Sizing up
Veterinary practices in the United States currently span a spectrum of sizes, but the number of veterinarians per practice has increased noticeably in recent years.
For all private practices combined, the mean number of full-time–equivalent veterinarians per practice increased from 2.08 in 1999 to 2.44 in 2009, according to the AVMA Biennial Economic Survey.
For companion animal–exclusive practices specifically, solo practices are now less common than practices with more than three veterinarians. Many companion animal practices have even more veterinarians, of course, and many have multiple locations. Meanwhile, the biggest corporate practices, Banfield Pet Hospital and VCA Antech Inc., continue to expand.
Business considerations and veterinarian preferences, not the increase in the supply of veterinarians, seem to be the primary factors contributing to the growth in practice size. However, it has yet to be determined what effect, if any, the weakening demand for veterinary services might have on the trend toward larger practices.
Practice growth
The AVMA Biennial Economic Survey collects economic data from a random sample of all practicing veterinarians every two years and asks respondents who are practice owners to report information about their practices. The survey revealed that the number of veterinarians at companion animal–exclusive practices increased from a mean of 2.09 in 1999 to 2.39 in 2009.
I think it's possible to be economically successful at various levels of practice size, although some efficiencies are only possible in a larger practice.
Dr. Karen E. Felsted, former chief executive officer, National Commission on Veterinary Economic Issues
The American Animal Hospital Association also surveys veterinary practices about economic data on a biennial basis and publishes the findings in Financial & Productivity Pulsepoints. The respondents, mostly small animal–exclusive practices that are AAHA members, had a mean of 2.7 full-time–equivalent veterinarians in 2009, up from 2.5 in 2007.
Practice size has increased for some key reasons, said Dr. Karen E. Felsted of Felsted Veterinary Consultants Inc. She is the former chief executive officer of the National Commission on Veterinary Economic Issues, which recently dissolved but sold its assets to the AVMA.
Dr. Felsted said larger practices clearly benefit from economies of scale such as efficient use of space. Larger practices also can provide veterinarians with good work hours while providing clients with a broader range of services and longer office hours.
The shift toward larger practices is a relatively slow-moving trend because smaller practices offer other advantages, Dr. Felsted said. Owners in smaller practices retain more independence, for example, and smaller practices are able to offer very personal service to clients.
"I think it's possible to be economically successful at various levels of practice size, although some efficiencies are only possible in a larger practice," Dr. Felsted said. "It will be difficult for the smallest practices to maximize usage of equipment, space, and management personnel.
"The biggest practices have to focus on not accumulating too much space or management overhead."
Dr. Richard A. Goebel of Simmons Veterinary Practice Sales and Appraisals said smaller practices remain popular with buyers. Nevertheless, he said, economies of scale might be increasingly important to practice success as some clients are unwilling or unable to absorb sizeable fee increases.
"How can we continue to provide high-touch, high-tech care, good-quality medicine and surgery, and not raise prices? Well, the only way you can do that is to be a little bit smarter about the utilization of your resources and be more diligent on the expense-control side," Dr. Goebel said. "The reality of the marketplace, I think, drives us to be more efficient. And being more efficient often means getting a little bit bigger."
Dr. R. Michael Thomas, president of Noah's Animal Hospitals in the Indianapolis area, promoted efficiency and practice consolidation as 2001-2002 AAHA president. Ten years later, he thinks veterinarians need to continue to reduce fragmentation.
"Historically, we've been a very independent lot, and we kind of like being on our own, at least many of us of my generation," said Dr. Thomas, who has been in practice for decades.
Next generation
Many veterinary students are looking for positions at large practices and not necessarily for ownership, said Dr. Goebel, who has taught on business issues at the Purdue University School of Veterinary Medicine.
Joseph M. Esch, president of the Student AVMA, said, "I think that there is still a wide variety of veterinary students out there. Some who want to work in large practices, and those who don't. Those who want to be owners and those who want to be associates."
Esch said students who plan to work in a large practice may have less interest in things such as managerial and financial aspects of practice and more interest in aspects of the practice such as mentorship and high-end diagnostic tools. Students who plan to work in a small practice or to start a practice may have more interest in autonomy, along with the business aspects of practice.
Among companion animal–exclusive practices, the ratio of owners to total veterinarians decreased from 0.65 in 1999 to 0.56 in 2009, according to the AVMA Biennial Economic Survey. A recent study of first-year veterinary students at North Carolina State University found that only 52.5 percent expected to become practice owners (JAVMA 2011;239:329-334).
With rising student debt, more students might decide to become practice owners because the higher incomes associated with ownership would help when it comes to paying off educational loans, said Dr. Dennis M. McCurnin, a professor of surgery and management at the Louisiana State University School of Veterinary Medicine.
