Less foot traffic at veterinary practices spells declining revenue

The percentage of U.S. household that own dogs and cats has increased steadily from 1991-2024. At the same time, many consumers have been getting more budget conscious as inflation has limited their spending power.

For small animal practices, these trends have resulted in fewer product purchases and fewer patient visits, which Katelyn McCullock, AVMA chief economist, says are here to stay for 2025. During the 2024 AVMA Veterinary Business and Economic Forum, held virtually October 8-9, she also highlighted several macroeconomic factors impacting U.S. businesses and households, as well as the chances Americans will soon endure another recession.

“The economic growth and consumer pressures just seem like they are lining up to enter a weaker economic phase and that will impact veterinary visit data pretty significantly for 2025,” she said. “How long that lasts, I think is anyone’s guess, but we’ll have to just keep monitoring that data and the consumer side of things.”

Revenue and pricing

McCullock and Sheri Gilmartin, vice president of data services for Vetsource, presented during the Practice Pulse session at the economic forum on October 9. They summarized findings collected from a survey of 6,000 veterinary practices across the U.S. between August 2023 and August 2024.

The data was collected from mostly small animal general practices that have a direct data connection with Vetsource or are Vetsource customers. About 35% are corporate owned and 65% are independent. They looked at in-hospital transactions only.

Overall, patient visits decreased 2.3% year over year, on average, while overall revenue increased 3.9% in that time, mostly because of price increases, Gilmartin said. Specifically, the average annual revenue per patient increased 7% year over year, coming out at $622—$499 from professional services and $203 from product services.

From August 2021 to August 2023, veterinary practices saw similar patient visit trends (-2.7%), however, there was sustained revenue growth from August 2021 to August 2023 at 5.7% on average.

By comparison, in 2019 and 2020, both years saw around 2% growth in patient visits and overall revenue increases at 6.7% and 10.1%, respectively.

“We look at the last 12 months compared to 2019, and we are seeing that the visit trend is very different, and those declining visits are slowing down revenue growth year over year,” Gilmartin said.

On average, veterinary prices have increased 8.24% over the past 12 months. The impact on revenue was a gain of about 6.1%, Gilmartin said. Comparatively, veterinary prices increased by 9.81% from July 2022 to July 2023 with revenue increasing 8.8%. From July 2021 to July 2022, veterinary prices rose 7.3% and revenue increased 9.8%.

Gilmartin said when looking back 24 to 36 months, the impact of price increases on revenue was higher than they were these past 12 months because of the decline in patients and visits, Gilmartin said.

Patient visits

Active patients are down 1.9% per practice, on average, despite feline patient visits being up .8%. That’s largely because of the decline in canine patients by an average rate of 3.3%. Notably, these canine patients account for about 81% of practice revenue.

The biggest decline in visits, at 7% on average, were product-only visits that involve the owner purchasing food or medication only. Sick visits have stabilized since 2023 but well visits are still lagging and down about 1.5%, on average, Gilmartin said.

New puppy and kitten patients are also down 9% year over year, on average, and new clients are down 8.6%, which Gilmartin says is certainly impacting veterinary visit trends.

“The other thing to note is that 8% of total practice revenue is from new clients, so we're seeing this decline in canine patients, which is a large portion of revenue, and then we’re not seeing that backfill of (new) patients,” she said. “We’re also seeing pet owners extending the time between visits and these trends seem to be impacting all practices.”

Looking at July 2020 to July 2021, pet owners had an average of 57.6 days between visits. But between July 2023 and July 2024, the average was 85.8 days between visits—a 48% increase between those two time periods.

Gilmartin noted that since December 2023, there has been less of a difference between the benchmark practices and those in top 20%, based on visit growth compared to the national average.

“This tells me macro-economic trends are impacting everybody,” she said, “And then looking at (the number of) transactions, days worked, and monthly patients per DVM are all down each year for the past three years.”

The big picture

The bad news is recession is coming, if it isn’t already here. The good news is recessions are normal and not necessarily something to fear.

“Boom and bust cycles happen globally. They happen in every country’s economy,” the AVMA’s Katelyn McCullock said during her presentation, “Setting the Scene: Forces of Change,” on October 8.

One of the hardest jobs an economist has, McCullock said, is predicting when large-scale economic events will occur. In this case, several key indicators strongly suggest the nation is either already experiencing a recession or will be soon.

One of these indicators, the yield curve, is a longitudinal depiction of the relationship between interest rates yields on bonds of varying maturities issued by the U.S. Treasury.

A healthy yield curve is upward sloping, meaning that longer-term bonds have higher yields than shorter-term ones. The upward arc indicates an expectation of economic growth in the future. An inverted yield curve is when the curve slopes downward, reflecting short-term yields are higher than long-term yields, meaning investors expect lower growth and possibly lower inflation in the future.

“What this measures is expectations in the long term relative to the short term,” McCullock explained, adding that the yield curve has been inverted since July 2022, the longest in U.S. history.

“The previous one was in 2005 up to the Great Recession,” McCullock said. “That doesn't necessarily mean we will see a recession quite the magnitude of 2008, but what it does say is that we are generally thinking that a recession is coming.”

Another economic indicator is weakening consumer positioning. That is, consumer debt is increasing, consumer spending is slowing, and consumer confidence is dropping. For example, nonhousing debt is currently $4.9 trillion, up roughly 4% from 2023.

During the Great Recession, serious credit card delinquency—balances unpaid for more than 90 days—totaled about 13%-14%. By comparison, from July 2023 to July 2024, approximately 9.1% of credit card balances and 8.0% of auto loan balances transitioned into delinquency, according to Federal Reserve Bank of New York’s Center for Microeconomic Data.

The Federal Reserve has shifted from raising interest rates to cutting them. It cut the federal funds rate a half percent in September, partly because of rising unemployment and weakening economic data. While inflation has come down from its peak, wage growth has lagged, diminishing consumer purchasing power.

“The adjustment to the federal funds rate happens first, and that will trickle down to all those consumer and commercial loans in the future,” McCullock said. “But these things do take time, and so they're trying to thread that needle between lowering inflation and keeping unemployment relatively low and a soft landing in this economy.”

Each of the last two recessions have been unique, she said. The anticipated recession may resemble a more typical economic downturn, with potentially fewer acute impacts on society.

“Although the specific effects on veterinary spending remain uncertain, we expect general pullback that mirrors reductions across the other sectors of the economy,” McCullock said. “Assessing the timing of these changes is challenging. However, consumer spending tends to follow seasonal patterns, with higher volumes typically observed in the fourth quarter. The first quarter of the next year may serve as an early indicator, further complicated by shifts in the political landscape.”

A version of this story appears in the January 2025 print issue of JAVMA