Keep in Mind: Essential Consolidator Checklist

24min
Season 1
Listen directly on:

Our guest, Dr. Bob Murtaugh, is highly accomplished as a double-boarded internal medicine and critical care specialist. He is currently the Chief Professional Relations Officer at Pathway Vet Alliance, where he builds the talent pipeline for hospitals and looks for means to support research and community service.

In this episode, Bob shares more about what consolidators need to keep in mind when looking to acquire a practice and the importance of community in the industry. Veterinarians have an incredibly unique career and set of job requirements, so we discuss the value of having someone who understands the vet and the operational side of things to ease the transition.

Topics discussed:

  • The importance of community and culture and why consolidators should be aware of these aspects;
  • Veterinarians drive the business, so it’s important to choose the right people;
  • Insights into how consolidators starting out can look to scale their operations;
  • How Pathway has dealt with consolidating during the pandemic;
  • The key people who help make integration as smooth as possible;
  • A look at Pathway’s Veterinary Incentive Program and what it offers associates.
  • Veterinarian’s performance measuring tactics;
  • Some of the benefits of being part of a larger organization;
  • The importance of support rather than control for consolidators.

Helpful links:

Speakers

Bob Murtaugh, DVM, MS, joined Pathway in 2015 as chief medical officer. He is a pioneer in specialty veterinary medicine and paved the way for emergency and critical care to become an American Veterinary Medical Association–recognized specialty in 1989. Prior to joining Pathway, Dr. Murtaugh was chief of staff for Dove Lewis, a nonprofit community emergency animal hospital, in Portland OR, where, in addition to clinical and training activities, he led community programs involving pet-facilitated therapy and grief counseling for owners/animals affected by domestic violence. As regional director at VCA, he oversaw the quality and growth of medical operations in 40 varied general practice and 24/7 ER/specialty hospitals. During this period he continued his own clinical specialty practice and medical director duties in a couple VCA specialty hospitals in Boston and Orange County, CA, until joining Pathway in late 2015.

Transcript

Ryan Leech, Director of Sales
Ryan Leech

Hello and welcome to Consolidate That! Ivan, good morning, how are you doing today?

Ivan-Zak
Dr. Ivan Zak

Pretty good, I am excited to introduce our guest today. He is an old friend of mine and colleague, Dr. Bob Murtaugh. He is known from many achievements in his career but he is a double boarded internal medicine and critical care specialist and formed the college and the specialty at Tufts University in emergency and critical care. He was chief of staff at Dove Lewis and I learned that he was the only critical care specialist that wore cowboy boots in there.

Then he proceeded to work for VCA where he spent 15 years, and I contacted Bob then, trying to get SmartFlow into Orange County specialty hospital and then he left and then his veterinary career continued with Pathway Alliance now and then Pathway Partners, I think they were called at that point. He started as a chief medical officer and then now he is a chief professional relationship officer.

Bob, what a pleasure to see you again, welcome to the show.

bob-murtaugh
Bob Murtaugh, DVM, MS

Thanks Ivan, great to be here. I appreciate the opportunity.

Ivan-Zak
Dr. Ivan Zak

Can you tell us a little bit more about the details about the role because chief medical officer is something that everybody can understand that. Chief professional relations officer with the wealth of background in veterinary medicine, what is that like and what does that role do in the organization?

bob-murtaugh
Bob Murtaugh, DVM, MS

Yeah, it’s kind of a unique role I think, breaking some new ground here, basically you know, our challenges in the profession right now are around manpower both on the staff side and on the veterinary side so my role with Pathway Vet Alliance now is a university relationships, tech school relationships, building talent pipeline for our hospitals and looking for other opportunities to support research and community service and those partnerships as well. It’s a pretty fun gig, I’ve been doing it for about six months now and I think given the 40 years of experience and the relationships I’ve built over that time, it’s a role that I feel comfortable in for sure.

Ivan-Zak
Dr. Ivan Zak

That’s amazing. I know that I’ve been talking to some people at Pathways, especially in the early days and I know that you were the secret weapon when the deal is not closing and someone needed to understand the culture, then the secret weapon, Bob Murtaugh was released and so that’s why I think you’re the perfect candidate for the relationship.

Today, we wanted to talk a little bit about consolidation. It’s such a frothy sort of market right now, we’re consolidating and rapidly, Pathway ultimately, I think was, and probably is the fastest growing consolidator in terms of the number of practices per unit of time. You’ve seen it all from the very inception and then through the transition and all the changes. The topic that we choose for today and we don’t have to stick directly to it but we want to talk about what is that checklist of someone jumps into the industry, especially not from the industry and they want to consolidate veterinary practices.