Dr. McCurnin said many veterinary students, regardless of whether they want to become owners, will continue to look for positions at large practices—for the ability to develop special clinical interests as well as for good work hours, mentorship, and high-end diagnostic equipment.
Spectrum of sizes
The spectrum of practice sizes has shifted notably away from solo practice.
The AVMA Biennial Economic Survey found that the proportion of companion animal–exclusive practices with one veterinarian decreased from 52.4 percent in 1999 to 21.1 percent in 2009. The proportion with four or more veterinarians increased from 10.6 percent in 1999 to 26.3 percent in 2009.
The AAHA economic survey found that 23.2 percent of respondent practices had one or less veterinarian in 2009, while 27.1 percent had 3.1 or more veterinarians. Two-thirds of respondents with 3.1 or more veterinarians were in urban areas, and half of respondents with one or less veterinarian were in town or rural areas.
Solo practitioners say they still have a place in both the cityscape and the countryside, regardless of whether solo practice is a starting point for building a larger practice (see story).
Dr. Goebel noted that solo practices are less expensive for buyers than multiple-veterinarian practices, although the cash flow can be so low that the buyer will struggle to pay off any loan for the purchase.
Dr. Thomas has experienced much of the spectrum of practice sizes himself.
Early in his career, he purchased a one-veterinarian practice in Miami with a partner. The practice grew as they provided a variety of services, enjoying many facets of veterinary medicine. Eventually, a third veterinarian joined the practice.
Returning to his native Indianapolis, Dr. Thomas purchased a one-veterinarian practice on his own. The upsides of being a solo practitioner included having more control of the practice and fewer employees to manage, he said.
"I knew the clients personally, I knew their pets, and could be much more customer service-minded to every individual," Dr. Thomas said.
The downsides included the difficulty of taking time off and not having colleagues to consult on-site.
Over time, Dr. Thomas added other veterinarians to the practice. Then, he started to buy out practices from retiring veterinarians, sometimes keeping the additional locations and sometimes keeping only the additional clients. Now, the practice has six locations, including a 24-hour location.
The growth has allowed the practice to develop a deep pool of expertise, offer flexible work hours, provide longer office hours and a broader range of services, increase purchasing power, and assign staff members to particular duties such as management and bookkeeping.
Dr. Thomas distinguishes between the growth of large local practices and the rise of corporate practices. He sees corporate practices as a mixed bag for fragmentation, depending on whether they acquire or open locations. In addition, he said, corporate practices often focus more on the bottom line than many veterinarians do—for better or worse.
Banfield and VCA representatives say their models of practice are not dissimilar from other practice models, with profitability being one consideration of many (see story).
A practice of any size is a business, Dr. McCurnin said.
"Some people don't see it as a business," Dr. McCurnin said. "They see it as a professional service that they're providing and that money is just an afterthought."
Dr. Felsted believes practices of all sizes should strive to improve profitability and to provide personal service.
Supply and demand
When the economy was good, Dr. Goebel said, the growth in practice size went hand in hand with the increase in the supply of veterinarians. Dr. Felsted believes the increase in the number of veterinarians probably had more of an impact on the number of practices than on the size of practices.
Dr. Goebel believes that the number of veterinarians per practice will decrease in the near term with layoffs, reductions in hours, and reductions in hiring. Dr. McCurnin believes that the increase in practice size will continue because of the benefits of larger practices as the profession becomes more specialized.
Dr. Felsted said she could see practice size going in either direction.
"The practices that will survive will be those that are financially strongest and best at providing medical care and client service in a way that pet owners want," Dr. Felsted said.
Food animal, equine practice
The number of veterinarians per practice has increased not only for companion animal–exclusive practices but also for food animal–exclusive and equine practices.
According to the AVMA Biennial Economic Survey, the number of veterinarians per practice for food animal–exclusive practices increased from a mean of 1.87 in 1999 to 3.15 in 2009.
The proportion of food animal–exclusive practices with four or more veterinarians increased from 12.3 percent in 1999 to 30.0 percent in 2009. The proportion with one veterinarian decreased from 64.9 percent in 1999 to 35.0 percent in 2009.
The sustainability of some food animal–exclusive practices has come into question. In late September, the American Association of Bovine Practitioners announced a practice sustainability project to offer business education for veterinary students and veterinarians (see JAVMA, Dec. 1, 2011).
Equine practices are growing larger, but more than half remain solo practices. The proportion of equine practices with one veterinarian decreased from 62.6 percent in 1999 to 56.7 percent in 2009, according to the AVMA Biennial Economic Survey.
The proportion of equine practices with four or more veterinarians increased from 11.0 percent in 1999 to 20.0 percent in 2009. The mean number of veterinarians per practice for equine practices increased from 2.07 in 1999 to 2.47 in 2009.
