics about how this employee could work towards getting the desired raise. If it’s a financial issue, say that. This isn’t a time to get into exhaustive detail. It is, however, an opportunity to encourage the employee, if possible, and let them know what you appreciate about them.
Through this process, you may discover holes in your practice’s policies about giving raises. If so, now is the time to fix them so that more clarity exists for everyone, going forward. If this process uncovers disparities (such as pay differences based on gender), then this is crucial to prioritize and address. Update your employee manual and share specifics.
Read the article originally posted in Today’s Veterinary Business HERE.
Chewy and Covetrus Face Off in Veterinary Prescription Dispute
By: Isaac Brownstein
A 2017 study shows that 77% of people consider their cats and dogs to be members of the family—and so it isn’t surprising that, collectively, they’re willing to spend big dollars on their pets. According to the American Pet Products Association, Reuters reports, Americans spent $72.56 billion on their pets in 2018 alone with the Federal Trade Commission anticipating pet prescription drug sales to exceed $10 billion annually.
Savvy businesses—including Chewy, Covetrus, Vetcove, and more—have therefore identified lucrative revenue opportunities to take advantage of by selling veterinary products and services, including prescription drugs. Currently, veterinarians still sell most of the pet medications, but cat and dog owners are also exploring newer options to see which ones offer the most convenience and/or lower prices. After all, people are used to shopping around the clock from the convenience of home with just a few clicks and so it’s a natural progression to get pet prescriptions this way.
The result? A gradual chipping away of the predominance long held by veterinarians for direct prescription sales as well as, in 2021, the eruption of a legal clash between two publicly held companies—Chewy and Covetrus—that have entered the pet prescription space fairly recently. The lawsuits between these two companies are not especially surprising. What’s uncertain, though, is how all will unfold and what impact they’ll have—short term and long term—for the veterinary industry where practices have relied upon prescription sale revenues to help run their businesses.
Legal Nuts and Bolts and Parties in the Dispute
On May 19, 2021, Chewy, Inc. filed a lawsuit in the Supreme Court of the State of New York against Covetrus, Inc. and Vetcove—with the legal matter heating up further after Covetrus countersued in August 2021. Here are high level looks at each of these companies:
Chewy is a publicly traded company, founded in 2011, that sells pet supplies online and, in 2018, added Chewy Pharmacy to their business offerings.
Covetrus is also a publicly traded company, founded in 2018, and they provide global services for veterinarians. Services include the creation of online pharmacies that are branded for specific practices.
Vetcove is an independently-owned company founded in 2015. Vetcove is completely unaffiliated with Covetrus and Vet’s First Choice.
In their lawsuit, Chewy alleges that Covetrus and Vetcove collaborated to redirect online orders of pet prescriptions away from their company through improper collection of customer information and deceptive messaging.
Although, on the surface, this may seem to simply be a dispute among businesses that are competing for the same dollars, at the very heart of it is the veterinarian-client-patient (VCP) relationship and how it should be defined. How this lawsuit is ultimately resolved, then, can impact the very nature of the VCP relationship in the future.
According to the American Veterinary Medical Association (AVMA), the physical examination of pets is an essential aspect of their care. So is an ongoing relationship with the animals and their owners and careful record keeping of their health care, including prescriptions. Traditionally, pet owners paid for and received their pets’ prescriptions as part of an in-person visit. How pet prescription processes have been changing—and what’s acceptable for quality pet care—is a central part of the Chewy versus Covetrus lawsuit.
Pet Prescription Processes
In most states, veterinarians provide pet owners with the prescriptions they need for their animal companions or they approve the purchase of regulated medications and other products.
If pet owners decide not to get the prescriptions directly from their veterinarians’ offices, they can then choose a pharmacy to fulfill these approved products—and some of them select Chewy. If someone orders a regulated product from this online company and there isn’t an authorization on file, Chewy will contact the prescribing veterinarian to get confirmation before fulfilling the order.
