Fees, referrals and pet insurance: what does the future hold? - Veterinary Practice
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InFocus

Fees, referrals and pet insurance: what does the future hold?

GARETH CROSS
believes that education about, and promotion of, good pet insurance is essential for the financial well-being of practices – and talks to a fairly new firm about its future

THIS week I received a message
from one of our nurses that a client
had made a mild complaint about
fees.

His cat has a minor recurrent
problem with occasional bills over the
years of less than £40 a time. This call
fell on a quiet day, so I thought,
“Right, let him have it,” and rang him
up.

I knew him as a reasonably regular
client and a reasonably reasonable man
of some intelligence and also retired,
i.e. someone with too much time on
his hands
who finds
analysing his
receipts from
the last four
years a fun
way to spend
the morning,
probably after
completing the Telegraph crossword and
wondering what to do with the rest of
his final-salary pension that month.

So it was I engaged in a
surprisingly vigorous and good-
humoured discussion that lasted about
20 minutes and ended up with me
agreeing that we were in the wrong
and him offering to pay us more
money for the treatment his cat had
received over the last few years.

I won’t preach to you, the
converted, but it involved a brief
education in veterinary economics,
practice overheads, wages, internet
competition, the fact we sell a skill
products, and the like.

He said I should have been a
barrister; I thought, more like a
bullshitter, but managed not to say
out loud.

The complaint was that he had
been charged more than usual last time
he was seen but, as you may be guessing, he was of course charged
correctly the last time he came.
Previous visits had been allocated
random discounts ad hoc by different
vets, and the same vets differently each
time, depending on the prevailing
wind, from 0.3 to 0.75 of a follow-up
consult.

Vets, especially long-standing ones
at a practice and practice owners, have
a tendency to discount. I remember
our SPVS/VDS new graduate reunion
seminar where this was much
discussed.

The reasons for it are many and
debatable: the fact we have developed
friendships with many clients, the fact
we want to be liked, often it’s the fact
that experienced vets may make a
quick diagnosis and prescribe
successful treatment with what seems
like little effort, compared to the
longer tortuous consults of our early
days.

Thorny issue of fees

In a possibly controversial statement, I
would hazard to guess that many of
you out there find yourselves less
inclined to ad hoc discount for insured
clients.

This exchange prompted me to
have a rational think about our fees,
and fees in general across the
profession in the UK. Fees are always
a thorny issue to discuss, especially
when considering the increase in fees
charged by vets as a whole over the last 10 years or so.

You can’t discuss fees without discussing both the growth of the
referral sector and the growth of pet
insurance – the former no doubt being
permitted by the presence of the
latter. This is obviously a great thing
for the profession and the pets of this
country, with centres of excellence
becoming available in many disciplines
and locations.

So, too, the presence of pet
insurance has grown in the UK. When
I graduated in ’98 there was Petplan
and a few other companies around,
now pet insurance is being advertised
on the TV and at supermarket
checkouts. However, as we all know,
the quality of cover is not always as
good as clients expect and clients are
now often put off by the premiums.

Due to FSA regulations, poor
experiences in practice and the
confused market-place (there are now
420 different policies to choose from),
vets have started to become less
involved in promoting insurance
compared to the old days of filling out
the carbon-copy “Petplan” form at the
reception desk.

To discuss the past, present and
future of veterinary fees and the pet
insurance market, I interviewed Ashley
Gray of Vetsure, a relatively new
insurance company.

When I first heard of
Vetsure and what it did,
I was interested as they
have a very practice-
centric approach to
insurance. For example,
premiums are tailored to
the fees charged at that
practice (via a detailed
questionnaire) as well as
breed type, etc.

So if you are in a basic rural practice with Herriot-style
fees and service, then your premium
won’t be shoring up the latest whiz-
bang clinic in Knightsbridge.

The ethos of the company seems
to be pet insurance as you would
design it yourself as a practising vet,
which indeed the founder was.

