March 01, 2009

 

 Economy means slowdown for some veterinarians - March 1, 2009

 
 

A number of small animal practices have reported a drop in client visits

posted February 15, 2009

 
 
 

Transactions at small animal practices have been flat or falling during the recent economic downturn, according to statistics from the National Commission on Veterinary Economic Issues and a study by Brakke Consulting.

The NCVEI Economy Tracker and Brakke's study on "Economy and Pet Care" also found that mean transaction charges increased only moderately in 2008.

Dr. Karen E. Felsted, NCVEI chief executive officer, said, "Growth in 2008 was quite a bit less than it has been in recent years, and the growth rate declined as you got toward the end of the year."

According to the Brakke study, about a quarter of practices did report a decline in revenues for the year. A survey by the American Animal Hospital Association in July 2008 indicated that revenues dropped for about 28 percent of the 550 respondents from the first half of 2007 to the first half of 2008.

Yet, total U.S. spending on veterinary services has never turned negative during other recent recessions, according to a 2007 report by William Blair and Company.  

Tracking the trends

More than 200 practices, mostly small animal, had entered data into the NCVEI Economy Tracker as of early February. Revenues increased by a mean of 4 percent from 2007 to 2008, with mean transaction charges increasing by 5 percent but the number of transactions decreasing by 1 percent.
 

Dr. Felsted said the NCVEI also conducted a poll on its Web site in January regarding layoffs of veterinarians. Out of about 250 respondents, 5 percent said the recession caused their practice to lay off at least one veterinarian, and 16 percent said the recession is causing their practice to consider veterinarian layoffs.

"From talking to veterinarians and from talking with my consulting colleagues, everybody's feeling the effect one way or the other. Everybody's nervous," Dr. Felsted said. "There are some practices out there that are doing just fine, but I think the majority of them are feeling the pinch."

The Economy Tracker features a "Recommended Treatment" section that discusses strategies for weathering a slowdown. All NCVEI tools are available for free to AVMA and AAHA members at www.ncvei.org.

The economic downturn may force practices to improve business management, Dr. Felsted said, particularly by becoming more efficient. She predicted that few practices will shut their doors, though.

"I think it's a time to be cautious," she said. "I don't think it's a time to panic."

Dr. Felsted said most pet owners see veterinary care as a necessity unless they are living hand to mouth. She advised practitioners to continue communicating the value of their services, while working with clients who have fallen on hard times to provide the most vital veterinary care.  

Reactions of clients, veterinarians

The Brakke study on "Economy and Pet Care" drew on surveys from October and November 2008 of 1,500 cat and dog owners and 225 small animal practitioners. 
 

According to the research, 46 percent of pet owners reported that their financial situation was worse in 2008 than in 2007. About 27 percent said the employment status of the chief wage earner had declined during the past year.

John Volk, a senior consultant at Brakke, said about 15 percent of pet owners reported spending less on veterinary services—with about half of that segment saying they were trying to cut costs for economic reasons.

The study found that a third of veterinarians reported a drop in visits. The mean transaction charge increased a little more than 3 percent overall. Veterinarians who reported a decrease in mean transaction charge said clients were opting for less-expensive treatments, refusing or postponing nonessential procedures, and refusing or postponing such services as diagnostic procedures.

"I think what the study shows is that clearly the industry is not recession-proof," Volk said.

The Brakke study estimated a 2 percent increase in revenues for 2008 across responding practices, Volk said.

According to the research, 44 percent of veterinarians canceled or postponed capital investment such as equipment purchases, and 40 percent canceled staff additions or laid off staff.

"When we asked about 2009, pet owners tended to be a bit more optimistic about their pet expenditures than were veterinarians," Volk noted.

Many of the pet owners predicted that they would maintain or increase spending on their pets in the coming year.  

Surviving the slowdown

Dr. John W. Albers, AAHA executive director, said the association's informal surveying indicates that some small animal practices continue to grow while others have seen a decline in revenues.
 

"Revenues are definitely less robust or flatter than they have been in the past," Dr. Albers said.

While the economic downturn has impacted veterinarians, Dr. Albers doesn't think the impact is devastating. He's heard of practices that are delaying hires or postponing plans to add staff, but not of practices with a lot of layoffs or drastic cutbacks.

Dr. Albers said some practices that have seen a slowdown in client visits are using the time to update records, send out newsletters, or send extra reminders to clients.


More than 200 practices, mostly small animal, had entered data into the NCVEI Economy Tracker as of early February. Revenues increased by a mean of 4 percent from 2007 to 2008, with mean transaction charges increasing by 5 percent but the number of transactions decreasing by 1 percent.

"Clearly, the economy has everybody tense. People are really watching it very carefully," Dr. Albers said. "I think practices are monitoring income and expenses a lot more closely than they may have in the past."

At press time, AAHA was working on a survey to compare practice revenues for the last half of 2008 and the last half of 2007.

The association also has formed a joint task force with VetPartners, formerly the Association of Veterinary Practice Management Consultants and Advisors, to write and distribute articles about minimizing the impact of the economic downturn.

Dr. Albers added that he has concerns about news reports with anecdotes about pet owners cutting back on veterinary care or relinquishing animals to shelters. He thinks most pet owners will keep their animals and continue paying for veterinary care even if they need to cut back on other spending.  

Recession spending 

The investment firm William Blair and Company took a historical look at recession spending on veterinary services in a 2007 report on industry trends.

According to the analysis, spending on veterinary services increased during each of the years since 1972 in which the real gross domestic product declined—1974, 1975, 1980, 1982, and 1991.

"If history is any predictor, we might get scuffed up in the short term—but should come out in the long term just fine," said Dr. Richard A. Goebel of Simmons Veterinary Practice Sales and Appraisals, current president of VetPartners.

Dr. Goebel said Simmons has seen transactions relevant to practice sales increase more than 20 percent from the last half of 2007 to the last half of 2008, suggesting to him that many buyers and lenders still have confidence in the veterinary market.

Local economic issues such as job losses may impact local veterinary markets, but experts have not discerned obvious regional patterns. Dr. Felsted said the NCVEI Economy Tracker has not found clear regional differences. The Brakke study found that the economic downturn is having the most impact on pet owners in the Midwest, but Dr. Albers of AAHA said he hasn't seen much regional variation in how practices are faring.

Across the country, though, practitioners are responding to the economy by hunkering down for the rest of 2009.

"I think people are prepared that this will last a while," Dr. Felsted said.