According to Chewy’s lawsuit, when their customers participated in this process, they were redirected to buy the medications from Covetrus. This was accomplished, they allege, because Vetcove accessed their customers’ confidential data—and these customers were then sent confusing messaging that guided them to make prescription purchases through Covetrus.
It should be noted that more than 13,000 veterinary hospitals and nonprofit agencies use Vetcove’s purchasing platform in the United States.
Chewy states that, because of these actions, their company has suffered irreparable harm. As a remedy, they want:
an injunction that would prevent Covetrus and Vetcove from continuing this behavior
compensation for lost profits (dollar amount not stated)
compensation because of harm to their reputation
About three months after Chewy filed this lawsuit, Covetrus countersued.
In their legal filing, Covetrus states that, because Chewy does not require a written prescription from a veterinarian—instead being willing to contact them for authorization—this is harming the animal’s well-being by removing veterinarians from the health care process. They also claim that Chewy is intentionally suppressing competition, which has the potential to cause veterinarians “substantial financial harm.”
As a further action, Covetrus emailed their veterinarian customers, sharing their belief that Chewy’s business strategy is actually undermining the “indispensable vet-client-pet relationship.”
In response, Chewy says that Covetrus is misrepresenting its lawsuit and business model.
Covetrus is not making comments about Vetcove and any role that its software is playing in Chewy’s lawsuit. Covetrus does deny, however, having a close relationship with Vetcove. As for Vetcove, the company has not responded to Chewy’s lawsuit or Covetrus’s countersuit with the CEO making no public comments on either.
It’s impossible to predict how the court system will decide this case, but it’s almost certain to affect the veterinary industry. If, for example, the court system decides that Covetrus is correct and Chewy’s business model doesn’t fit within a reasonable VCP relationship, that will take the industry in one direction; if the decision tilts in another way, that will affect the veterinary world in another one, as well.
How Practice Managers Can Keep Up with Changing Employment Laws
By: Kellie Olah, SPHR, SHRM-CP
Although it has always been challenging for many small business owners to keep up with evolving employment-related legislation, COVID-19 has made this situation even more problematic. Legislation is being rapidly passed, containing new and sometimes confusing information. It can be hard for your practice to keep up but it’s worth the effort because when you don’t have access to the most current information or you lag in compliance, this can lead to numerous problems. The consequences can be as serious as litigation against your practice.
As a general approach, it can be helpful to gather a list of trustworthy resources that you can regularly check. This includes reviewing the most current information on topics ranging from healthcare and injury/worker’s compensation to paid time off, unemployment, retirement, and much more. Once armed with the foundational knowledge you need, you can then determine which tasks you can handle within your practice and which ones require help from an expert, such as an employment attorney.
Employment Law Resources
At a federal level, the U.S. Department of Labor (U.S. DOL) provides information on a comprehensive range of employment issues. As just one example, here is their resource page that helps employers and employees to address the impact of the coronavirus. The DOL also provides a newsletter, along with contact information for your state labor office so that you can stay up to date with state-level laws and pending legislation. Subscribe to receive email updates from both a federal and state level (for each state where you practice).
If you come across a legal term that is new to you, or one where you need clarification, the Cornell Legal Information Institute has provided a wiki-style legal dictionary and encyclopedia. You can also find human-resource-related legal advice at NOLO’s free employment law center. NOLO has been publishing legal guides since 1971 and has developed into a trusted website.
You can also glean helpful information from the Society for Human Resource Management (SHRM) website, including free tools and information. This organization has a mission to empower people and workplaces by advancing human resource practices and maximizing human potential. If you find the free content provided by SHRM to be valuable, you can also consider becoming a paid member.
Another in-depth resource is HR-Business and Legal Resources. There, you can find state-specific information on a variety of employment topics. There is a reasonable amount of free content with more available for members. To see if the premium content would be valuable for your practice, you can sign up for a 14-day free trial.
What we’ve provided isn’t a comprehensive list of available resources, but they are some of the most commonly used and trusted ones. If you find another credible source that provides the employment law information you need, share it with the rest of your practice.
