Our guest today, Andrew Schultz, Jr, Director of Business Development & Clinical Services at Midmark Animal Health, talks about how dentistry can be applied as a strategy for consolidators, the importance of client education on the necessity of dental cleaning for their pets.
During this episode, Ryan Leech and Dr. Ivan Zak discuss with Andrew how to determine the cost for optimizing dentistry in a veterinary clinic and ways to assess clinics prior to acquisition.
Welcome back to Consolidate That! Ivan, I’m excited for today, why don’t you introduce our guest?
Hi Ryan, I’m very excited to introduce a friend of mine Andrew Shultz Junior. He’s currently a Director of Business Development and Clinical Services for Midmark Animal Health and Project Director for Midmark Academy. Midmark Academy delivers in-clinic dentistry and anesthesia training to more than 500 vet hospitals each year and it’s raised improved courses amount to more than 100 hours of CE.
He currently serves on the board of directors for the Foundation for Veterinarian Dentistry as a representative of industry and as consultant to the board of North American Veterinary Anesthesia Society. He started his work at Midmark as a director of monitoring and critical care, following his 2008 acquisition of Sharn Veterinary. Maker of the Cordel’s vital signs monitor, one of the most popular ones in the industry.
He was president and CO of Sharn Veterinary which was recognized nationally as one of INC Magazine’s 500 fastest-growing, privately held companies and was a finalist to the small business of the year. He holds a masters degree in business administration with an emphasis in marketing and entrepreneurship and began his career as a CPA with Arthur Andersen & Co.
He lives in Tampa Florida with his wife of 20 years, Irma. Three children, Sophia, Drew and Nicholas and two dogs, Nola and Atlas. He enjoys cooking, boating, vacationing and health and ed and is a boy scout leader. Wow, Andrew, good to see you again, welcome to the show.
My pleasure, good to be back.
You’ve been busy.
Yeah, it sounds like. I have a lot of questions, we had this conversation that kind of prompted towards this episode and I was very excited because what we’re going to talk about today is applying dentistry as the part of strategy for consolidators. Not just dentistry as a service but basically, having that as a growth lever that could be applied to the hospitals or even the synergy that could be assessed prior to acquisition and then implemented as a growth lever strategy post-acquisition.
I would love to dive in, why don’t we start with talking about how did you start the dental academy? All of this, it seems like it’s all well put together right now, what prompted you to investigate further, where did you find the opportunities in the hospitals, where this, the whole idea came from?
Well, thanks for asking, Ivan. I think this starts back with, Midmark is an equipment and medical device manufacturing company and before joining Midmark, of course, you mentioned in the bio that I ran Sharn Veterinary and we had one of the world’s top vital signs monitor, the Cardell. What we learned very quickly was we could put out the best equipment in the industry but if people don’t know how to use it, that’s a problem. We would get calls all the time about the vital signs monitor for instance, why the alarms are going off, how do I shut off the alarms, we still get those calls today.
It became very clear that there was an education gap opportunity around things like anesthesia and then when Midmark acquired us, very soon after they acquired the company called Progenywhich made digital dental x-ray. The same thing happened as we were selling those into the veterinary space, we get the question, “Who’s going to train us? Who’s going to teach us how to use the equipment?” and thought, well, the person that comes to install it will show you how the buttons work and the software and they’re like, “No, no, no, no.”
How do you get a full mouth X-ray in a cat versus a great dane, versus a chihuahua, you know? We realized, that’s a clinical question and it’s more of the fact that dental education is a missing link in the veterinary schools and certainly the technician schools. It’s been around a while but up until recently, until the AVMA last fall mandated dental education in the core curriculum for schools, it’s just something that most people learned on the job.
As we’re selling that equipment, we’ve discovered early on that there was an opportunity to provide post-graduate education around dentistry and it started with the clinical skills but it got us thinking as we again, working with more and more clinics that we’re operating dentistry, doing dentistry in their hospital and we’d ask those questions, “Well, what’s your dental program look like?”
