A few months ago, I was sitting in a hospital break room with an owner reviewing her year-end numbers. At first glance, things looked pretty good. Revenue was up right along the lines of the national average, the hospital remained profitable, and the team was relatively stable. Yet as we continued working through the reports, something felt off and she eventually pointed to the metric that had been bothering her.
“Stith,” she said, “am I crazy, or does it feel like things are slowing down?”
The metric she was focused on wasn’t revenue. It wasn’t profitability either. It was transaction count. It wasn’t down dramatically, yet as we looked at last year, and the year prior, and the year prior, there was a trend and it wasn’t heading in the right direction.
While this case applies to a specific hospital in Ohio, I know she’s not the only one of us as practice owners asking that question.
Through COVID, and even right after, many Veterinary hospitals experienced tremendous growth. Pet ownership increased, demand for Veterinary care surged, appointment books stayed full, and in some hospitals growth became so consistent that it almost felt normal. Today, however, I’m hearing—and much of the industry data I’ve seen suggests the same thing—a different conversation. Many (certainly not all) owners are reporting softer transaction counts. Others are seeing fewer new clients and most are experiencing slower revenue growth than they became accustomed to during and immediately following COVID.
Before we go any further, however, let me make one thing clear. Slowing growth is not the same thing as failure. In fact, one of the most dangerous assumptions business owners can make is believing every year should look exactly like the year before it. The question isn’t whether growth eventually slows—the question is how we respond when it does.
First, Understand the Problem
When growth begins to flatten, many owners immediately start searching for solutions. Maybe it’s a capacity problem and we need another doctor. Maybe we need a new marketing campaign. Maybe we need a newer building. Maybe we need to raise prices (or cut prices). Maybe we need to cut expenses.
The challenge is that we often begin searching for answers before we’ve fully diagnosed the problem. One of the lessons I’ve learned through consulting and ownership is that good decisions begin with good information. When an owner tells me growth has stalled, my first response is usually another question. Compared to what? Compared to last month? Last year? Pre-COVID?
The reason I ask is because context matters. Many hospitals experienced extraordinary growth between 2020 and 2022. Comparing today’s performance to one of the most unusual periods in Veterinary medicine may not always provide the clearest picture of what is happening.
Before making major changes, let’s make sure we’re measuring the right things.
Revenue Doesn’t Tell the Whole Story
One of my favorite questions to ask practice owners is, “How is the hospital doing?” Most answer with a revenue number, and that’s understandable. Revenue is easy to find, easy to compare, and easy to celebrate. The problem is that revenue rarely tells the whole story.
Let’s consider two hospitals. Both increased revenue by 5% last year. On paper, they appear identical.
However, the first hospital increased revenue because it saw more clients, improved patient compliance, strengthened client retention, and became more efficient. The second hospital increased revenue solely because of fee increases while transaction counts declined.
Would you view those hospitals the same way? I wouldn’t.
This is where key performance indicators become so important. When growth slows, I encourage owners to look beyond gross revenue and examine metrics such as transaction count, active clients, new clients, average client transaction, doctor productivity, and revenue per full-time equivalent employee. More often than not, those numbers tell a much richer story than revenue alone.
Healthy Growth Versus Artificial Growth
Let me ask another question – Why has your hospital grown over the past five years?
Seriously, take a moment and think about it. Many owners immediately point to revenue growth, but that’s not what I’m asking. I’m asking what actually created that growth. Was it more clients? Better client retention? Expanded services? Improved compliance? Additional doctors? Fee increases?
The answer is usually some combination of all of the above. To be clear, there is absolutely nothing wrong with fee increases. Most hospitals should be evaluating fees regularly. Payroll has increased. Benefits have increased. Equipment costs have increased. Drug costs have increased. If we expect our hospitals to remain healthy, pricing adjustments are often necessary.
The danger occurs when fee increases become the primary growth strategy. Eventually, clients push back. Eventually, the market notices. Eventually, growth slows.
The strongest hospitals I’ve worked with tend to grow because they improve. They improve systems. They improve communication. They improve the client experience. They improve how effectively they leverage their team. They improve medicine. Those forms of growth are often much more sustainable because they create value rather than simply increasing price.
Returning to Fundamentals
One of the things I love about business is that long-term success rarely comes from a secret formula. More often, it comes from consistently executing fundamentals. The challenge is that fundamentals aren’t always exciting.
When growth slows, owners often begin searching for complex solutions. More often than not, I encourage them to revisit the basics.
- How effectively are we retaining clients? In other words, what is our client bonding rate? (For readers unfamiliar with the term, bonding rate refers to the percentage of clients who return within a given period. Over an 18-month period, the industry average is roughly 65%.)
- How many appointment slots go unused each week?
- How well are we leveraging technicians?
- What percentage of wellness recommendations are being accepted?
- How clearly defined and consistent is our client communication?
- Are doctors practicing at the top of their licenses?
- Is the team practicing at the top of theirs?
I recently worked with a hospital that believed growth had stalled because of increasing competition. As we dug deeper into the data, we discovered the larger issue wasn’t competition at all. The practice had gradually developed inefficiencies in scheduling that were preventing doctors from seeing as many appointments as they previously could. Once those issues were addressed, growth resumed.
The lesson wasn’t that competition didn’t matter; the lesson was that the answer was inside the hospital, not outside it.
Growth Isn’t the Only Measure of Success
One of the unintended consequences of the post-COVID boom is that many owners became accustomed to rapid growth. Growth is exciting, it feels validating, and it creates opportunities.
But growth is not the only measure of success.
There are seasons when the most important objective is improving profitability. There are seasons when the priority is strengthening culture. There are seasons when leadership development matters most. There are seasons when building systems creates more value than adding revenue.
I recently spoke with an owner whose revenue had been essentially flat for the year. Initially, she viewed that as a disappointment. Then we looked deeper and discovered that employee turnover was down, profitability was up, her leadership team was stronger, and she was working fewer hours. Suddenly, the year looked a lot more successful.
If you’re reading this article because your hospital’s growth has slowed, I want to leave you with some encouragement.
Every successful practice owner eventually experiences a season like this. Markets change. Competition changes. Consumer behavior changes.
The owners who thrive are rarely the ones who react emotionally. They’re the ones who become curious, ask better questions, study the numbers, revisit the fundamentals, and continue improving even when growth isn’t automatic.
When growth slows, which it will at some point for all of us, view it as an opportunity to better understand your business, strengthen your foundation, and perhaps most importantly, become an even better leader than you were during the easy years.
Growth is rewarding, but disciplined leadership during slower seasons is often what separates a good hospital from a truly sustainable one.