Revenue growth can't hide 'alarming' decline in client visits

Survey: Income increased at many pet practices in 2010, but frequency of veterinary visits remains depressed
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Most U.S. companion animal practices saw modest revenue growth in 2010 despite a drop in patient visits.

A survey of more than 3,800 U.S. practices encompassing data from over 19 million pet records found 58 percent of the practices had revenue increases. Overall, revenues increased 3.1 percent this past year, up from 1.4 percent in 2009.

The American Animal Hospital Association's State of the Industry 2010 Review also showed a decline in the numbers of patient visits in 2010—dog visits fell by 0.6 percent, cat visits by 1.7 percent. The finding underscores an "alarming" trend predating the 2007 economic recession of depressed numbers of client visits.

Although higher veterinary service fees are cited as one of several factors explaining the low numbers, consumers show little reluctance when it comes to spending on animal-related products and services. Last year, the U.S. pet industry recorded just more than $48 billion in expenditures, a total expected to be surpassed in 2011.

Industry observers say the veterinary profession's struggle to fully capitalize on this trend is a result of a failure to effectively communicate to pet owners the value of veterinary services and the importance of regular wellness care for pets.

That many companion animal practices saw revenue grow is welcome news to AAHA Executive Director Michael Cavanaugh, but his enthusiasm is tempered by the fact that the number of patient visits continues to shrink.

"That's certainly alarming, considering the numbers of pets in U.S. household don't seem to be decreasing," Dr. Cavanaugh told JAVMA News after AAHA announced its findings March 24 at the association's meeting in Toronto.

In fact, pet ownership appears to have climbed to a record level. In April the American Pet Products Association announced that its most recent National Pet Owners Survey indicates the number of pet-owning U.S. households had increased by 2.1 percent to an all-time high of 72.9 million.

Moreover, as the post-recession recovery continues, the APPA is projecting a 5.1 percent increase in consumer spending on pet-related services and products in 2011, with the total expected to exceed $50 billion.

The slight revenue growth most AAHA practices saw in 2010, despite the soft demand for veterinary services, is due to a combination of price increases and new service options, Dr. Cavanaugh explained. Fee hikes can help make up for declining visits in the short term, but raising prices to account for dwindling numbers of clients isn't a sustainable business strategy, he noted.

"If our profession chooses to continue using price increases to make up for that deficit, then that will not be a pretty picture, long term," he said. "I think we're smart enough not to do that, but we're at a point where many veterinarians are going to have to re-evaluate how they've been operating."

While the AAHA survey did not examine why veterinary visits for cats and dogs are declining, a major report released earlier this year—the Bayer Veterinary Care Usage Study—identified a number of factors associated with the trend (see JAVMA, March 1, 2011; and JAVMA 2011;238:1275-1282).



In addition to the economic recession, the Bayer study attributed the decline to fragmentation of veterinary services, consumer use of the Internet for animal health information, routine checkups being seen as unnecessary, higher than expected veterinary service fees, and difficulties associated with taking a cat to the clinic.

Dr. Cavanaugh says this and other economic analyses of companion animal medicine strongly suggest that the strength of the human-animal bond alone can no longer be counted on as the business driver. "Before this recession, we enjoyed a period of time where the entire veterinary industry was busy. When times are good it can be tough to make changes that make good sense, because you are busy and comfortable," Dr. Cavanaugh said.

"We in the veterinary world have done an inadequate job of communicating the importance of proper wellness care, and probably an even poorer job of communicating and demonstrating the value of the services we're providing," he explained.

Future economic success will require veterinarians to be more effective communicators of their value and how they are an essential component of a pet's health and well-being, according to Dr. Cavanaugh.

Veterinary practices will also have to aggressively compete with Internet stores and the large box chains by taking pains to provide consumers with convenience and value. Options include hospitals offering their pet products online or making the prices for flea-and-tick and heartworm products competitive with prices offered by nonveterinary retailers. Notably, AAHA practices reported a drop in 2010 in the numbers of doses of flea-and-tick and heartworm treatments dispensed for cats and dogs.

"Does it make sense to earn a little bit less on some of those items to keep people coming into the practice? Yes. Every time they're there, you've got an opportunity to bond them to the practice and educate them about proper wellness care," Dr. Cavanaugh said.

Findings from the AAHA review are consistent with what is known about the state of U.S. companion animal medicine, according to Dr. Karen Felsted, CEO of the National Commission on Veterinary Economic Issues, who, like Dr. Cavanaugh, thinks effective client communication is no longer a luxury and is tied to economic growth.

When people understand the veterinary services they're purchasing can lead to their companion animals living longer, healthier lives, Dr. Felsted says, they are less likely to balk at the costs than are those who lack that information.

"Pet owners are concerned about prices, but it may be that it's not so much about the dollars paid as they don't find value in what they purchased," she explained. "If we can do a better job in communicating value, communicating the need for veterinary care, and providing the client with a better service experience, that will help them be more comfortable with the price."

The AAHA review reiterated that cats are a major, mostly untapped growth opportunity for veterinary practices. Dogs continue to outpace cats in veterinary visits, according to the survey, accounting for 70.4 percent of a practice's patients and generating 79.1 percent of revenue. The mean transaction charge for a canine patient in 2010 was $109.26 compared with $90.73 for a feline patient.

Bayer's study found several reasons for the low frequency of cat visits. Many cat owners said they would bring their pet to a veterinarian only if the animal were sick, but the primary reason cited is the stress the visits cause the cat.

For that reason, veterinary practices need to make every effort to manage not just the cat's experience while at the clinic but the owner's as well, Dr. Cavanaugh explained. "We know that the owners are nervous and stressed, and the cats are stressed when they come in," he said, "so we've got to anticipate that and do everything possible to make it a more soothing experience for the cat and owner."

Keeping cats from seeing other cats and dogs when they enter the practice through the use of partitions and elevated areas where their carrier can be placed, for instance, are simple strategies to manage the cat's experience.

The American Association of Feline Practitioners and the International Society of Feline Medicine have developed feline-friendly handling guidelines that demonstrate low-stress handling techniques for cats. Dr. Cavanaugh expects the guidelines will be a valuable practice resource to those working to make their practices more "feline friendly." The CATalyst Council is another organization working to improve cat health through regular veterinary visits.

Correction: A earlier version of this article incorrectly referred to a drop in new patient visits rather than a drop in patient visits.