Once you’ve identified resources for your practice to use and you have signed up for newsletters, email alerts, and so forth, what’s next? These steps can include:
deciding who at your practice should monitor all the information that’s coming in; if you have a discrete human resource department, that answer may be easier than if multiple employees are wearing the HR hat
concluding which sites and resources end up being the most valuable to your practice; it can make sense to start out by receiving and reviewing information from a larger number of organizations and then focusing more on those that provide the targeted information you need
determining which message format works best for you; for example, your practice might find watching videos of employment law updates is the best use of everyone’s time
attending relevant online trainings; these may come with a cost, but they’re likely to be much less expensive than traveling to a location where trainings are being held—and, because of the COVID-19, online resources are more practical and becoming more prevalent
Although online trainings may not allow for the in-depth personal networking that can take place over, say, a weekend-long event at a training center, they’re more affordable; can fit within busy schedules (especially if you have access to the videos after a live event); and can be ideal for practices where in-person trainings aren’t often available nearby.
As you learn new information and as employment law evolves, it’s important to review your policies and procedures; update what’s needed; and share the revised information with your practice team.
When to Talk to an Employment Law Attorney
The ideal situation would be to have an employment law attorney on retainer— one you trust, and who understands the legal issues that veterinary practices often face, as well as your practice’s unique workplace culture. If that’s not possible, then the next best option is to choose an attorney with expertise that dovetails with your practice needs and consult with him or her when issues of significance arise, or you need clarification on areas of employment law.
Examples of when it can make sense to consult with an employment attorney include, but are not limited to, when:
firing an employee; ideally, you always run employee firings past your attorney, but especially if you believe an employee might sue the practice, perhaps because of an employment contract or because he or she is in a protected class
an employee files a complaint or sues your practice
creating a contract or agreement
creating or updating your employee manual
bringing in or buying out a practice partner
Choosing the Right Employment Attorney
If you don’t have one yet for your practice or you’re looking to switch attorneys, be clear about what you want the attorney to do. If you want him or her to regularly update you on employment law changes, for example, then that’s different than if you want someone available when you want to address a specific issue at your practice.
Consider asking other practices and small businesses for recommendations. Ask what they like about the attorney and if they’ve had any problems with their choice. You can read online reviews of recommended attorneys, but remember to take them with a grain of salt because it’s hard to find an attorney of substance with no unhappy clients. You can also use lawyer directories such as those available through the American Bar Association, and other similar websites.
Once you have a short list of candidates, interview each one. Many attorneys, but not all, offer a free initial consultation so you can get to know one another. This can help you make the right choice. You’ll want an experienced attorney who is well versed in the laws of your state, someone you feel comfortable with and who communicates well without reverting to jargon that can be confusing. By the end of your initial conversation, you should be able to determine if that individual has a personality that you would enjoy consulting with, and has the knowledge base to successfully assist you with managing your veterinary practice.
As the presence of corporate consolidators in the veterinary field increases, it has become even more important to understand what to look for when negotiating an associate contract with a corporate practice. Generally speaking, corporations can have a significant edge in negotiations because they can cause you to believe that their contracts are non-negotiable. They may, for example, say the following: “This is our contract for everyone.” In reality, everything is negotiable, and it’s your value that allows you to negotiate your own contract.
While it’s true you may have less negotiating power with a corporation than with a private practice, you will have more legal protection under the employment laws with a corporation. Ideally, all contracts should be reviewed by an attorney or translator experienced in reviewing veterinary employment agreements, because contracts are intended to prevent miscommunications in the future. Below are some key points to consider when negotiating a contract with a corporate consolidator (“CC”).
Term and Termination: How long will it be until your contract expires? Does the term automatically renew at this time? Note that, if a contract has a one-year term, that does not guarantee you a one-year employment. The employer may in fact have the ability to terminate you sooner. CCs like to use the term “at will,” meaning they can fire you at any time for any reason. Other ways of termination would be “without cause” with both parties agreeing to give “X” number of days’ notice before termination. Many CCs, though, will not want to give you advance notice, especially if they are taking over a new practice.
