From 2021-22 during the COVID-19 pandemic, when U.S. consumers were awash in discretionary income, companion animal veterinary clinics saw robust demand for their services. Now consumer spending in this area is trending back to normal levels, according to a new economic report by Brakke Consulting.
The report also shows that while practice revenue increased 5.2% year over year in 2022, visits dropped 3.1%.
How to explain the discrepancy? “It can come from two things: a bigger basket of services or, more likely, increased prices,” said John Volk, a senior consultant for Brakke, who presented highlights from the report on Jan. 16 at the 2023 Veterinary Meeting & Expo in Orlando, Florida.
Brakke’s analysis is based on monthly surveys and industry sources, including data from the AVMA and the Veterinary Hospital Managers Association.
As Volk explained, pet care is paid for with discretionary income, and U.S. households were awash in government subsidies from 2020-21 during the height of the pandemic.
“People were not taking vacations. They were not going to restaurants. They were not going to movies,” he said. “But people were taking their pet to the veterinarian, and veterinarians were not getting a lot of pushback on higher prices during the pandemic.”
The money ran out eventually, however, and practices were seeing weaker revenue growth in 2022 compared with 2021.
Further evidence of price increases comes from patient-generated revenue, which rose an average of 8.3% in 2022.
Attracting new clients continues to be a challenge for most practices, Volk said, explaining that the percentage of business generated by new clients continues in a 10-year downward trend. “The amount of business coming from new patients in 2022 was down about 10% overall,” he said.
About a third of the practices surveyed for the Brakke report said they were busier in 2022 than in 2021, with the remainder indicating they were as busy or somewhat less busy. “So again, we see the business returning to normal as people have more demands on their discretionary income,” Volk observed.
Labor supply remains a critical issue for most veterinary practices. Fifty-three percent of practices reported vacancies for one or more veterinarians, Volk said, adding that this position remained open for an average of 16 months for respondents. Sixty-three percent of practices had roughly three open positions for veterinary technicians, each of which took about nine months to fill.
The average number of work hours has increased substantially since 2019, about five hours per week for the average veterinarian in terms of median number of hours worked, Volk said. Consequently, starting salaries are rising, with companion animal practitioners earning the highest starting salary while equine practitioners earned the least.