Vet Industry News

For years those of us in the veterinary industry thought that we were somehow immune from the general downturns in the American economy. I know our practice experienced an upturn in 2001 after 9/11 while the overall economy experienced a mild recession. And so all of us in veterinary medicine expected the same would happen this time around – but we were very wrong.  Most veterinary practices around the country have had flat to declining sales since 2007. Client visits are down overall, cat visits are way down, and this decline in visits has been exacerbated by a drop in the average dollar value per transaction. This trend will continue and turn into the “new normal” for vet medicine. Private practice owners must learn to adjust and do so quickly if they are to survive. Waiting until it “returns to normal” is no longer an option as this IS the new normal. I say this for the following reasons:

• Northwest University economist Robert Gordon projects that gross domestic product per capita will grow from 2007 to 2027 at the slowest pace since America’s founding
• There is a fiscal crisis in Washington and state capitals throughout the country, with cuts in spending and higher taxes inevitable to balance budgets
• Web based coupon companies like Groupon are thriving
• As the value of the US dollar declines because of Federal Reserve actions, the costs of commodities soars putting pressure on American households and manufacturers
• Strained state budgets mean less money for higher education, which means fewer opportunities for students, which will further depress future economic growth

So what’s next, what do we do? Change to meet these challenges is the only answer. Veterinary medicine must learn to do more with less. We must start to make productivity gains, something that we have NOT done in the past. We must move from focusing on average transaction to lifetime value per client and hospital utilization as the metrics of the future. How close to capacity are we operating our hospitals? As a former manufacturing manager I know that filing the plant and maximizing the utilization of each machine or tool in the plant was essential to profitability. We must do the same for our veterinary practices. Exam rooms filed all day long with a busy surgery room are now essential for a health veterinary practice. Running at a higher capacity is the only way to lower the effects of fixed costs such as rent or mortgages or equipment leases. Veterinary medicine must change to survive and must improve efficiency if it every hopes to return to the prosperity of the 1990′s.

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This is not an easy question to answer and the “crisis” depends on who you are and your particular perspective. If you are a new grad the job market in 2010 is worse than it has ever been if you are looking for a small animal job in an urban center. If you are a new grad looking to for a career as a large animal vet you are probably asking”what crisis” I’ve had lots of job offers. If you are a 63 year old sole practitioner you are wondering why no corporate chains are interested in buying your practice and why  practice brokers are telling you your practice isn’t worth near as much as you think it is.  This “crisis” is much broader than these examples but is used to illustrate the complexity of the problem we face.

The default answer would be to just look at the American economy and blame the economic downturn for all our industry’s woes, but that would be both too simplistic and inaccurate.  The economic decline in veterinary medicine has been in the making for more than 20 years and is the confluence of a number of factors.  As a new grad without a job the last thing you want to see are more vet schools, larger graduating classes or pressure from corporate chains on the AVMA to loosen the standards for accreditation of foreign veterinary schools. Rural America is experiencing a shortage of veterinarians that we should have seen coming for years with the drop of enrollment  from rural American students in veterinary schools. And the 63 year old sole practitioner who thought that the sale of his practice would be his retirement fund missed the shift in veterinary schools 20 years ago when bright young women started to outnumber their male counterparts in vet school.

That does not mean that the economic downturn has nothing to do with our current crisis, it does, but from these examples it shows that it is not the sole cause of our problems. Private veterinary hospitals around the country are experiencing difficult times due to the slow economy but the slowdown has only hastened what I thought was inevitable. For as long as we have owned  our veterinary hospitals (since 1995) the veterinary journals have been telling us to raise our prices regularly. Some suggested every quarter, others every six months and everyone else yearly. The line was we are “worth” more and should make more. But very few pundits in those 15 years said we had to increase our productivity or provide more value for our clients, it was all about me, me, me. Well times “they have a changed” and now too many veterinary hospitals are finding out that they have priced themselves beyond the means of  many of their clients and are paying the price today. The result has been for the first time in memory the laying off of veterinarians and support staff around the nation – a tragedy for each on them.

