Veterinary Trades Say It's Time to Rip-off the Rubes

My friend Louie called me the other day to talk about fraud. Specifically, he wanted to talk about a particular kind of putative kickback scheme, and whether it violated the “safe harbor” provisions of Medicare.

I know a little about such things, because over the years I have written and talked about various kinds of fraud, particularly fraud in the health care arena – kickbacks, upcoding, bill-padding, billing for medically unnecessary services, price-gouging, off-label marketing, and the like.

At the end of the phone call, our conversation degenerated to a discussion of the off-label marketing of atypical anti-psychotics to underweight teenage girls; a massive kickback scheme currently under investigation by the U.S. Department of Justice.

”How could so many doctors be on the take,” I asked rhetorically.

Louie laughs. “Well, you know,” he says, “No one ever recommends a bad doctor.”

Louie's right. Any doctor you go to is “a good doctor,” almost by definition. And here’s why: Most doctors don’t do much. They catch the obvious stuff, they treat the obvious ills with the obvious medication, and if the patient does not die (most don’t) and the insurance company pays the bill (they generally do), then we figure we have a good doctor.

Of course, we don’t really know.

Most of the time we don’t even pick our own doctor – we get what’s assigned to us at the “Doc-in-a-box” Health Maintenance Organization or emergency room. The most important qualification of these doctors is not that they are any good, but their ready availability.

And so it is with many things. In truth, my dentist is my dentist for the same reason my mechanic is my mechanic; they are close to a subway stop and are easy to get to in a hurry, with or without a car.

Even when you are in the market for someone in the service sector, how do you know who is good and who is not price-gouging you?

You don’t.

You take a stab in the phone book, and hope you don’t get ripped off too bad. At best, you ask a few friends for their recommendations – never mind that in all probability your adviser would not know a “good one” from a “bad one” if it ran them over in the parking lot.

And, of course, the same is true for veterinary services.

Most people go to the veterinarian that is closest to them, or the one they passed twice on the way to the grocery store that first week they moved into their new house. Maybe they ask a neighbor.

Are they being price-gouged? Is it a “good” vet?

Who knows? How do you compare? The only thing for certain is this: No one goes to a “bad” veterinarian.

Yet, veterinarians are just people. They are no worse than, or morally superior to, car mechanics, roofers, electricians, defense contractors, or insurance salesmen.

They are certainly not morally superior to human doctors who routinely engage in complex schemes to bilk Medicare, Medicaid, and private insurance companies (and by extension, all of us) of billions of dollars a year.

Unlike the human health care system, however, veterinary care is almost unregulated and without sanction.

A veterinarian wants to price-gouge? He is free to do so.

A veterinarian is prescribing medically unnecessary services or medicines? Good luck trying to get a sanction for that.

A veterinarian is getting kickbacks? There’s no law against it.

A veterinarian kills your pet through sheer incompetence? Good luck going to court – it will cost you thousands of dollars in legal expenses, and the court may award you only a few hundred dollars. After all, a dog or cat is just considered property. The court is very likely to rule that your dog or cat is worth no more than its replacement value of a few hundred dollars.

Of course, historically, there has been a governor on veterinary price gouging. It’s that people have not cared enough about their pets to be extorted by vets for over-expensive and medically unnecessary "services." If a veterinarian priced him or herself too high, a lot of owners would simply walk away. It was "time to put Blackie to sleep."

Every dog is a potential cash machine.

Several things have changed that equation over the course of the last 30 years.

One thing has been a significant drop in U.S. fertility rates. The Total Fertility Rate (TFR) of the United States hit 2.1 (the replacement rate) in 1972, and it has more or less remained there to this day.

What this means is that while some folks are still having four, five, six or seven children, a lot of others are having just one or none. For a lot of these folks – and for a rising number of older Americans whose adult children are out of the house – their dogs and cats have become “their children,” and they spend on veterinary care commensurately.

Along with “no kids,” has come the phenomenon of double incomes and rising home equity, both of which have worked to speed the extent to which people are able (and willing) to spend vast sums of money on things that were incomprehensible a generation or two ago.

Finally, we have the rise of suburbia and the advent of dog doors. Not only do people have dogs and money now, they also have dogs that spend a lot of time indoors and on the couch.