Schedule: How many scheduled hours per week are you required to work? Beyond that, how many additional hours must be spent calling owners, overseeing patient care, and more? Are there any required emergency hours? What about holidays, weekends, and nights? CCs tend not to give exact number of hours to be worked. They tend to use language such as “minimum of 40 hours” as opposed to “from 35-45 hours.” Specificity is against the interests of the CC.
Duties: What, as an associate, are you required to do? Review this, because some CCs may require you to do additional work that you didn’t need to do for old management. Do you, for example, have to organize staff meetings? Participate in marketing? Handle emergencies during work hours? Being specific in the contract almost always benefits the employee. Note that private practices tend to be more willing to mentor you in these duties than CCs.
Compensation: Typically, compensation is paid by salary, commission (production), or a combination of both. How is your production calculated? Do you get production reports? Are there any deductions from your salary and, if so, what are they? Is there negative accrual during slow production months? CCs can change how they calculate their production pay. If you’re not aware of how you get paid, you may not realize why your production pay has changed.
Benefits: Most practices offer some sort of benefits package, and CCs typically offer larger and better packages than private practices. However, these benefits can be subject to change and are not guaranteed by the employer. CCs tend to comply with state and federal employment laws that govern how benefits are given, while private practices may not, due to lack of knowledge. These benefits are tax deductible and are not calculated as employee income. Therefore, there is a large savings to be gained with a larger benefits package. This usually includes but is not limited to health insurance, professional liability insurance, and retirement benefits. Note that, if a CC offers malpractice insurance, it often does not cover license defense.
Exclusivity: Employers will usually require you to perform services for their hospital alone. This would prohibit you from doing any shelter or relief work on the side. This may even prohibit any other type of job, even if not related to veterinary medicine. CCs are no exception here, and you must negotiate specific exceptions if you wish to work outside of the CC.
Performance Evaluation: Will you be provided written or oral evaluations? When? Does this correlate to compensation?
Signing/Relocation Bonus: In today’s market, veterinarians are valuable and most places will offer some kind of sign-on bonus. CCs can usually offer a significantly higher bonus and, depending on where you are coming from, often offer a significant relocation allowance as well. Most of these bonuses are tied to retention, meaning you must work there for a predetermined amount of time—perhaps one year—to keep the bonus. If not, the money must be repaid. Also, in your contract, it’s important to find out if the bonus can be kept if you are fired without cause. One perk of working for CCs is that, if you are moving, they can often help you to relocate to another one of their locations, which can make the process significantly easier.
Non-Competition: The agreement states that the employee will not directly compete with the employer after termination of employment. The provision must state a specific distance and time (e.g., two years, ten air miles). This area should cover where 85% of the practice’s clientele comes from (trade area). When does your non-compete kick in? When does the non-compete become enforceable? CCs often have a much stricter policy than private practices. For example, some do not allow you to work in proximity to any of their hospitals. This could easily double or triple the area you could be prohibited from working in and can change if new hospitals open up. Also, the scope of restricted activity may be broader with CCs. In addition to small animal medicine, they may include intellectual property, research, practice management, and so forth.
Non-Solicitation: This agreement states that the employee will not try to poach other employees away from the business to work elsewhere. This would apply even if you are outside your non-compete area. It is important to also know that some CCs will not allow you to solicit employees from any location of theirs, even if you don’t personally know them.
Assignment: There is currently a very active market for the sale of veterinary practices. Many employers include provisions that allow your original contract to be signed over to the new owner. This means the buyer would not need to negotiate a new contract with you. It is important to check for this provision, whether you currently work for a private practice or already work for a CC.
It is important to understand all aspects of your contract while negotiating your associate contract to decrease any confusion during and after your contract period, whether a private or corporate practice. With the rise of corporations in the Veterinary industry, it is also important to note the differences between what a private practice and corporation could look like relating to an associate contract.
Try to make the contract as specific as possible so there is no ambiguity if an issue arises. Ask as many questions as you need prior to signing to clarify what exactly your job will entail. Always have the contract reviewed by a lawyer familiar with the field and do not feel pressured to sign prior to this. Corporations may be pushy and imply they do not negotiate, but this is your well-being and livelihood, not theirs. Know your value and pursue it in any contract.