While I believe all of these issues have contributed to the difficulties in veterinary medicine I believe our biggest problem is the debt load now carried by new veterinary graduates. If the trend of escalating debt load continues, and I think it will at least for the next 5-10 years, the next major problem will be a reduction in the number of top notch students applying to our veterinary schools. Instead our top students will apply to med school or opt to become dentists or try out Wall Street with an MBA.  This happened twenty years ago to our education system when some our our best and brightest students decided not to become teachers but instead chose vet school or another professional careers. We should NOT let this happen with our vet students!   I believe increasing vet student debt  to be the most fundamental, and solvable of our problems, so let’s start solving this problem before we worry about internet sales (that ship has already sailed and now WalMart is in the flea control business with Frontline) or other problems that we have little or no control over like the economy.

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Everyone in the veterinary industry wants to know, but is this really the $64,000 question?   Here are a few of the trends I see:

• Veterinary medicine will struggle for the next couple of years until the economy recovers but a “new normal” will exist
• Vet student loan debt will continue to increase at a much greater rate than their pay for at least the next 5-10 years
• The sole man practice will go the way of the dodo bird within 10-15 years
• Corporate veterinary medicine will continue to make inroads to the overall detriment of the industry as a whole
• The shortage of large animal vets will continue unabated
• The increasing cost to consumers of veterinary medicine will cause more counties to open up their own spay/neuter clinics further reducing private practice business
• Average transaction prices will continue to drop as will the frequency of visits to the veterinarian
• Pet insurance will not be the silver bullet that rescues private veterinary practice

I hope I’m wrong, but many of these trends are already baked into our past and present and will likely just continue into the future. But these are not really earth shattering predictions or crystal ball revelations, nor should they be. No one can predict the future but we should be able to see where trends are headed based on what is happening today.

Then the question is shouldn’t the leaders of industry be “looking” into the future to see where vet medicine is going? No, because they really can’t. Remember that Steve Jobs didn’t come up with the idea of the ipod before the internet and file swapping. Both existed and he just figured out a way of capitalizing on those two technologies. Nor did Mr. Jobs invent the first cell phone, he just came up with the best cell phone long after they existed. We in the vet medicine industry should learn from these examples. What we do (examinations, diagnostics, etc.) has not changed near as much as “HOW” we now do it. So lets not worry too much about what we will do in the future because we will continue to exam pets, perform spays and neuters and repair fractures and remove masses. We should focus on how we do them and how to do them more efficiently and divide  those savings among our clients, our associates and  ourselves.  Increasing our productivity should be our major focus for the future, if we do not, our current business model as executed over the last five to ten years will not be sustainable in the future.

Industry leaders should not be focused on predicting the “killer app” or “setting” a path into the future, instead they should help us find ways to do what we do better, more efficiently, based on best practices and evidence based medicine. There is no silver bullet, just a long road that must be paved with incremental improvements in productivity and the quality of medicine.

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On May 10, 2010 Pfizer Animal Health brought together key leaders of the veterinary industry for the first Companion Animal Industry Executive Forum. The Forum’s intent was to examine the major problems that exist in the veterinary industry and in particular  the “practice” of veterinary medicine. All I can say is TOUCHE to Pfizer Animal Health. The forum was long overdue,  but in a highly fragmented industry of small providers there was no one  ”natural leader” with the clout to coalesce such a highly respected group other than the leading provider of veterinary products to the industry – Pfizer Animal Health.

