Why Have Veterinary Diagnostics Contracts Become More Complicated?
5 Tips for Navigating These Changing Contracts
Ten years ago, the veterinary diagnostic landscape was far less complicated from a contracts standpoint. In that time, the number of players in the field have increased, the overlap in products and services has become more mired, and the types of contacts and agreements veterinary practitioners will be asked to sign and changed dramatically. It is more important than ever to pay close attention to any contracts you are signing in order to ensure both the health of your practice and protect yourself from potential legal constraints.
As a Co-Founder of Ask Jan For Help, I frequently use my expertise to guide members through the process as they review proposals for new in-house diagnostic equipment, reference lab services, single-use ‘rapid’ tests, and sometimes bundles that involve a mix of these components along with pharmaceuticals or there services like telemedicine. If legal concerns come into play, I put members in touch with attorneys who specialize in veterinary medicine. However, here are some basic rules you can follow when considering a new capital equipment contract.
#1 Always Keep Your Contracts Where They Can Be Easily Accessed
This may seem obvious, but many veterinarians and practice managers file these contracts away and cannot easily locate them when a new contract is being considered. Though practice management is a time-consuming endeavor, failing to review existing contacts can be detrimental when it comes time to purchase or rent new capital equipment. ‘Exclusivity’ clauses in these contracts (language that restricts your ability to use a competing diagnostics provider) have become stricter and terms of contacts are longer than they once were, often stretching for 72 or even 84 months. Having your contacts in a single, readily accessible place can save you thousands of dollars and possible litigation should you be found in breach of contract.
#2 Don’t Overlook the Benefits of Buying Equipment Outright
I often tell Ask Jan Members that if they can’t afford to purchase a piece of equipment, they should really think twice before signing a rental agreement. If your practice cannot absorb a $10-$15k capital purchase, you likely have more pressing needs than new diagnostic equipment. However, if you are considering an agreement that provides equipment at no cost, it is likely that this contract will include both in-house as well as reference lab diagnostics. This means additional work on the practice’s end as you examine past spend in both areas to determine how likely it is that you will be able to meet the terms of this new agreement.
#3 The Transition from Reagent Count to Customer Spend May Not Be In Your Favor
If you’ve been practicing veterinary medicine for at least ten years, it is likely that you remember ‘reagent rentals,’ agreements based on the quantity of tests run. These days most contracts are based on customer spend as both a dollar amount AND a percentage of diagnostic spend. Though this provides greater flexibility for veterinary practices, it has also increased the likelihood that practices overcommit when signing these agreements. I have seen it happen time and again and the results are unpleasant. Sometimes this overextension simply result in the extension of the time period on your contract, but other times it can result in your vendor requesting an audit to ensure you are not in breach of the exclusivity clause in your contract. This is where practices can end up with legal trouble, which of course the Ask Jan Member Attorneys can help you with, but I’d rather see you avoid these problems all together.
#4 Long Term Contracts Limit Your Ability to Practice The Best Medicine Possible
As the veterinary diagnostic marketplace becomes more competitive, companies are investing more and more time and resources into R&D. This means wonderful things for the field as it will result in better tests, better equipment and better outcomes for your patients. However, it also means that the competitive aspect of your long-term contact could prevent you from purchasing new test, equipment or even pharmaceuticals as they become available. Once again, I will point to Tip Number 1. It’s painful to get excited about a new diagnostic test only to find out you can’t access it due to your non-compete. Keep those contacts on hand to avoid disappointment.
#5 Remember: Everything Is Negotiable
There is nothing new about negotiating on the price of a product. Even ten years ago, diagnostic equipment was rarely purchase without some type of negotiation. However, as purchases have moved further from the price of the equipment itself and into percentage of diagnostic spend or overall customer spend, practice owners have become less likely to push for a better deal. Don’t forget that every aspect of your contract is negotiable. If you do your homework and understand what your practice can realistically commit to, you can avoid the pitfalls that come with falling short on your contract commitment.