How do they approach the culture, what are the essential things when they start, they should have in their back pocket when they’re talking to veterinarians? How do you inspire vets to sell their businesses to a consolidator? Because the market is completely different, I know when you guys started, the most important thing was to be different from Banfield and VCA and there was a differentiator.

Then these days, it has to be something special. What is that starting point and what do you think just from the message and the cultural aspect and the vision and mission, what is that, attracts the veterinarians these days to sell to one consolidator versus another?

bob-murtaugh
Bob Murtaugh, DVM, MS

Yeah, that’s a long and broad question there Ivan, but to boil it down from a standpoint of the essentials perhaps, I think you know, veterinarians are unique profession. I think people that come into our industry needs to understand our industry, and so I would encourage people that are thinking about investing and consolidating in veterinary medicine is to spend a little time in some hospitals and get to know the people and the process and understand the relationships both on the hospital side with the staff and doctors and the client aspects of our profession.

Because I think, when a seller or potential seller and owner is looking for a home for their legacy, it’s a community practice. I mean veterinary medicine, at least, if you want to look at the general practice side of things has a radius of three to five miles if you’re in a big city, maybe some blocks and so it’s a community operation and I think the culture is important and owners typically want to make sure that their people are taken care of and that the people that are taking over their practice understand the legacy that they’re inheriting and respect that privilege of having that opportunity to have that practice be part of their platform.

I think that would be an important consideration. Certainly, as you mentioned, it’s a very dynamic industry right now with regard to investment and opportunity, and so money speaks, certainly, but I think some of the other pieces are as important down deep for veterinarians that are looking to sell as the money that they get upfront or as part of an investment in that platform that they’re considering.

Ryan Leech, Director of Sales
Ryan Leech

I’ve noticed that as we’ve looked at some of the different consolidators that are newer in the marketplace, a lot of them are not adding in that Chief Medical Officer, the Chief Veterinary Officer until maybe a little bit later. Do you think that’s a person that should be an earlier ad to the executive team or do you think that an aspiring CEO or COO should just embed themselves within the practices?

bob-murtaugh
Bob Murtaugh, DVM, MS

Well, I think it’s a relationship-based profession and I think that for my standpoint as you can enter the industry or try to scale your platform as a consolidator, you need to have the understanding that it is veterinary medicine that’s driving the business. Business people are important, operators are important but the reality is again, that if you don’t have somebody that can provide the veterinary perspective on an issue or problem or potential project, your disadvantaged in getting it to be successful, whether it’s on a single hospital level or a platform level.

So, from my standpoint, choosing the right people and the right mix of people as you start up and then as you scale is very important and it’s a veterinary platform so chief veterinary officer seems like a natural to me.

Ivan-Zak
Dr. Ivan Zak

That makes sense. I want to dive a little further into this culture aspect because I think that’s very important. By their nature, I think that veterinarians are a very well-selected cohort of people that are passionate about helping animals so there is one unity around the passion but then, when these different consolidators now erupt, they’re talking about purpose and I think that the motivation in general for people is the combination of the two. Your passionate about something you like and then there is a purpose that is bigger than yourself behind it.

Can you talk a little bit about the purpose behind the consolidation and what could be articulated to the veterinarians to join them as a group around one purpose inside of consolidation?

bob-murtaugh
Bob Murtaugh, DVM, MS

Yeah, I think there are definitely advantages to being part of a larger whole. Some local industry leadership at the local level and some decision-making at the local level has to be maintained and remain in place.

But I think the benefits of sharing across not having your knowledge base or your business acumen to be limited by the four walls of your practice. I mean, if you truly take advantage of the good of big, that you’re talking about educational opportunities, personal growth and staff growth opportunities. You’re talking about purchasing opportunities, you’re talking about potential to serve clients and pets better with the sharing of best practices so there’s a lot of advantage that comes with being part of a bigger whole.

Ivan-Zak
Dr. Ivan Zak

I would like to switch to the business development, if I’m a new consolidator, there’s different strategies that people choose based on geography or maybe haven’t spoke. How would you choose if you’re starting fresh? Would it be sort of anybody who will sell, anywhere in the North America or do you try to stay local in the same state? Is there advantages from the regulation perspective where you don’t have it here to several states immediately?