The Forum covered topics ranging from the impact of internet sales of veterinary products such as flea control to the problem of every escalating student loan debt of veterinary students. The forum also looked at macroeconomic issues such as the overall economy and it’s influence on veterinary medicine and the trends that may impact our industry over the next 10 years.  I believe that these are important issues to discuss but I also believe that the group must not get caught up in what they cannot control or predict with any certainty.  Another fact that the group must understand to be successful is that the future is embedded in the present. Let me give one example that that illustrates my points.  Numerous groups around the country are concerned that there are not enough veterinary students entering large animal practice upon graduation. Numerous governmental and veterinary organizations are attempting to “entice” students with generous loan forgiveness programs throughout the country but I believe this is not the long term answer.  The reality is that fewer Americans live on farms in rural America today than ever before. The other reality is that most of our large animal veterinarians’ roots were in America’s farmlands in rural America. We are fighting a trend that we cannot win without changing how we approach the problem.  We should not be trying to entice more urban vet students to be large animal vets but encouraging more students from rural America to enter vet school, because they already have a positive predisposition to rural America and large animal veterinary medicine. If rural America needs more large animal vets the only way the can meet that demand is to ensure that more vet students ARE from rural America.  The time to influence is before the student enters vet school not after. Scholarships to students from rural America to enter vet school will yield a better success rate than “loan forgiveness” programs given to urban vet students to make a 5 year commitment to large animal medicine.  Our past and present determine our future and we cannot change the future unless we understand what influences the future and make those changes today. More tomorrow on why veterinary medicine is in crisis.

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Which Side of the “Truth” Are You On

The “truth” about pet insurance always depends on what “side” of the insurance you are on – the buyer of the insurance or those benefiting from those that buy insurance. The “truth” for clients that purchase pet insurance is certainly different than the “truth” for us “in” the veterinary industry. I work in a veterinary hospital and let’s face it pet insurance would be good for the veterinary industry – that is the “truth” for us. Insurance companies that sell pet insurance design policies to make a profit so the expansion of pet insurance would surely benefit them as well. But the very reason that it benefits us puts all veterinarians in a conflict of interest when recommending pet insurance to our clients – wouldn’t you think? It seems the insurance companies only see it one way – good for everyone! The real question that must be answered: “Is it good for our clients?” And of course that’s where the debate begins and maybe the controversy too. But before I go to far into the debate lets go back and take a quick refresher on pet insurance and make a simple comparison with a type of insurance we are all familiar with, our car insurance. Like car insurance pet insurance is a type of indemnity insurance. Crash your car and your car insurance company pays – all things being equal. But most of us don’t crash our cars and don’t make a claim. But do we feel ripped off at the end of the year when we’ve paid our premiums but haven’t made a claim? Not likely. That’s a comparison the pet insurance industry would love us to make. Gee aren’t we lucky we didn’t wreck our car or have Fido hit by a car!! But is that how a pet owner should feel about pet insurance? I’m sure pet insurance companies want pet owners to feel that way. But as consumers we would think that pet insurance is similar to health insurance and that’s where consumers are mistaken. The reality is pet insurance is really NOT like human insurance because pet insurance is not true medical insurance it is indemnity insurance. With indemnity insurance insurers generally only pay a portion of the costs incurred by the policyholder (i.e. there are deductibles, co-pays, exclusions, policy caps, etc) as specified by the policy – soif you can find the fine print read it carefully. So we ask the question again: “Is this good for our clients, does it provide an economic benefit to our client?” Again there is not always a straightforward answer. If the client is simply looking for “peace of mind” when a veterinary medical disaster occurs, insurance may help reduce the costs of such a calamity to such a degree that they can afford the expenditure – these individuals may find value in pet insurance. Still others may be looking for more of a financial return on their investment in pet insurance and these individuals may not be as satisfied with the benefits. But again this is only part of the answer with pet insurance. In today’s difficult economic times many clients, even if they had the best and most comprehensive pet insurance, could not withstand a major medical veterinary calamity or take advantage of their pet insurance because they could not afford to pay the “up front” costs to get the procedure done and then wait to be reimbursed. This inability to pay the veterinarian would make any pet insurance basically useless or at best only part of the answer without help from a third party provider (someone that can lend you some money to pay the vet before you get reimbursed) such as Care Credit. There are pet owners that will purchase the more comprehensive wellness programs and expect most, if not all of their “routine” veterinary costs to be covered, and common sense dictates that only a portion will be covered (visit my website at www.wvah.net look for pet insurance and use our “calculator” to estimate how well you would fair with your pet insurance given your vets prices). While most of the articles extolling pet insurance gloss over the potential coverage “shortfalls” Dr. Christine Merle, a consultant with Brakke Consulting in Dallas states that “the goal of pet insurance is not for clients to recoup costs – they might not make a financial return on their investment.” Pet insurance is about risk management for serious illness and emergencies. While this is exactly how the pet insurance industry wants consumers to think about insurance our clients might think twice about pet insurance when they are told not to look at the financial returns. Imagine if your financial advisor told you that? It is no wonder that in one article the author states that the “experts and practitioners we talked to agreed that pet insurance is a good thing” (for themselves) when they also state that “pet insurance is not for clients to recoup costs.”  But we still haven’t determined whether or not this is good for pet insurance holders. So let’s look to our veterinarian for help and see what she has to tell us because we trust her to be an honest broker in this ordeal.

