Ripple effect of Megastudy still being felt

"There is a group of serious problems that need special and sustained attention. These problems are frequently manifested by economic pressures in some segments of the profession.

"At the same time, opportunities abound but may not be realized unless veterinarians are able to reconcile the need to adapt and change current inefficient structures, inappropriate business practices and attitudes, and habitual ways of delivering services that may be incompatible with future success."

These pronouncements were first uttered 20 years ago, when the JAVMA published the executive summary of "The Current and Future Market for Veterinarians and Veterinary Medical Services in the United States." Known also as the Megastudy, it was the first of its kind for veterinary medicine: a comprehensive and far-reaching analysis of such issues as supply, demand, income, gender, and the characteristics of successful practices. It identified emerging trends such as substantial increases in veterinary educational debt, emergence of large corporate organizations that deliver veterinary services, and changes in how people view their pets and other animals.

The organizations that commissioned KPMG LLP Economic Consulting Services to conduct the study—the AVMA, American Animal Hospital Association, and Association of American Veterinary Medical Colleges—interpreted the findings as a call to action requiring fundamental changes within the profession to ensure its relevance and economic health in the 21st century.

Highlighted in the 22-page executive summary were six critical issues that the study authors said veterinary leaders needed to remedy to ensure the economic viability of the profession:

• Stagnant veterinary incomes.
• The economic impact of large numbers of women in the profession.
• Global demand for veterinary services.
• Inefficiency of the delivery system.
• An oversupply of veterinarians.
• The absence in veterinarians and veterinary students of some skills and aptitudes that contribute to financial success.

"It really was a watershed for the profession," said John Volk, an analyst with Brakke Consulting, referring to what would be known as the KPMG study or Megastudy (J Am Vet Med Assoc 1999;215:161-183). "It led to the formation of the National Commission on Veterinary Economic Issues and made the profession aware that there were things they needed to address."

The NCVEI was established in 2000 by the AVMA, AAHA, and AAVMC as an independent, not-for-profit organization to identify strategies to solve the problems identified in the Megastudy. Dr. Karen Felsted, NCVEI CEO from 2008-11, described the study as the foundation for the profession's subsequent focus on the business of veterinary medicine. "Most every other study out there has built on the Megastudy in one way or another, and you definitely saw changes within the profession as a result," she said.

A fair price

In the two decades since the executive summary's publication, veterinary economics has risen in importance. The Veterinary Business Management Association for veterinary students originated at the University of Pennsylvania in the early 2000s, and veterinary curriculums have since expanded to include business courses. Continuing education on practice efficiency and profitability has become common. Additional economic studies of various aspects of veterinary medicine have been published. The AVMA created a new staff division and new volunteer committee to study the topic and began holding annual economic summits.

Prior to the study, most veterinarians did not seem overly concerned with the dollars and cents of running a veterinary practice. Such an attitude was not only bad for business but also was seen as an existential threat. As the Megastudy revealed, real income for veterinarians declined between 1985-95, an alarming finding given the robustness of the U.S. economy and rising incomes for physicians and dentists during that period.

The Megastudy authors warned that stagnant salaries would not only make it difficult for veterinarians to repay their student loans but also could make a career in veterinary medicine less appealing.

One reason for low veterinarian income identified by the Megastudy was veterinarians charging less than what customers were willing to pay. The AVMA's current chief economist, Matthew Salois, PhD, said the Megastudy was key to furthering the profession's economic viability by showing that many veterinary practices were underpricing their services, while the more successful practices were better aligned with what the market was willing to pay.

"The findings in this study went a long way to establishing what, at the time, was a really important prescription around 'You need to raise your prices because you're leaving money on the table, and it's going to affect the economic sustainability of your practice,'" Dr. Salois explained.

I think it's worth reminding ourselves of what we said 20 years ago, where we've made progress, and where we still have some room to grow,

Matthew Salois, PhD, AVMA chief economist

Under the leadership of Howard Rubin, the NCVEI's first CEO, the national commission in 2001 rolled out an interactive website that offered tools teaching users about veterinary pricing strategies. Unveiled in stages, the website expanded to cover companion animal, equine, and food animal practices.