We started partnering with some of the leading dental board of veterinary dentists and one in particular, Dr. Cindy Charlier had this idea that dentistry is one of the biggest opportunities for patient care and practice growth in the veterinary profession. There’s been studies that show that over 80% of dogs and cats over the age of three have some sort of periodontal disease or oral disease.
Yet, when we asked the question, “How much dentistry are you doing in your hospital?” we discover that more often than not, they’re just scratching the surface with the disease that’s walking in and out of their doors.
The first step was we had created a network of dental expert trainers that could go into clinics and teach radio rep positioning. This was the clinical skill that went along with the dental radiograph equipment that we were selling. We contracted with – by now, 35 veterinary technician specialists. VTS is the AVTA, puts out different specialties just like the veterinary profession does, there’s a dental specialty so they were very skilled and educated around dentistry and so, we contract with them when somebody buys one of our devices, they will show up and teach the entire staff how to take diagnostic digital dental X-rays, a half-day course.
That’s when we got into being a raise provider of CE. Dr. Charlier with her hypothesis about the idea around the opportunity in dentistry, we collaborated on a study so we decided we would have the secret study, we call it the project milk-bone and the idea was, if we could recruit four or five well-managed practices, practices that were solid practices, practicing good medicine, I think four out of five were AHA accredited hospitals.
Let’s baseline and benchmark their dentistry and then we had an idea of what levers we could pull to help them increase their dentistry, because if we look at the market and we did the benchmarks, whether it’s the AHA productivity pulse points or the widget [incumbelence 0:06:24.9] 100 well-managed practices or you talk to a group like VMG that tracks this, even today, the average rent in your hospital is pulling about three or 4% at best of their overall revenue from dentistry.
That low? It’s just 3%?
Yeah, 3%. When you ask the number, we interview these five hospitals and the project managers and the owners where we said, “You know, how much dentistry?” “We’re doing great with dentistry, we’re booked six weeks out” what have you. Then we’d ask, “What did it look like last year? What percentage of dentistry did you do?” and they’d say, “Well, I don’t know.”
Yeah, well you know, one of them literally said, “I don’t know, we just turn our books over to our accountant and they do our taxes, that’s it. We have no idea” and then we’d ask them, well, can you pull some reports out of practice management software and let us know how many procedures you did and what the revenue was and so forth.
I mean, it took weeks for them to do that, they weren’t already tracking it, they didn’t really understand how to get that information of practice management software. Especially when you consider, if you want to get a good picture of what dentistry is worth, you got to take all the charges that come with dentistry.
You can’t just look up dental trophy revenue because that’s just going to give you that one sliver and not the anesthesia that goes along with it and all the other things that they itemize and worked hard for.
You hit on a good point of sort of the lack of education in the initial kickoff, right? Where veterinarians in school and vet techs in school aren’t learning as much about the dentistry and then I think you said, is it 3% was the revenue that you receive within the clinics?
Is there any other reason besides education that you would find that would be an inhibiting factor for the growth of that? I mean, obviously, people – veterinarians and techs are going to do things that they feel comfortable with but is there any other inhibiting factor to keep that from going more?
Absolutely. In fact, when we did the study, what came out of the study, when we applied the kind of the recipe we thought in this study and that was, you know, first of all, we needed to get everybody together and give them a baseline in dentistry 101 and not just the veterinarians but the technicians, the front office staff, the client care people, everybody, the whole team. Who talks to the clients more than the people up in the front, right?
We applied the training, we had Dr. Charlier come in and train those hospitals for three days, we made sure that they were properly equipped in particular with dental x-ray. Then we began, after baselining and benchmark in their dentistry, tracking their dentistry through that year and that first year, in those 12 months with those five practices, they more than doubled the amount of revenue as a percentage of their overall revenue.