With the rise of indoor “companion” dogs has come a change in our relationship with canines. There was always a bit of emotional (as well as physical) distance between a yard or kennel dog and its owner.

A dog that has sat on the couch with you for six seasons of “The Sopranos," however, is likely to have a significant emotional bond with you and other family members. The price quoted at the veterinarian's office is going to have to get pretty steep before you think "it might be time to put Blackie to sleep."

And don’t think veterinarians don’t know that.

In fact, they are being told that by the veterinary trade associations which have gone so far as to commission a host of studies and reports whose primary purpose is convincing veterinarians to raise their prices and invent new services to bill for.

The first study was commissioned from “Big Four” accounting firm KPMG by the American Veterinary Medical Association, the American Animal Hospital Association, and the Association of American Veterinary Medical Colleges, and was designed to get everybody singing out of the same hymnal as far as raising prices was concerned.

Why was KPMG chosen?

Well, one reason might be that KPMG had already established a lucrative business running around the country explaining to human doctors, medical groups and hospitals how to jack up prices through concerted programs designed to “maximize billing.”

Doctors and hospital managers were told how to maximize testing, how to upcode, how to disaggregate tests so they could be billed separately, and how to choose treatment regimes based on how much money they made for the doctor or hospital.

The fact that much of this advice crossed the line into illegality for which KPMG and its clients were nailed for hundreds of millions of dollars, was not too germane to the veterinary profession. After all, veterinarians operate with little regulatory oversight. And in a world without laws, there are no law-breakers.

The KPMG study was entitled “The Current and Future Market for Veterinarians and Veterinary Medical Services in the United States,” and its purpose was to frame a rationalization for raising vet prices and determining how high -- and how fast -- they could be raised.

At about the same time that the AVMA, AAHA and AAVMC were commissioning the KPMG "megastudy," Bayer Animal Health gave a grant to the American Veterinary Medical Association to hire Brakke Consulting to "conduct a study of the business behaviors of small animal practitioners, both clinical owners, and associates."

Once again, the question on the table was a pretty simply one: How could veterinarians increase their revenue stream by raising prices and performing "more procedures?"

According to KPMG and Brakke, two economic forces were at work undermining the veterinary trade.

One problem was that there were simply too many vets, and demand for veterinary care for cats and dogs was not increasing very much.

A second problem was that the veterinary profession was increasingly being dominated by women who were less likely to price-gouge and bill for every little thing.

Since there was nothing to be done about the number of vets, the focus had to be on changing the culture of the veterinary profession, especially among women veterinarians.

Veterinary care is not just about making sick animals healthy, after all. It is also about getting paid. Which is fair enough. Veterinarians have bills like the rest of us. They too have to go to the dentist, get their car fixed, and send their kids off to college. No harm or foul there.

And, truth be told, veterinary billing has never been simple for the vet. While a human doctor is generally free to practice medicine and send off the bill to a third party to be paid (a private health insurance company, Medicare or Medicaid), the veterinarian generally presents the bill in person, and before the work is done.

This last veterinary billing practice -- the so-called "prospective bill" -- comes as a shock to most customers, and is more than a little distasteful for all concerned. It feels so mercenary.

Yet, experience has shown that if vets do not collect a credit card before the work is done, they may not get paid at all, and they are certainly in a poor position to haggle over the price. Better to present the bad news on the front end.

It may seem heartless for a vet to ask for a credit card before beginning emergency services on a dog or cat (especially if it is your dog or cat, and you are broke), but the alternative for the vet is to get stiffed in a predictable number of cases, in which case they will have to pass on the bill (in the form of higher fees) to the rest of us.

Veterinarians also point out, quite correctly, that people often seem to manage to pay for other things in life, but often cry poverty when it comes to veterinary bills.

Point made, and it's not a small one. With dog or cat ownership comes a responsibility to squirrel away money for emergency health care needs should those needs arise.

But, of course, this ethical see-saw within the veterinarian profession is not a new one, is it?

In fact, it is the old paradigm -- the paradigm that once kept vet prices reasonably low, dogs and cats reasonably healthy, and a lot of people interested in becoming a veterinarian.

So what was "the problem" that the veterinary trade associations set out to address by trying to get veterinarians to raise their fees en masse?

Simple: Greed.