The Megastudy essentially gave veterinarians permission to raise prices, resulting in higher incomes. The problem was that veterinarians soon grew overly reliant on fee increases as a business model and neglected to incorporate additional measures for growing practice profitability, such as staff utilization and training. They also failed to justify higher prices to clients, resulting in sticker shock.

For example, Consumer Reports published an article in 2011 suggesting some veterinarians may be overcharging for their services and advised pet owners to shop around for lower prices. Two years later, the ABC news program "20/20" aired a story also critical of veterinary prices. "All of a sudden, the veterinary profession, which had been highly respected up until this point, was now portrayed as money hungry and a bunch of price gougers," observed Dr. Peter Weinstein, chair of the AVMA Veterinary Economics Strategy Committee.

While the NCVEI did a good job of collecting data and benchmarking prices for veterinary services, Dr. Weinstein believes the commission presented fee increases as a quick solution but didn't help veterinarians sustain profitability in their practices. "What the NCVEI did was like lab work, which is important," he said. "But what do you do with that information? There weren't enough tools coming out to treat the diagnosis they came up with."

By 2011, the NCVEI had run its course. AAHA, citing problems with the national commission's business model, severed ties with the organization. The following year, the AAVMC declined to continue funding the commission. As a result, the AVMA bought NCVEI's assets and dissolved the organization. In its place, the AVMA established the Veterinary Economics Division and Veterinary Economics Strategy Committee.

"Now we have a veterinary economics division staffed by experts doing research, and we have an economic strategy committee with veterinarians who are in the trenches and feeling the pain," Dr. Weinstein observed. "There's more research being conducted, more data being collected, and hopefully, by the end of the year or the next two years, there'll be more treatment plans available to practices that they can use to be successful."

Not without debate

Reaction to the Megastudy was mixed. As JAVMA News reported at the time, responses ran the gamut, from high praise to indifference to barely tempered outrage. Food animal veterinarians were upset that their sector of the industry was included in the report after they had received assurances otherwise. Female veterinarians objected to the implication that they could harm the profession's economic viability because their income was lower than that of their male counterparts and they were less likely to pursue competitive pricing strategies.

Because they weren't consulted during the data-gathering phase of the study, the American Association of Swine Veterinarians and the American Association of Bovine Practitioners considered the study's conclusions flawed and worried about the potential fallout. "If you look at the steering committee for the Megastudy—AVMA, AAVMC, and AAHA—while they're all very esteemed colleagues, there wasn't one person on there really who was involved in food animal private practice. That, and they did not reach out to ask for that expertise from either association during the study," recalled Dr. Tom Burkgren, who was executive director of the AASV at the time.

The gender-related concerns were voiced at the time by the Association of Women Veterinarians, which has since disbanded. Dr. Weinstein believes the study missed the mark on this topic. "I think that there is nothing in terms of gender that prevents one gender or the other from making more money," he said. "I think it's just really having the knowledge, skills, and attributes and the team around you to make you more successful."

Eventually, after many heated discussions, all three organizations agreed to move beyond debating some of the Megastudy's conclusions and to instead support the NCVEI's goal of improving the bottom line for everyone in the profession.

Dr. Salois marvels at the Megastudy's relevance 20 years later. Issues identified in the study that are still front and center today include pricing strategy and income, escalating educational debt, veterinary technician utilization, practice efficiency, corporate practices, and opportunities for pet health insurance to play a greater role in veterinary care. Areas that have emerged since the report's publication include access to veterinary care, the lack of underrepresented minorities in the profession, the rise of online pharmacies and retailers, and telehealth and telemedicine.

"I think it's worth reminding ourselves of what we said 20 years ago, where we've made progress, and where we still have some room to grow," Dr. Salois said.

"I think the economic state of our profession is strong," he added. "There's a lot of rhetoric out there that's negative, that's doom and gloom. There are challenges that we need to face, but we've got the right agencies, the right people, and we've got the passion and resolve to address them."

Read "The Current and Future Market for Veterinarians and Veterinary Medical Services in the United States" (PDF).

Related JAVMA content:

Getting down to business (Oct. 15, 2011)

Board looks at veterinary economics, AVMA finances (June 1, 2011)

"The golden age of veterinary medicine" (May 1, 2001)

National commission targets key areas (Oct. 15, 2000)

Veterinarians eager to talk about profession's future (Sept. 1, 2000)

Think tank reacts to KPMG study (Jan. 1, 2000)