I put a few questions to him which
are relayed here…

  • Some time ago I wrote an article debating
    whether insurers will ever cap fees payable for
    certain procedures or direct referrals to certain
    providers. Have any insurers now moved in
    this direction and if so, how successful has it
    been?

Although there has been a lot of talk
there has been little actual action on
the part of the insurers. There is one
insurer of which I am aware that has
applied caps per condition type but as
far as we are aware the range has not
been tremendously successful.

We know of insurers increasingly
challenging claims made by certain
veterinary practices and referral centres
but do not know of any insurers
proactively directing policy holders to
one centre or another.

Vetsure does not actually restrict
the policyholder in any way – there is
complete freedom for the clients to use whatever veterinary clinics they
wish to use including
specialist referral centres.

However, the
policyholder is
incentivised to use
“Vetsure-affiliated”
clinics and the specialist
centres that vets at these
clinics recommend
through lower excess
payments when making
claims.

Vetsure policy prices are determined by the service and
treatment prices charged by the
Vetsure-affiliated practice in question
and by the specialist centres that the
Vetsure-affiliated practice uses – this is
undertaken by completion of a pricing
questionnaire during the “affiliation
process”.

In this way, Vetsure can support
any practice in the country and the
charges applied at the practice (and the
specialist centres they use) with an
appropriately priced product.

Our “partnered consultant
accreditation scheme” is our answer to
the RCVS “intermediate level of
expertise”, offering an alternative to
full specialist referral where this is
sought by the policyholder or advised
by the referring vet.

I do not believe that models that
restrict consumer or veterinary choice
are appropriate for our profession: the
market is diverse and the needs of pet
owners vary considerably.

One of the challenges facing the
industry has been the discord between
the insurance premium price and the
choice of veterinary clinic that the
policyholder makes – as a result, a
policyholder happy with a veterinary
practice offering solid “basic” services
is being charged the same insurance
premium price as a policyholder who
wants to use a state-of-the-art
veterinary hospital and the best
specialist centres within
the same postcode.

The Vetsure model
seeks to go some way
to manage this discord
and price appropriately
for the needs (and
therefore insurance
risk) of the pet owner.

  • It is perceived by some
    that vets, especially but not
    just referral centres, charge
    as much as the insurers will
    stand, and this has led to
    uncontrolled fee inflation for
    certain procedures and
    certain practices: is this
    borne out by your experience?
    There is little solid evidence within the
    pet insurance industry about the
    proportion of claims that is attributed
    to referral centres.

Taken from our own experience
and anecdotal observations through
exposure to the ABI pet insurance
committee, it appears that referral
claims represent an increasingly
significant proportion of the overall
claim costs.

In my belief this is as much to do
with a generally increasing tendency
for vets to refer as much as increasing
referral costs. [Interesting point, I
think.]

The argument that “the insurer will
pay” is becoming increasingly redundant-ultimately, the consumer
always pays.

  • There is no doubt though that without
    insurance the referral sector would not have
    flourished as it has over the last 20 years. Do
    you think that referral fees have been the
    main driver of insurance premium increase?
    No, but they have contributed
    significantly and are perhaps one of
    the biggest of the drivers. There are
    various factors that have contributed
    that nobody ever thinks of, e.g.
    practices are now more frequently
    charging appropriately for their
    time/services [see my example at the
    start of this piece] partly driven by a
    greater level of business understanding
    in practice, along with external factors
    like rising costs.

We have an ever dwindling client
base that vets need to get a greater
ATV from and inevitably this has
contributed to claims inflation.

Couple this with the usual quoted
reasons: increased costs of technology,
new medicines, new techniques, etc.,
etc.

What is clear is that the referral
sector is thoroughly dependent on
insurance: centres that have answered
this question when I have asked have
quoted figures of 80-95% of turnover
being from insured pets.