They nearly tripled the productivity, dental revenue per doctor and they grew the number of patients the treated by more than 50%. That was just in their first 12 months and they were just getting started. What we’ve learned from that, we ended up putting together a lecture of the veterinary dental forum called The Five Keys to Success.
The first one was that the owner of the practice and really, everybody needs to understand and buy into the importance of dentistry. I mean, oral disease, periodontal disease is systemic. I mean, the head is connected to the rest of the body, right? It’s associated with certainly, pain and suffering but unfortunately, if you’re not trained in how to identify that disease, you’re not going to treat it, right?
When a dog comes in limping, you know you got to send him to the orthopedic, if they’re getting sick, you send them to the internist. They hide their pain as a pack mentality instinct or whatever and so, they may be chasing their balls and fetching and acting like they’re normal and you would never know that they have an abscess tooth or a fracture or something else going on in their mouth until it gets really bad and that’s when they’re doing the dentistry because the client is complaining that their pet’s mouth stinks or they’re not eating now, it’s gotten so bad that they’re not eating properly or their behavior changes but a lot of times, that comes along in like stage three and four.
The other factors were, then it was the training and education of the entire staff, not just the clinical staff, not just sending a doctor or technician to a weekend wet lab at a veterinary conference. It was, you know, “How do you train everybody?” Get everybody on the same page, speaking the same language, agreeing on the same standards of care and approach and then, creating tools for client education.
The number one reason why pet owners do not get their pet’s teeth cleaned is because it’s not recommended to them in the first place. That was the survey that was done by NABC clinician’s brief about a decade ago and it’s probably still true today.
Now, if it is recommended, the next reason is because their fear of anesthesia. When you ask the staff why do you think that people aren’t taking your recommendation, they might list fear of anesthesia but they also say it was, cost. They’ll say, it cost too much or they have this fear that their clients won’t pay for the dentistry. That’s actually not the case.
If they’re educated and trained, not only in dentistry but even anesthesia, that’s going to help them provide more confident recommendations about dentistry earlier so that it’s preventative and not treating disease that’s progressed and systemic.
Such a common problem in veterinary medicine, not recommending because we think that the client is not willing to pay, it’s always – always we assume that and even in the vet school, I remember, they were teaching us, don’t try to asses the client whether they’ll pay it or not. Do the best recommendation.
I wanted to ask you to repeat the stats, you said that every pet at what age has a dental disease that is – or at least preventative that is worth doing in those stats?
80% of cats and dogs over the age of three have some sort of periodontal disease, that was a stat put out by the AVMA a while ago but it was corroborated by Banfield and several of their state of the pet industry or state of the pet health reports that they put out annually, they’re tracking millions of pets to come in and out of their doors and they – on a perennial basis, list oral disease as one of the highest things that they see when they’re treating their pets.
You’re reminding me that I need to get my older dog’s teeth cleaned.
When was the last time you cleaned your dog’s teeth, Ryan?
Well, you know, it’s a good question, I do give him some greenies and I give him some dentist sticks but he is overdue because the last time I brought him in…
Nobody recommended, blame the vets.
Actually, I brought him in, it was on my wellness plan because I’m a wellness plan advocate and he aspirated from the anesthesia and so they woke him up and did a clean or anything like that and then I had to reschedule and then I get busy and – but the thing is, no one’s called me to reschedule, right? There’s the opportunity there, I’m more than happy to do it, I never say no if my veterinarian is listening, you know that I never say no for any cost associated with my dogs. Just call me, I will book it, I would spend that money, yeah.
I think that was like number four on the list of top 10 reasons why and it was no follow-up.
Yeah, of course, it’s a common problem. Andrew, I want to sort of – because this is a fascinating topic and that’s why I was so excited to invite you because the way I look at this is not only that this is the right thing to do for the pets but it’s an absolutely revenue driver for the clinics.
Because we were so focused on consolidation, at least on this podcast, I just want to put it in perspective and the steps to get there. I just want to be very sort of, step-by-step, what Midmark right now is doing because you described it and you kind of went there but I want to kind of go from there because you start with analyzing the data and understanding what is that dental.
