Veterinary specialists band together

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A new umbrella organization for veterinary specialty practices looks to take shape by next year after a meeting held in Boulder, Colo., this September.

The veterinary specialty practice consolidation initiative comprises a group of 60 veterinary specialty practice owners and executives representing 38 businesses. They met for three days to discuss the current challenges and opportunities facing the industry.

Challenges include expensive equipment costs, a limited pool of qualified job candidates, and practices making the transition to a larger scale of operation.

Dr. Dwight Gaudet, managing partner for Veterinary Surgical Associates and Veterinary Medical Specialists in Concord, Calif., says consolidation allows greater leverage in negotiating purchases of supplies and contracts with insurance companies or other benefit providers, as well as assistance in developing a training and recruitment process.

"The very high expense of specialty facilities and equipment, such as CT scanners or MRIs or linear accelerators, those are big factors for large specialty hospitals. Hopefully this effort will address those issues from a financial position," Dr. Gaudet said.

Dr. Gaudet said offers from private equity firms to facilitate consolidation among growing specialty practices was one motivating factor to initiate the process.

"The thought was that if there were financial benefits to be achieved in consolidation, then the profession might look to keep them in the profession rather than to have dollars go to groups that facilitate consolidation, like private equity groups," Dr. Gaudet said, noting successful consolidation models already exist in the human medical profession.

In turn, thoughts of consolidation also prompted practice owners to consider what they wanted for their business and what their priorities were.

"In many discussions leading up to meeting and then there at the meeting itself, many of these veterinarians who are nearing the end of their career have concerns for the veterinary ethos," Dr. Gaudet said. Many larger specialty practices, by growing as fast as they have, are now struggling with maintaining a common vision, practice philosophy, and core values.

It is not uncommon to now see specialty practice hospitals with staff numbers more than 200, or those that have gross revenues from $10 million to $20 million a year in gross revenues; a select few are starting to reach the $30 million mark, Gaudet said.

"Typically a business in any industry, when they reach a certain scale—whether it's $15 million or $20 million—requires a different level of skill set and expertise. Rather than having 30 or 40 practices around the country crossing that threshold in the next few years independently, it makes sense to do a quantum shift in that particular arena and consolidate so as to more efficiently get the best in management and leadership expertise in knowledge and skill set," Dr. Gaudet said.

The focus of the new group is a commitment to preservation of the veterinary ethos and representative governance. The group developed an organizational model that would allow participating practices to maintain autonomy while improving their practice capacity and market position by pooling resources.

The new organization will launch sometime in 2009, with initial membership to include up to a dozen practices having cumulative gross revenues in excess of $170 million. Plans are to expand the group by about four new practices each year thereafter.

Existing similar organizations for veterinary specialty practices include the VCA Animal Hospitals network, the Veterinary Specialty Practice Alliance, and the Veterinary Specialists in Private Practice group.