Summit paints mixed economic picture for practitioners

Speakers discuss trends in veterinary practice, market for veterinarians, market for veterinary services
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There’s good news: Revenues are growing at many veterinary practices.

There's mixed news: The AVMA Veterinary Career Center now has more jobs than applicants, which is good news for applicants, but bad news for employers.

And then there’s bad news: Practices still need to do better at expense management, and many animal owners remain unable to afford veterinary care.

Photograph of a piece of framed abstract art

These are some of the takeaways from the fourth annual AVMA Economic Summit, held Oct. 24-25, 2016, in Schaumburg, Illinois. While the first day of the summit focused on veterinary education and educational debt (see story), the second day covered veterinary practice, the market for veterinarians, and the market for veterinary services.

Veterinary practice

Revenues grew, but the number of invoices was flat from 2011-2014 in a sample of companion animal–exclusive practices that work with the accounting firm Katz, Sapper & Miller. Terry O’Neil, partner-in-charge of the firm’s Veterinary Services Group, felt encouraged to see invoices and revenues alike grow in 2015.

O’Neil said the most profitable 20 percent of the practices had sources of revenue similar to those for all practices collectively—and charged similar prices. The difference was in expense management.

Among trends he is seeing is a bit of a push toward paying veterinarians on a salary, rather than production, basis. A quarter of hospitals are open seven days a week. Dogs make up 70 percent of pets seen in hospitals, so there remains an opportunity to increase caseload on the feline side.

“Practice owners and managers are seeking to make sense out of their financial statements and practice reports,” said Tracy Dowdy, president of VetPartners, an association of veterinary business specialists. She said there is a need to create industrywide standardization to track data.

Financial statements can lack detail, Dowdy said, and practice management systems are not consistent in how they collect data. On a positive note, software can extract data to create meaningful benchmarks and performance reports.

Terry O’Neil
Terry O’Neil of the accounting firm Katz, Sapper & Miller speaks at the 2016 AVMA Economic Summit. He said the most profitable practices have sources of revenue similar to those of practices collectively—and charge similar prices. The difference is in expense management. (Photos by R. Scott Nolen)

Dowdy said the new Veterinary Procedural Terminology Council has come out of the AVMA Economic Advisory Research Council’s subgroup on practice finance. The purpose of the terminology council is to become the coordinating body that contributes to the development of standard terminology across veterinary practices.

Dr. Karen E. Felsted, a veterinarian and practice management consultant, said numerous studies make it clear that veterinarians need leadership, management, financial, and communication skills. Many resources are available, but veterinarians are still struggling.

The AVMA Convention 2016 offered core sessions on practice profitability open to all attendees. A pilot group consisting of an owner and a manager from each of 57 practices attended the sessions and went home with a 16-point action plan. VetPartners consultants are following up with the practices.

Dr. Karen E. Felsted, a veterinarian and practice management consultant, said numerous studies make it clear that veterinarians need leadership, management, financial, and communication skills. Many resources are available, but veterinarians are still struggling.

Dr. Felsted said there should be a continued focus in the selection process of veterinary colleges on students with a business interest, and veterinary conferences should improve continuing education in practice management.

“I think many practices are going to need outside help to make changes,” she said. This help could be in the form of consultants, practice managers, or study groups.

Market for veterinarians

Frederic Ouedraogo, PhD, an economic analyst with the AVMA, presented preliminary results of analyses of segments of the market for veterinarians, with a focus on Arizona, Colorado, Indiana, and Texas and on bovine practice, equine practice, and laboratory animal practice.

In comparison with AVMA members overall, members of the American Association of Bovine Practitioners and American Association of Equine Practitioners were less likely to be unemployed, as were board-certified veterinarians. Veterinarians in poorer health were more likely to be unemployed, as were female veterinarians.

Note: New job seekers are job seekers newly registering with the Veterinary Career Center each month.
Source: 2016 AVMA Report on the Market for Veterinarians

Members of the AABP worked the most hours per week, 51.27 on average, while Arizona veterinarians worked the fewest, 40.59. The equilibrium point for veterinarians wanting to work more or fewer hours per week was about 45. Factors impacting income included hours per week, gender, board certification, and experience.

Charlotte Hansen, a statistical analyst with the AVMA, spoke about supply and demand for veterinarians. Although women are more likely to be unemployed than men, unemployment has been low. In 2015, the AVMA Veterinary Career Center had more jobs than applicants for the first time since 2008.

Hansen noted that veterinarians in industry earn much more than veterinarians in other practice types. Another finding is that veterinarians who grew up in rural, suburban, or urban areas tend to find employment in the same type of area.

The net present value of a veterinary degree is on a downward trend, with an uptick in 2016. That figure refers to lifetime earnings from a veterinary degree versus lifetime earnings from a bachelor’s degree after taking into account the cost of a veterinary education.

Dr. Scott Spaulding of Badger Veterinary Hospital and Badger Equine Veterinary Services in Janesville and Cambridge, Wisconsin, offered a practice owner’s perspective on the market for veterinarians.

Disposable income has increased as the economy has continued to recover, but Dr. Spaulding believes practices have lost pricing power. He said, “Many animal owners simply can’t afford to provide the veterinary care their animals desperately need.”

He continued, “The profession needs to get past this idea that an oversupply of veterinarians exists. The profession must devise strategies, implement tactics to transform this tremendous built-up need for veterinary medical care into profitable demand for professional services offered by our practices.”

