By Cynthia Bournellis

It used to be that a veterinary hospital was a recession-proof business. Not anymore. Vet hospitals are just as vulnerable to downsizing if not to going belly up.

Rather than roll over, Adobe Animal Hospital, a prominent pet hospital in downtown Los Altos, is positioning itself for profit despite the flat economy. Furthermore, it’s doing it on the heels of the breakup between business partners Jerry Berg and Dave Roos - a breakup that will cost Adobe $1.5 million.

Veterinarians Roos and Berg ran Adobe for 37 years. In August, Berg retired from the practice. The split wasn’t exactly amicable, as often is the case when partners don’t always see eye-to-eye. There came a point where their philosophies, ideas and management styles clashed.

“(Nonetheless) I will say that you won’t get finer care in California than at Adobe,” said Berg, whose buyout settlement will be paid out over the course of 10 years.

Berg, who is relocating to Arroyo Grande, Calif., said he will continue to advise his clients on issues concerning geriatric care and transitioning to another primary care physician.

With Roos assuming sole ownership, he and his staff are making operational changes that otherwise had been delayed. For starters, a formal management team now exists. “I believe in making decisions by consensus,” said Roos, who values his staff’s input.

“The team is like the difference between having anarchy or having structure … people now feel like their opinions can be heard and changes can be made,” said Brian Maxwell, D.V.M., who wants to open an Adobe day clinic as early as next year.

However, the biggest concern on Roos’ plate is the viability of the hospital, which “depends on us making sound, financial decisions,” he said, the finances of which are burdened by the buyout of Berg.

Not an easy task for a small business whose monthly overhead is $600,000. Half of that expense is Adobe’s 90-member staff, a necessity Roos said is critical to ensuring that the animals get the very best care.

To help Adobe reach its goals, Roos hired Sherry Freitas in August to oversee finances. Coming from the tech industry, Freitas quickly put her MBA to work and has already saved the hospital money by cutting internal costs. For instance, going with a new health insurance provider has resulted in a $15,000-a-year savings, which can be reinvested in the business.

In September, Adobe upgraded to a new, $50,000 ultrasound machine, which helps doctors make better diagnoses. A new administrative software system, which would improve integration between the hospital’s accounting and medical practice software programs, is also under review.

Revamping the accounts receivable process has also helped tame costs. While Adobe has always had a “pay upfront” policy, which was rarely enforced, it will offer a payment plan in certain situations for existing clients rather than turn them away, Freitas explained. However, new clients are required to pay at time of service.

As operational changes continue to unfold, Adobe will break even this year, grossing roughly $7.5 million. “The economy has affected us, because people who have been laid off have put off pet care expenses like elective surgery,” Freitas said.

While making a profit is key, Roos admitted that making good decisions for the animals, his customers and his staff doesn’t always show up on the bottom line. “It just makes me understand that we are doing good things.”