The veterinary trade associations wanted vets to get greedier. They decided that something was wrong with any veterinarian that was not eager to embrace the "Greed is Good" ethics of Gordon Gecko. It was not enough to make a profit. Now was the time to profiteer.

Or, as Dr. John Albers, the Executive Director of the American Veterinary Medical Association put it in an article entitled "The Golden Age of Veterinary Medicine, "I really believe that we [veterinarians] are the biggest barriers to achieving financial and economic success in our practices."

Of course, when Dr. Albers talks about a "Golden Age" in veterinary medicine, he is not talking about quantum leaps being made in veterinary care for sick animals. He is talking about quantum leaps being made in veterinary billing.

The "golden age" is not about health care; it's about gold. Money. Cash. Moola.

And Dr. Albers' message is that it's time more veterinarians began to systematically rip off their customers.

And don't worry: customers won't mind, says Dr. Albers. After all, "people tend not to be price sensitive when it comes to their pets. People will pay for quality care and service for their pets, which are no longer valued primarily for practical utility, but for companionship."

In short, veterinarians should milk the changing relationship people have with their pets for all that it is worth. It's time to get paid!

And vets should not feel guilty about ripping off their clients. After all, if the vets don't rip them off, then someone else will -- a car mechanic, a dentist, or someone else jacking up the prices on other things people want or need.

Or, as one columnist for Veterinary Economics magazine put it in a presentation made to vets from across the country: "The less money a family makes, the more TV channels they have."

So don't feel guilty about ripping off the rubes. They are only going to waste their money on cable television anyway.

The drum beat from the veterinary trade associations is non-stop, and their primary message is that avarice is good, and that it is an itch that can be scratched without cost.

"There has never been a clinic that has priced itself out of business," one CPA told a panel of vets. Later, in the same presentation, the CPA noted that "Practices that charge more will make more money and work less hours."

As for the notion that perhaps some clients might not be able to afford a steep price hike: never fear. Income and willingness to pay have no relationship to each other. Or, as one CPA put it, "People can afford anything they want, just not everything they want."

And what if customers complain? Well they should! As this same CPA told his audience: "Peter Drucker said 25% of clients should be complaining about your prices." So if you are not getting a lot of complaints about pricing, then you are not ripping off the rubes enough!

And for God's sake, don't offer discounts to your customers: "Discounts are bad. There is no way you will make that up in new clients. Discounts do not increase client satisfaction and satisfaction is all people remember about their trip to the vet."

In fact, you should be ripping off your most loyal customers the most. "Over the years people pay more if they keep coming to the same practice. Bills can be increased 80 percent between years one and three. Exploit the trust."

And remember "People associate high prices with quality," so if you jack up your prices a lot people will think they are getting something better even if they are getting the same-old, same-old.

So how should these rip-offs be accomplished?

Simple: Use the same scams that other professions, from car mechanics to human doctors, have used to rip-off their customers.

Sell folks goods and service they do not need. "People are used to the idea of visiting the doctor more when they get older, so it will make sense to them that their pet needs to do the same thing. About 50% of your client base are geriatric."

Charge more for all services, including the ones that are not needed: "Perform more services and charge more for services rendered."

Do a lot of expensive diagnostic work: "[You are missing opportunities if] lab work is not more than 10% of gross income. It should be more than 30%. You should require all pets to have a preanesthetic [lab] exam. The lab work brings in money and any diseases that are unmasked also bring in money."

Make sure customers know they are just there to pay the bill: "Don't let the client make choices about animal health. Your job is to offer the best only. Use the weight of your authority and knowledge."

Be friendly in order to bill more: "There is a relationship between the face time with the vet and the amount of money they will spend. So spend more time with clients in the slow months so that they will spend more money."

Offer Candy and Soft Drinks: "Give candy to kids and the mom will pay for that blood test. Bottled water given at the door and Fritz [the cat] bought an $800 office chair."

Make customers feel guilty for questioning your billing: "If a client says you are expensive then tell them that quality medicine is expensive. Then ask why the client thinks others are not charging more?"

For the record, all of the above quotes come from a real presentation made to a national convention of veterinarans by a columnist for Veterinary Economics magazine.

This is the mantra that veterinarians are being bombarded with these days: It's time to rip off your customers, and here's how to do it.