Do you try to stick to sort of one central, let’s say, emergency hospitals, we have this hub and spoke sort of structure? What are those tactics that you’ve seen and that worked well for others?

bob-murtaugh
Bob Murtaugh, DVM, MS

You certainly sort of described the landscape there. Based on my learnings with Pathway and others, I would suggest that if you’re a beginning platform consolidator that you probably stick to a base philosophy of types of practices and geography that’s manageable from a standpoint of support as you begin to scale your business. I think, being rigorous in your what it is that we want to acquire and where we want to acquire them is an important aspect of setting the foundation for success to the future, in my opinion.

Ivan-Zak
Dr. Ivan Zak

It’s interesting now actually, you know, everybody has to talk a little bit about COVID and we will. I’m just wondering, the dynamics through the acquisition and the pipeline because when there was no COVID, it makes sense to visit every practice to get to know people, but as you scale and then the COVID starts, do you see the deals being closed without even just remotely without people flying out visiting and preparing everything or is it still very much hands-on and visit the facility?

bob-murtaugh
Bob Murtaugh, DVM, MS

I can’t speak for everybody but certainly with Pathway Vet Alliance, our approach has become largely virtual. I mean personally, I’ve only been on one airplane since last March, which was a trip to California a month ago and we do have integration managers that are regional that will visit t he hospitals maybe on the day of closing to help with onboarding of people into the payroll and so forth. Even our meet and greets and all of that are virtual these days and probably will continue to be so for the next, at least, next quarter.

It’s interesting that it hasn’t really created any more of a dynamic of say, losing doctors during the process or having staff not understand what’s happening with their benefits or whatever it might be. I think it’s an interesting – it’s kind of like a lot of things we found that you can get by with a virtual world and still provide on service and business success. It’s been an interesting learning for sure.

It’s probably going to change how we do it going forward because there’s a significant expense obviously with traveling the globe and a large waste of personal time as well.

Ivan-Zak
Dr. Ivan Zak

A lot fewer steak dinners to buy people too.

bob-murtaugh
Bob Murtaugh, DVM, MS

Right, you can lose weight and exercise more all at the same time.

Ryan Leech, Director of Sales
Ryan Leech

Yeah, there you go. Bob, you mentioned the integration side of it. Obviously, you guys have people all over the country that help with that integration but what are some of the key things as we’re talking about the essential is, who do you think is important to have on the ground whether within the clinic or within the consolidator for that integration to go successfully?

bob-murtaugh
Bob Murtaugh, DVM, MS

Yeah, I think again, it’s veterinary teams feel comfortable and respond to veterinary oriented people that come into their midst and so I think somebody like myself or another senior veterinarian or certainly people that come in as integration managers, a lot of those people for us have been practice managers, they understand the industry, they understand the stresses.

Many of them have already undergone an acquisition event themselves and so I think having a team of people that can relate to those staff on their level and understand where their concerns and fears may be is important for sure.

Ivan-Zak
Dr. Ivan Zak

There was a constant conversation between with the easyVET software because we implemented a lot. We implemented SmartFlow alongside with easyVET and I was always a proponent of hiring people from the industry, the technicians and the veterinarians so they can find the same language very quickly at the hospital and they were hiring people that were more techy and I found that we integrated with the team faster and better because you certainly speak the same language.

But I also know that you’re a proponent of making the announcement earlier and this is very interesting. Do you actually recommend that to the seller? Because a lot of the sellers just show up one morning and say, “Hi team, I love you. I sold you all.”

Do you recommend or do you guys insists or make a strong recommendation so they make that announcement earlier and help them with it?

bob-murtaugh
Bob Murtaugh, DVM, MS

We actually wrestled with that early on but now it’s a requirement that it has to be at least four weeks in advance into closing. Get all the deal points done, sign the paperwork, everybody is happy with that.

And then it’s a life-changing event for many people on the team and certainly you want to make sure that you develop a relationship with the doctors and get them integrated and over with regard to what their terms are and their comfort level with the new organization.

Because you are basically buying, I mean without people, you don’t have much of an asset there at the hospital. And so, I think it is important that the seller is getting a lot of money and they have a responsibility to make sure that the deal goes through and a way that’s comfortable for their people and makes the transition as smooth as it can be and so yeah, it’s something that we insist on at this point in time for sure.