It would be so simple if practice owners
could open a fortune cookie for each one of their employees and find the method
by which to fairly compensate them.
While there are commonly accepted methods of compensation, their
implementation in veterinary practices varies because different entrepreneurs
have different business goals. Also,
“fairness” is a relative term that introduces variability into an equation that
might otherwise be consistent from practice to practice. This article describes the factors that
practice owners should consider when determining compensation for veterinarians
and paraprofessional staff.
Below is a table that provides a snapshot of current key indicators available for small animal companion practices. It is not meant to be all-inclusive, but rather to provide some guidelines that enable managers to take the practice’s compensation pulse. They can then determine if the practice is on track for the next year or needs to perform some diagnostics to prevent a fiscal derailment.
Many periodicals and books discuss
the factors one should consider in establishing a compensation policy for
veterinarians. Of particular importance is the question of whether compensation
should consist of a fixed salary, a percentage of the revenue generated by the
veterinarian and collected by the practice (i.e., commission-based), or a
combination of the two. If a commission-based component is present, it is also
important to consider how the revenue figure will be calculated. Will it be
limited to revenues generated from professional services, or will it include
revenues generated from items like over-the-counter medications and foods? Percentages can also vary in relation to
the magnitude of the revenue number that is generated. Implementing compensation systems in practice
requires attention to the details of production calculation and timing of
payment. The key to remember is there is NO one size fits all when determining
the appropriate compensation for veterinary and non-veterinary staff. There are numerous factors that go into
assessing the actual method used for compensation, which often requires the
assistance of an advisor.
National starting salary
information is generally published annually in the Journal of the AVMA. (See:
Employment, starting salaries, and educational indebtedness of year-2013
graduates of US veterinary medical colleges, October 1, 2013, Vol. 243, No.
7, Pages 983-987; Employment of male and female graduates of US veterinary
medical colleges, JAVMA October 1,
2011, Vol. 239, No. 7, Pages 953-957.) See also the latest biennial edition of
the American Animal Hospital Association’s Compensation and Benefits-An In-Depth
Look and the AVMA’s Economic Report on Veterinarians and Veterinary
Practices (Wise, J., Center for Information Management, AVMA, Shaumberg, IL
(Tel: 847-925-8070). Two
periodicals, Veterinary Economics and Veterinary Hospital Management Association
Newsletter, also regularly publish helpful articles. In addition, Wutchiett
Tumblin and Veterinary Economics published Benchmarks 2019 Well Managed
Paraprofessionals are often compensated on
an hourly basis and the industry has yet to develop widely adopted
performance-based compensation models. Paraprofessionals generally report low job
satisfaction and high turnover rates. In the 2016 NAVTA Demographic Survey, 38%
of veterinary technicians left the practice due to insufficient pay, 20% due to
lack of respect from an employer, 20% from burnout and 14% because of the lack
of benefits. Full time technicians reported a salary between $15-20 per hour,
while part-time technicians reported $14-16 per hour. After taxes, even the
well-paid veterinary technicians are only slightly above what is considered the
poverty line for a family of four in the United States ($24,300).
According to the United States Bureau of
Labor Statistics, the median pay for veterinary technicians was $16.55 per hour
in 2018. By comparison, a JAVMA published study on Jan. 1, 2016 of certified
veterinary technician specialists
reported that the weighted mean pay rate in 2013 was $23.50 per hour.
In AAHA’s 2020 Compensation
& Benefits survey, average veterinary employee turnover was 23%. Turnover was 32.5% for receptionists, 23.4%
for veterinary technicians, 10.3% for managers, 16% for associate veterinarians,
and 32.9% for all other staff. To compare with the national workforce,
Compdata’s Annual Compensation Survey showed that national average turnover was
15.9% in 2010 and 19.3% in 2018. The chart above can be helpful to
calculate a practice’s turnover expenses. Turnover is a pervasive and expensive
problem that can be mitigated by learning how to properly motivate employees.