Not all veterinarians are listening, of course. There is a real war going on for the soul of the veterinary profession. A lot of vets decry the "greed is good" mantra of the AVMA.

But not all are. As time goes on, more and more veterinarians are slipping to "the dark side." Corrupt practices such as bill padding, kickbacks, price-gouging, and prescribing medically unnecessary procedures are becoming normalized. Young veterinarians are being told, "this is the way you do it."

So what can dog owners do about it?

Plenty.

The simple truth is that most dog owners are taking their dogs to the vet too often and for no reason at all other than a vet has sent them a notice that it's time to bring Blackie in for a "well dog" checkup.

Most of what a vet does at these checkups does not need to be done at all, and what does need to be done can be done, most of the time, by the owners themselves for a fraction of the cost.

But of course, that's not something a veterinarian is going to tell you, is it?

Just as a mechanic will never have a literature rack in the waiting room telling folks how to change their own oil, a veterinarian will never have a simple sheet telling folks how long vaccines are really good for, how to get medicines for less, how to worm a dog at home, or why most of the routine laboratatory tests (and some of the most recommended procedures) are bunk.

The business of a veterinarian, after all, is not a healthy dog for less money, but a healthy dog for more money.

Should you be surprised at the price-gouging and bill-padding?

No.

In fact, if you are surprised, you are probably naive.

Of course, that's not what the veterinary profession will call you. They will call you a "really great customer" and a "responsible pet owner," because you are both ignorant and compliant.

And veterinarians use the word "compliant" a lot when they talk about their ideal customer. They do not want tight-fisted clients who know about canine health any more than the average car mechanic wants someone who understands a little about cars looking under the hood to see whether the work is really needed, is really being done, and whether factory parts are actually being installed.

You don't trust me? I am outraged!

And, of course, not everyone minds being price-gouged. Some folks are more than willing to pay a lot of money to a vet to avoid doing the most perfunctory stuff themselves. A lot of folks do not want to make waves and are uncomfortable challenging any bill, while others are only too eager to swallow the excuses and rhetoric used to rationalize price-gouging.

For example, if you point out that veterinarians typically charge $100 or more for nothing more than a "well puppy" visit, a lot of dog owners will parrot their veterinarian: So what, a plumber charges $85 just to show up.

Which, of course, is true but pretty close to irrelevant. Yesterday, for example, my plumber drove 30 miles to get to my house on icey roads, and when he got to my house he had to lug in the tools (and lug them out again) while working for more than an hour on things that were (ahem) ... not clean.

A veterinarian, on the other hand, generally has his clients delivered fresh and clean to his door, can do several exams an hour, and if a booster shot is needed, that costs all of $2 in material.

Of course, well-puppy exams are the least of it. The real expenses with dogs comes with procedures and medicines that are not needed at all, kickbacks and markups on foods and medicines, frequent bill padding, and the "annual checkup" that somehow balloons to $350 or more for absolutely nothing.

Which is not to say that veterinary services are never needed, or that all vets are crooks trying to sell you goods and services at absurd prices.

That is NOT true. In fact, there are still a lot of good honest vets around, and if you are going to them for the right stuff (fixing a bone, removing certain tumors, etc.) then they are worth their weight in gold.

That said, most people are not going to vets for the right stuff. And, as a consequence, a lot of dog owners are wasting thousands of dollars over the the life of their dog for absolutely no reason what-so-ever.

The simple truth is that most of what a vet does -- and most of what they bill for -- you can do yourself.

Pet owners do not need to go to the vet for dog food, annual booster vaccines, annual teeth cleaning, routine worming, and "well puppy" checkups.

Not every mass needs to be biopsied, and not every limp needs to be x-rayed.

You can treat your dog yourself for ring worm and ear infections, and you do not need to buy flea and tick medicine from your vet at sharply inflated prices.

More on all these points later.

For now, it's enough to know the kind of message veterinarians are receiving from their trade associations -- and the kind of message these same vets receive from us when we acquiesce to unneeded procedures and inflated prices.

Caveat Emptor. Buyer beware.

It's high time that dog owners come to terms with the fact that the veterinary business is changing, and that because of that we need to: 1) get better educated; 2) do more routine veterinary work ourselves, and; 3) be a little less "compliant" when prospective bills are submitted for approval.

A repost from December, 2007.