What I captured, let me try to repeat and then you maybe correct me. You guys come in and you actually assess the hospital, what is the percentage of their dentals done right now, right? You guys come in and then you also understand the training and the available training and qualifications of the staff for a diagnosing, describing and identifying dental disease and also, you train them in how to articulate this as a regular sort of maintenance and the preventative measure.
Then, if there’s an opportunity, you can help them to assess the workplace for additional dental suite equipment and stuff like that. Can you open up a little bit on that as well?
Yeah, absolutely. What you’re describing is a process that has evolved over a number of years but when we came out that study, it turned out that one of the study hospitals happened to be owned by one of the top veterinary companies at the time that had about 180 locations and they performed the best out of all five. In fact, they had dropped I think $100,000 to the bottom line, they had grown their dentistry over 10% of the revenue.
In one hospital, a hundred grand in revenue.
In one hospital, yeah and you know, of course, you get an organization like that with multiples and everything else as far as value, you’re like, “How fast can you train all 200 of our hospitals” right? At the time, it wasn’t – we had one trainer and it took three days and all that but as we got into that process and by now we’ve trained more 200 of their hospitals, they have 800 now but we’ve made that happen overtime but that evolutions started with first of all, we need to take a benchmarking survey.
We had put together an online survey that came out of what we did in the study asking questions about the quality of their dental suite, for instance the accreditation tick marks on the AHA accreditation quality dental suite survey and then what equipment they have, what do they do for client education and marketing and then we got down to the performance, you know how much dentistry have they done in the last year and the revenues and the number of patients and what have you and then their fees.
We resolved concerns about how they stack up and so we take the AHA fee reference guide survey and have them complete the questionnaire about what they’re charging for a routine dental procedure and so when they complete that benchmarking assessment online, they get a turnkey report that gives them examples on how they can improve their dentistry in all of those different areas but also shows them how they stack up with practices that are like them and also the ones that we did in our study and so they could see very simply, “Wow, what I am charging for anesthesia falls in line with practices that are my size” or maybe, “I’m out of whack, I’m overcharging and undercharging” and then what does the total dental charge look like.
That’s where we start and then we use that information and this happened when one of these hospitals has been identified as a practice, we’re going to go and train and so now, that training encompasses some online learning ahead of time to get everybody level set and then it’s a two-day event and in a two-day event, it includes the first day as what we call the best practices training. That’s the secret sauce where we get the entire practice together and level set them on dentistry why it’s important, how it’s done.
We’re talking everybody, including the receptionist and the client care people and then there is roleplaying involved about how you communicate a recommendation to a client and we get them interacting and this is led by some of the top board of dentists in the industry. We have now three or four board of vet dentist that do these trainings. They’re partnered with a veterinary technician specialist in dentistry, so it’s like the dynamic duo right there, all in one.
Then after that, at the end of that first day of course, they’ve been keeping track of ideas that are generated from that, you know about how we can improve our particular practice. Some of that is generated automatically through that benchmarking survey but then as the whole team is engaged, they’re getting those ideas done, you know I’m putting them on a list and they have a brainstorming session. They get it all in paper and they’ve already set an implementation team.
That would be key people, they don’t have to be the practice owner or the managing veterinarian or what have you but people that are passionate about dentistry in different departments, the technicians, the receptionist, whatever, there’s a handful of them to get together to take those list and prioritize it and begin working through that how they’re going to implement those different ideas and they begin meeting on a regular basis after that.
Day two is the clinical part, so that’s where we get the veterinarians together with the board of veterinary dentist to talk about pain management, regional nerve blocks, oral surgery, treatment of disease and then they get into a hands-on lab with specimens where they are able to practice the oral surgery techniques and the technicians, they get to work with this veterinarian technician specialists in dentistry on radiograph, acquisition and then cleaning, probing and charting.