What you should also bear in
mind, though, is that many clients now take up insurance to
protect themselves
from referral costs, so
there can be a knock-
on positive effect to
the first opinion clinic
– it is a bit chicken and
egg.

  • What is the general
    variation between practices
    for the same procedure in
    both first opinion and
    referral practices? Is it
    mainly regional, or just
    randomly variable between
    practices?

There is significant
variation both regionally and otherwise. This is not
really surprising given the diversity of
the marketplace.

Having managed a group in
London I understand the eye-watering
overhead costs of practices operating
in the capital v. the surrounding
counties. Similarly, the needs and
expectations of the client base are
incredibly variable in communities as
diverse as that seen within cities and
large towns.

Another challenge is that vets will
look to make their (usually meagre)
margins from different sources – so
one vet, for example, may make a
greater percentage of margins from
drugs compared to another putting more margins on
services.

From an insurance
perspective, Vetsure’s
solution has been to
price policies according
to the service and
treatment pricing in
place at the practice in
question.

If this makes our policies
uncompetitive then we accept this: we
believe that it is better to sell at the
right price rather than to sell too
cheaply and have to take drastic action
later. Instead, we ask vets to help
educate clients so that they in turn will
ask the correct questions from their
prospective insurers.

  • Is there a feeling in the pet insurance
    industry that something’s got to give as
    premiums are getting more unaffordable?
    What is the way forward to provide good
    quality cover at affordable prices?
    There is a general feeling that
    consumers have hit the limits of what
    they deem to be acceptable.

The pet insurance market
continues to grow in value just as does
the animal health industry; the
question to the profession is how we
make our services affordable to a
greater proportion of the pet-owning
population, not how we look to get
more money out of a declining
segment.

The Vetsure model allows the
policy price to reflect the veterinary
practice chosen by the client: in this
way we work successfully with
practices operating at all segments of
the pricing spectrum – it is then up to
the consumer to choose.

  • When I started out in ’98 there was
    Petplan and a few others, now pet insurance
    is advertised on TV and at the checkout.
    However, as we vets know, the value of these
    is variable. What’s the future? Fewer
    providers, better cover? More variation in
    cover level?
    Although there are over 420 individual
    policies available on the market, there
    are only in the region of 18-19
    underwriters and they all have more
    significant focuses outside of the pet
    insurance industry.

This has all happened at a time
when vets have largely become less willing to get involved
in pet insurance –
either due to
confusion over FSA
rulings or general
dissatisfaction with
existing providers.

A core Vetsure
focus is to highlight
the importance amongst veterinary teams of client
education: the future involves the
profession engaging with clients on the
subject of pet insurance more.

It is our responsibility as vets to
ensure that all pet owners understand
their responsibility under the Animal
Welfare Act to budget for veterinary
care of their pet.

In many cases this may mean that
pet insurance would be beneficial; if
so, we need to help them understand
pet insurance (within the guidelines
provided by the FSA) so that they can
make an informed choice.

A lot to consider…

There is lot to consider there. We are
all in this together and we all want a
diverse profession that treats a cat bite
abscess, flea allergy, ear infection, etc.,
for very little money for the pet’s sake.
Also, we all carry out fairly technical
expensive procedures too and need to
be able to do that in general practice.

On top of that, we, and the client,
want the facility to use the highest
level of treatment and equipment as
well – whether we are a provider of
that service or a referring vet.

Most of us practise a variety of
basic and higher level stuff on a daily
basis, and need to rationalise the way
we bill that.

We need our businesses to be
successful whether you are a new
graduate wanting good pay to pay off
the student loan or a retiring vet who
wants a business worth selling, or the
majority between one and the other.

What is clear is that poor insurance
cover that lets down clients is in no
one’s benefit. Education about, and
promotion of, good insurance is
essential. Also, over-charging and
under-charging will ultimately not end
well.

We need a fair way of funding our
business and quality insurance is an
essential part of that business model.

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