Ivan-Zak
Dr. Ivan Zak

Very interesting. For the veterinarian because there is a seller who obviously is the benefactor of the transaction and then there are certain incentives that are locked in behind that person. You guys have different structured deals, right? You could buy outright or you roll the equity or there’s different scenarios and you allow those different ones and then for the associates, you guys have a special program that you mentioned that there is also a great benefit for the doctors that stay on and work for Pathway. Can you talk a little bit about that?

bob-murtaugh
Bob Murtaugh, DVM, MS

Yeah, we just actually I think this is a game changer in our industry from a standpoint of I’m sure we’ll see some copycats as we did when we went with the partnership model on the equity at the level of the platform a few years ago.

But basically, we call it The Veterinary Incentive Program. If people are with us for several years, each year they get certain amount of money in the bank and then when we have our next financial transaction, they’re going to get a significant payout based on how the investor’s performance goes.

We had initial private equity partner that we transacted with to a new one last March in the middle of COVID and those people did a significant multiple on their initial investment and that sort of company performance is going to benefit our doctors hopefully going forward. All associates and all new hires, we anticipate hopefully our next event the sharing maybe as much as three to $500 million across our veterinarians, very excited about that.

Ivan-Zak
Dr. Ivan Zak

That’s incredible. It’s almost like you’re becoming an equity shareholder in a monetary perspective but you benefit from the overall organization through the next three capitalization.

The interesting question within performance, veterinarians hate to be measured. Well, I hated to be measured when I was vet, so what is the secret sauce and what do you find veterinarians are less resistant to? Because we value what we do based on the results and the outcomes of the patients and the health. And then, we are measured based on the financial results. Where is the balance and how do you measure so the veterinarians are less resistant? Let’s put it this way.

bob-murtaugh
Bob Murtaugh, DVM, MS

That’s an interesting question. I mean I think veterinarians need to understand that they are the breadwinners for the hospital team, so they have a home family and they have a hospital family and they need to not divorce themselves from the revenue aspect of the business.

But I think that the way to get to them in addition to sort of playing to that piece, which is you’re responsible for your team is also the fact that you can take financial metrics and create medical metrics from them. You can do comparative statistics around wellness blood work. You can do comparison statistics around diagnostic imaging and you can do dentistry and surgery.

And I think veterinarians in general are a competitive lot and they don’t like to be in second place. Many times, they’re perfectionist, which can get in their way sometimes. But I think if you play to the fact that the average doctor in your practice is doing X and you are only doing half of X, what is it that we can do to help you get the X because your patients need that. That is sort of my approach, it seems to be effective.

Ivan-Zak
Dr. Ivan Zak

That is certainly something that I’ve been looking at so I don’t know if you followed some of the stuff that I have done on burnout and I keep continuing looking into what is it that makes veterinarians to four times more likely to commit suicide or just why do we burnout that bad and one of the aspects that I am paying a lot of attention to right now is that I have this hypothesis that with a full-steam going as a veterinarian from the childhood.

When you were thinking becoming a vet to the point where you become a vet, these are people that set goals for 15 years ahead of them or they’re like you having a couple more degrees on top of that and that’s like, I’m even scared to ask how many years that took. In their sort of like a learning junkies with the goal setting and then when they arrive to this practice, they kind of go to full-stop because they don’t set the next goal.

My hypothesis that actually as the consolidation develops, setting the goals for the veterinarian that continuous their sort of motivation to achieve other goals, financial goals or learning objectives or things like that. It sounds like that competitive edge would be another interesting addition to it to combine with the metrics on financial – as well as outcomes of the treatment plans that they provide. Do you guys do anything with this structure continuous education or is it something that they just have in allowance for? Do you held them to kind of make a plan?

bob-murtaugh
Bob Murtaugh, DVM, MS

They have an allowance. The making of the plan is often a local per regional process in each of our hospitals as medical director and their role is to make sure that their teams have growth opportunities and have reviews and opportunities to be appreciated. We are developing as part of my role, new doctor mentoring programs, rewarding new grads for a continued growth and performance, some additional things that will be coming down the pike.

It’s important to kind of emphasize that lifelong learning and to recognize that individuals have that as need even if they don’t voice it themselves and so we need to build into our scalability if you will, the ability for people to grow individually and collectively and to continue to progress for sure.

Ivan-Zak
Dr. Ivan Zak

Yeah, that makes sense. I don’t know if you – do you know Patrick Welch from VetBloom or Ethos?

bob-murtaugh
Bob Murtaugh, DVM, MS

I hired Patrick Welsh from his residency that I was state when he was a fledging off the model list, so he came to work with me. Yes, I know Patrick. He’s done a great job with that platform. That is a fantastic – that was his growth point. You know, he was an ophthalmologist. He was a good ophthalmologist but that wasn’t satisfying and so that’s a case and point where people can continue to progress and do great things. He is a wonderful individual, and he’s done a wonderful job building that platform for sure.