Really, that’s their role in this process and they’re going to learn the skills and practice them in that day-long lab and so when they’re done with that training exercise, they’re ready to hit the street running with this new dental program that they have. That’s what we’ve been doing but to back up to your original question, we found that it’s important that they have all of those pieces of equipment in place.
As an expert in the manufacturing of a broad base of those, you know I mean we could basically put in an entire dental suite. We know what is needed and what’s not. When we first started, we would show up and then discover that their equipment wasn’t in order and they’re not delayed when they could take advantage of the training they just did or they were missing equipment that they needed to be trained on and so at this point with some of our veterinary partners, we will go in and do either an in-person or now in COVID a virtual kind of walkthrough of their dental suite.
We make those recommendations to the regional or corporate representatives about that suite what they need. We ran into issues where that was originally communicated to the local staff, it was like, “Oh we’re going to get all of this equipment we’ll get” you do need a monitor and that does entitle CO2 monitoring and you probably need better lighting or ergonomic seating or whatever but you know, it became a case where they had expectations that didn’t match with the capital expenditure budget was or whatever.
Honestly, the most important piece of equipment for the dental training and all of that are just the dental x-ray and the dental machine and then after that, the monitoring and anesthesia equipment. We provide that insight ahead of time so they’re prepared. These trainings or schedule that compliments out so that there’s time to do that walkthrough, get the equipment that they need ordered and installed and what have you and then they’re ready to hit the ground running when they go.
Andrew, this is fascinating. Just from the business perspective, I am thinking about any sort of product will execute it. You know, one thing is to build a tool, another one is to create the training, the assessment of the client, the academy around it, participating in the association, just the whole execution of this is just phenomenal how you did it around this particular aspect of Midmark and I think that one thing that I wanted to touch on is, well one, is after all this equipment let’s say the clinic needed all of it.
What was the average sort of breakeven on the equipment if the clinic really implemented all of these practices had the space and you put it in, let’s say obviously, Midmark makes money on selling that equipment but everything you executed around it, what is the return on investment and when do you breakeven on the equipment that you’ve put in?
Good question and we actually set up a calculator for that. There is a little app that we have online, I mean you can get to it at either dentalcalculator.com or untreatedpatients.com and that’s just kind of a back of the envelope return on investment calculator that asks a few simple questions. One, how many patients do you treat a day that you see for wellness exams? How many dental procedures are you doing per week?
We find those two questions are a lot easier than how many did you do in the entire year last year or how many pets do you treat a year or whatever? It’s like, “Okay, let’s do that in the background, the calculation will be made to annualize those two numbers, right? Then remember that 70% or 80% of cats and dogs with the age of three, we’re looking at about half of the patients that are walking in and out of the door likely have some level of periodontal disease that needs to be treated.
When you take those numbers compared to what they’re doing in dentistry, you could see what that untreated patient number is and when you think of the average cost of a dental procedure or price that the hospitals are charging is between four and $500 depending on the region, you know it will calculate what that – when they see that opportunity, normally it just jumps off the page as like that’s completely unrealistic because it’s like over a million dollars in a lot of cases, right?
We ask the follow-up question is, “What are you willing to invest in your dental program to achieve those goals?” and more importantly, “What goal do you want to set for improvement?” Do you want to just treat 10% more or 15% more or 20% more? When we say 10% more, that’s kind of associated with how we did it in the study where they’ve doubled their dentistry. If you think you’re only averaging, we’re treating about 10% of those that are diseased, so like you have 3,000 patients about half of them, 1,500 have disease, maybe I did 150 dental procedures last year, I am treating about 10%.
If you just wanted to treat 10% more, what does that look like or that becomes a little more realistic. That is maybe 200 or $300,000 worth of opportunity.
I was just going to say, I pulled that up while you were speaking here and one of the cool points I think for the consolidation world is that bottom bullet point that you have on there is if you were selling your practice a year from now and you treated just X percentage more patients, your selling price would be this much higher.
