Profession's economic health coming into focus

Starting veterinary salaries are up, veterinary unemployment is lower than the 5 percent national average, and the debt-to-income ratio for veterinary graduates is holding steady. Overall, the U.S. veterinary profession continues to see economic growth along with the rest of the economy.

The news was delivered this past fall at the AVMA Economic Summit, where findings from recent research paint a picture of a profession whose economic health is improving and for which job satisfaction is generally unrelated to income. Yet the picture is not entirely positive.

“Most people who visit the veterinarian are upper-middle and upper income people, and that’s a serious concern because that’s only 40 percent of the population,” explained Michael Dicks, PhD, director of the AVMA Veterinary Economics Division.

More than a dozen presentations were made at the AVMA summit, held Oct. 21 in Chicago, where results from research conducted in 2015 by the Association and more than 20 outside economists and analysts were highlighted. The findings augment previous research, providing a more thorough understanding of veterinary markets. What’s more, the research identified key areas for further investigation.

“Veterinary spending is discretionary spending,” Dr. Dicks said, “and we are in the process of trying to determine where veterinarians fit in that discretionary spending hierarchy.”

Part of the AVMA summit was spent looking at the market for veterinary education, addressing such topics as student loan debt and the demand for veterinary education (see “Worth the price of admission?" and “AVMA report gives specifics on student debt quandary”). The remainder of the meeting was given over to the latest research on the U.S. markets for veterinarians and their services.

AVMA economists saw encouraging trends in their most recent studies. Starting veterinary salaries had increased by 5 percent since 2014 to a mean of roughly $70,000, with the number of new veterinary graduates from the 28 U.S. schools with graduates in 2015 rising by 10 percent to just over 3,000. They predict continued growth in both areas through 2025, with starting salaries projected to reach nearly $90,000 and the number of new graduates topping out at around 3,300 once Lincoln Memorial University, Harrogate, Tennessee, and Midwestern University, Glendale, Arizona, begin graduating veterinarians in 2018.

Mean starting salaries for male and female veterinarians in 2015 were found to be approximately $73,000 and $70,000, respectively. Mean student debt was roughly $144,000 for female veterinarians and $136,000 for male veterinarians.

Weighted unemployment for veterinarians increased from 3.19 percent in 2014 to 4.11 percent in 2015, and the applicant-to-jobs ratio from the AVMA Career Center declined from 9-to-1 in 2010 to 1.5-to-1 in 2015. The percentage of new veterinary graduates opting for internships rather than directly entering private practice continued its downward trend, from a peak of nearly 50 percent in 2012 to approximately 36 percent in 2015. Finally, few high-income veterinarians experience low job satisfaction, while many low-income veterinarians report high job satisfaction.

Concerning the market for veterinary services, research shows a 2 percent decline in medical treatments during a five-year period when the cost paid for wellness treatments grew 8 percent. The estimate of excess capacity within the veterinary profession—that is, the amount of veterinary services that go unused annually—was updated from 13.1 percent in 2013 to slightly more than 12.7 percent in 2015.

Matthew Salois, PhD, director of economic research and policy for Elanco Animal Health, said the most striking of AVMA’s findings was the skewed distribution of new veterinarians. Of the 17,033 U.S. veterinarians who graduated between 2011 and 2015, 45.2 percent entered advanced education, including internships and residencies, while 35.6 percent took jobs in companion animal practice. The next closest sector, mixed-animal practice, was 9.7 percent. Dr. Salois was “shocked” by the lack of representation in industry (4.4 percent) and food animal practice (0.3 percent).

The data are clear that the veterinary profession has an excess capacity problem, but, according to Dr. Salois, neither reducing the supply of veterinarians nor lowering the cost of veterinary services is a sustainable business strategy. “As an economist and as a corporate economist, I want to emphasize that those are not successful, long-run strategies for a market or business enterprise,” he said. “You can only lower your price so much, you can only lower your supply of veterinarians so much, before you lower yourself out of the market.”

The solution, Dr. Salois said, is to generate demand through value creation and innovation. That requires offering new and convenient value-added products and services for pet owners beyond the product or service itself and innovating practice management and operations.

Maureen Kilkenny, PhD, an economist and senior fellow with the National Center for Food and Agricultural Policy, underscored the hazards of increasing prices without adding value. The growth rate in the price of veterinary services for pets had been less than the growth rate in prices of all other services in the U.S. economy up until 1996-1997 when veterinarians began raising prices. Since then, the price for veterinary services has increased 5 to 6 percent annually, while prices for other services grew by 2 to 3 percent annually over the same period. At least partly as a consequence, the real expenditure on veterinary services per dog dropped by 27 percent from 2001-2011.

The National Center for Food and Agricultural Policy, with funding from the AVMA and in association with Henry Schein Animal Health, is currently conducting a pilot study in the Raleigh-Durham, North Carolina, metropolitan area. By using actual purchase data, the study will eliminate selection and recall bias, which have limited the findings of earlier studies. Those results will presented at the 2016 AVMA Economic Summit.

As for the next steps, Dr. Dicks said the AVMA is setting priorities as to which areas of research need immediate attention. “For instance, we are beginning to really dig deep into learning why some practices are doing so well and others are struggling. We need to look at what’s happening at these practices to determine why they are so successful,” he said, adding, “We haven’t been focused on practices; we have been focused on markets.”

The AVMA Veterinary Economics Division, AVMA Veterinary Economics Strategy Committee, and the Association’s research partners also plan on focusing more on the analysis of consumer demand characteristics, including how to provide affordable veterinary services without reducing standards of care. Greater attention will be paid to helping enhance personal financial education, from veterinary school applicants to industry veterans with years of experience.

“The good news is that we are learning more every day and getting better information that allows us to focus our resources to fix the problems and address the challenges,” Dr. Dicks said. “We can’t fix things if we don’t know what’s broken.”

Related JAVMA content:

Report predicts increase in starting salaries (Oct. 1, 2015)

Report sheds new light on veterinary employment (April 15, 2015)

Market improving, but value of veterinary degree unclear (Dec. 15, 2014)