Ivan-Zak
Dr. Ivan Zak

Yeah, I was just chatting with him the other week and he was telling me about their plan about expanding the before you become the next level in, you know, your board certification but sort of a micro, not courses really but understanding let’s say if I’m a vet just like I am and then if I want to be an ER vet and if I work as someone who is an ER vet, I can complete certain courses and then those be transferable not as big as the board certification.

I think they are doing that with IBM. I don’t know if you’ve seen their work on that but it looks pretty interesting.

bob-murtaugh
Bob Murtaugh, DVM, MS

Yeah, additional certificate program – good stuff, you know?

Ryan Leech, Director of Sales
Ryan Leech

I think it is interesting too as we see a major benefit of the consolidation is how you said that the people that are your regional folks and the integration managers are former practice managers. I think we found that that’s a really interesting growth path coming from the PIMS space, as I was talking about hiring people that have been in that world before. I remember we hired some vet techs to work on our sales team and found that that was really successful place for them.

I think that’s a neat way for people that are looking to grow beyond the clinic. A consolidation should be looked at as a really great career opportunity as well, so need to see that on all levels of the practice.

bob-murtaugh
Bob Murtaugh, DVM, MS

Yeah, we certainly present that. I’m sure others do as well but here’s opportunities that being a part of a larger whole is going to provide to you as individuals and use that as part of the integration process and to lay people’s fears of being part of a bigger group and to emphasize the fact that there are a lot of advantages to being a part of a larger organization as well and that is one of them for sure.

Ivan-Zak
Dr. Ivan Zak

Yeah, it almost like expands that sort of ceiling on the like technician, which is sort of a dead-end profession and then some people quit when they hit these sort of 35 because it is just so hard to wrestle with the dogs, but then the consolidation can really open up their career later for them. The one role that I wanted to talk about, you mentioned in our previous discussions that support role, is that for the regional management?

That working for the hospital’s mindset because some consolidations when we talk to them, their regional managers are taking sort of those people that are coming in to look at your metrics and they don’t really want to talk to them. They are not seen as the support role. How does that work in Pathway? Did those people really work with the hospital managers and help them to accelerate certain KPIs if they’re behind or is there like a toolbox where they come in and have these meetings where they discuss how to progress in certain things that are below the benchmarks?

bob-murtaugh
Bob Murtaugh, DVM, MS

Yeah, I think it is a flip of the org chart if you will instead of sort of a top-down management approach where we tell people and direct people to do things. You actually have to think about it from how can I make this person grow and get to the same result but also keep them from blowing up or burning out or leaving? Since staffing on all levels is our greatest challenge in our hospitals across the profession.

I think it is important to recognize that if the hospitals aren’t staffed, we’re not making revenue and we’re not supporting the business. And so again, it comes back to the fact that it is a veterinary business. It is not a business-business and so if you have to be a regional manager, your role should be to support and coach not come in and have a directive stick approach, if you will to management is my view of it and I think in general, you’ll be as successful or more successful if you adopt the mindset of I work for them instead of they work for me.

Ivan-Zak
Dr. Ivan Zak

Yeah, that makes sense.

Ryan Leech, Director of Sales
Ryan Leech

Well Bob, we hate to cut you off but I know we’re very firm in promising our listeners no more than 30 minutes and there is tons of great things that I know we have to learn from you. You’ve given us some great insights on the initial foundation and a lot of the people portions of it. We’d love to have you back for at least one more episode. I think we probably could do an entire Bob podcast where it’s just you telling Ivan and I all the things that we need to learn.

We’d love to have you back for another episode or two in the next couple of weeks and talk about more things. Again, we really appreciate all of the insights here and we’d love to have another conversation soon.

bob-murtaugh
Bob Murtaugh, DVM, MS

Yeah, I look forward to it. Thanks for the opportunity and it’s great to spend time with you guys and look forward to our next episode, so thank you.

Ivan-Zak
Dr. Ivan Zak

Great to see you Bob and I’m looking forward to the next one. Cheers.

Ryan Leech, Director of Sales
Ryan Leech

To learn more about what Bob is doing with Pathway Vet Alliance, visit them at their website, pathwayvets.com.