The profession needs to get past this idea that an oversupply of veterinarians exists. The profession must devise strategies, implement tactics to transform this tremendous built-up need for veterinary medical care into profitable demand for professional services offered by our practices.

Dr. Scott Spaulding, Badger Veterinary Hospital and Badger Equine Veterinary Services, Wisconsin

Dr. Spaulding said there are opportunities in areas such as devising new business models, leveraging technology to provide access at convenient times, and consolidating capital expenditures among groups of veterinarians.

Market for veterinary services

Research suggests a positive correlation between pet health insurance and consumer spending on veterinary services, said Keith H. Coble, PhD, a professor of agricultural economics at Mississippi State University. What about causation?

He and Angelica Williams, PhD, a postdoctoral research associate at the university, are developing a survey of several hundred pet owners with or without pet health insurance. The researchers surveyed a sample of 50 pet owners while developing the survey instrument.

In the test survey, pet owners with insurance reported slightly higher spending on medical expenditures. However, in a catastrophic medical scenario, pet owners with insurance said they would spend much more, in light of the insurance, than did pet owners without insurance.

Using consumption of veterinary products as a marker of clinical caseload volume indicates that there has been good growth from the third quarter of 2014 through the third quarter of 2016, said Dr. Travis Meredith, a small animal practice owner outside Philadelphia who is also with Animalytix LLC. The company maintains a database on sales of animal health products.

There is some evidence of slowing in consumption of veterinary products, he said. Of practices, he added, “The big are getting bigger, and the small are working really hard to keep up.”

Using vaccines as a marker for preventive care indicates growth, with the volume of canine core vaccines increasing 21 percent and the volume of feline core vaccines increasing 15 percent. Growth in inhalant anesthetics, a marker for surgery, correlates with the growth in core vaccines.

Maureen Kilkenny, PhD, senior fellow at the National Center for Food and Agricultural Policy, spoke about the AVMA pet demographic survey. The AVMA has conducted the survey roughly every five years since 1982. Dr. Kilkenny is helping develop the 2017 survey and annual market surveys. In a 2015 pilot market survey, 12 percent of about 250 dog owners said they got routine veterinary care for their dogs somewhere other than a traditional veterinary clinic, and only 8 percent did not go anywhere.

For the first time, the 2017 pet demographic survey will delve into the quantities of veterinary services purchased at each price. Among other new questions, the survey will ask how pet owners usually handled pet health problems.

Ross Knippenberg, PhD, an assistant director of the AVMA Veterinary Economics Division, noted that the nonprofit National Bureau of Economic Research found that trends in use and pricing of pet health care are similar to trends in human health care (see JAVMA, Dec. 1, 2016). In the American Animal Hospital Association’s 2014 price survey, 53 percent of respondents who raised prices did so because costs have risen. Dr. Knippenberg asked, “Can services be provided at a lower cost?”

Dr. Knippenberg said the AVMA is working on a new economic model that will encompass prices, elasticities, employment, and excess capacity by practice type and by state and simultaneously consider the effects on veterinary colleges, veterinarians, and veterinary practices.

Wrapping up

Michael R. Dicks, PhD, director of the AVMA Veterinary Economics Division, offered a summary of the summit and his thoughts about where the veterinary profession is headed.

Dr. Saltman
Dr. Roger Saltman, chair of the AVMA Veterinary Economics Strategy Committee, offers closing remarks at the summit

He said there is a loose connection among veterinarians’ educational debt, income, and wellness. He elaborated later that wellness is associated with employment satisfaction, and employment satisfaction is associated with both lower debt and higher income, but no direct link was found between burnout and high debt or low income.

“I think veterinary medicine and the profession have an enormous amount of opportunity,” Dr. Dicks said during the summit. “It’s just a matter of whether you’re going to grab it.”

His take-home message was that practitioners should focus on return on investment rather than only on profit margins.

Dr. Roger Saltman, chair of the AVMA Veterinary Economics Strategy Committee, offered the closing remarks. He noted that the No. 1 goal of the 2012-2015 AVMA Strategic Plan was to strengthen the economics of the veterinary profession.

Since the AVMA established the economics division and committee, they have taken on numerous projects. In 2013, the AVMA released the U.S. Veterinary Workforce Study, which found excess capacity nationally, and held the first annual economic summit.

In 2016, the Veterinary Economics Strategy Committee worked on developing the Economic Advisory Research Council. The four research groups within the council cover pet demographics, pet insurance, practice finance, and academic issues.

Dr. Saltman said the economics division and committee are “devoted toward keeping a focus, an ongoing focus, day in and day out, on how we’re doing as a profession.”

The AVMA is releasing the 2017 AVMA Report on Veterinary Markets, a summary of the 2016 AVMA Economic Summit, as the first of four economic reports for the year. The reports will be available here for free download by AVMA members or for purchase by others as a series. The summit summary contains key data from presentations, including adjustments and additional information based on discussion.

Related JAVMA content:

Taking a multi-pronged approach to tackling educational debt (Jan. 1, 2017)

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

Profession’s economic health coming into focus (Dec. 15, 2015)

Report: Veterinary markets provide optimism, opportunities (May 15, 2016)

Report: Market for veterinarians has been robust (Dec. 15, 2016)