That’s awesome, I love that.
Ivan, if you want to look at that and just I’ll take 10% of that number as a pay raise, those numbers are pretty great and I threw in some really average super low numbers for a veterinary clinic that’s one or two doctor practice and you see a major financial impact on not a huge financial investment just to get started.
If you think on this thesis of the consolidation deck, when you said a hundred grand to drop through into the bottom line, that’s literally two million if you are exiting at 20, those averages has been in the last couple of acquisitions and if you have 200 hospitals, that’s $400 million. I mean the opportunity is massive. I hate to say this guys but we’re running out of almost 30 minutes, which we usually promised 20 but Andrew, this was a very interesting topic but I want to conclude with a couple of things.
Definitely, we already mentioned the calculator. We’ll mention all of these links that you want to mention in the notes but also, one thing that we kind of when we were talking earlier that we discussed is that there probably will be an interesting thing to brainstorm about how to assess clinics prior to acquisition, how to make that as a synergy and a growth lever post-acquisition. If you want to just add a little bit to that, like is there a survey that you can take or use this calculator prior to that and then we’ll conclude with that and we’ll leave the notes on how to find you and your wonderful program.
Yeah, I think the calculator would be a good place to start. You know, it’s just kind of like I said, a back of the envelope kind of calculation. It might be worthwhile looking, having them take the entire benchmarking survey just so we get an idea of that. I mean you and I talked about the opportunity what has happened with the clients we’ve worked in as they’ve gotten to some certain size and they began looking at opportunities and that’s where dentistry pops up but this is years after they started the process.
Why not start with that right? Why not have it upfront?
Right, yeah well, and just like that last calculator says that last point is well, if you are thinking of selling your business, well, if you are thinking of buying and flip it on like
Same thing, yeah.
If you look at the buying of business, what is this worth especially with the arbitrage going into difference what you’re paying and what it’s worth when it’s in the portfolio, if you can first of all, make that assessment about what equipment they need upfront, right? Have that in place.
But again, plan the CapEx.
Have the training program built into kind of that acquisition then you know, I know that there is a lot that transpires after acquisition and as far as integration that kind of stuff but the dovetail with something that you had talked about, you know other places about goal setting and purpose and all that, well what a better place to rally the troops than to give them this new set of goals, these new aspirations around dentistry when it hits it’s better patient care, it’s fulfilling for the team to learn a new skill as you’re investing in them and at the same time, you are getting this huge return on investment.
There’s just so much opportunity there and to do it earlier than later, I think it makes sense if you get that planning involved.
Andrew, one of our final questions, a fan favorite, we hear about it all the time is a book recommendation. What’s a book, something that you’re reading or something that you’ve read do you think our listeners would find value in?
Well, I thought about this and The Checklist Manifesto.
Love that guy.
By Atul Gawande. Actually, he was supposed to speak at the AVMA conference.
I don’t know if he’s still going to be on the virtual speaker list.
I would love to hear him, he is an amazing author and yeah that book was so inspiring to me for Smart Flow functionality and many, many things. That’s so awesome.
Absolutely. Yeah, well, we just build a checklist into our new vital sent monitor we launched, part of that and we can cover that on a different podcast maybe about the idea of anesthesia training and how that fits into the whole equation around dentistry but to go back to one of the original points you were making about the opportunities these consolidators have is that how do you make those practices compete with omnichannel, right?
Because the omni channel includes, I mean, the traditional sources of income are being taken up by Chewy and that’s far as
Yeah, there is a lot of challenges and then what about a way to use your staff? Because lots of these procedures could be done by technicians, so you scale your pair professionals to actually and raise their opportunity to actually learn something new. I’ll have to put the breaks to this. Andrew, I think that we’ll need to have you back for anesthesia talk as well. This was fascinating and I really appreciate your time and finding the time for us. Thank you for participating.
Thank you. I enjoyed it.