Here’s What Veterinarians Are Hearing And From Who

Now let’s look at what’s happening in the veterinarian’s world, the person the average pet owner looks to for advice on pet insurance. But first this important news flash – “most veterinarians and those working in veterinary hospitals know very little about pet insurance, we’re just like the average pet owner.” While veterinarians are genuinely interested in learning about pet insurance they are skeptical about “insurance” based on all of the horror stores they hear about human health insurance and how it might affect the way they practice veterinary medicine. So how are we in the veterinary industry finding out about pet insurance? Well not surprisingly primarily from the pet insurance industry itself, professional associations or professional journals that may not necessarily be completely objective (guess who advertises in those journals). As usual the internet also has vast amounts of information and we will examine that later. Veterinarian interest in pet insurance has sparked our professional associations to study the topic and insurance companies have already seen an opportunity to put their spin on our perceptions of it – the game of persuasion has begun. One of the first major studies of the pet insurance issue was completed this year by the National Commission on Veterinary Economic Issues (NCVEI). While the report is well written and thorough it is rather one sided – the side of the veterinarian – and also relies, in part, on studies conducted by the pet insurance industry – hardly an objective party in this analysis. The report articulates the benefits insurance has bestowed on the dental industry and suggests the same would happen to veterinary medicine but on a smaller scale. The study also “coaches” veterinarians on how to “make insurance a more productive factor in your practice.”Personally, I believe the problem with the study is it really only looks at how pet insurance benefits veterinarians (which is their role so it is hard to fault them for that) and not really how pet owners can benefit. The study is also troubling when it makes the following statements of fact: “The effect of insurance is to reduce the perceived price of care” “Pet health insurance is not true medical insurance. It is fee-for-service indemnity insurance…the insurers generally pay only a portion of the costs incurred by the policyholder as specified by the policy.” “those premium levels and the insurance company’s risk management approach – not veterinary fees – ultimately determine the amount the companies pay out for various types of claims.” I have not put these quotes in context but look at the quotes and tell me if they make you feel good as a prospective pet insurance policy holder or a veterinarian recommending pet insurance to a client – can you see the conflict there for your veterinarian? Does you family physician recommend insurance coverage? Still other articles in professional magazines tell veterinarians to use the car insurance model as a good comparison and dismiss the comparison with human health care as an apples to oranges comparison that CANNOT be made. Well the same can be said about car insurance and pet insurance even if there are some similarities. Maybe car insurance is better compared to life insurance – glad we have it but hopefully won’t use it this year – but that is not a comparison I want to make with pet insurance. I buy it because I expect to use it. On the whole the pet insurance industry, through surrogates (other veterinarians), is telling veterinarians that there is absolutely NOTHING to fear from pet insurance and that it will benefit veterinarians significantly – just look at dentists they say. Well one always has to worry when there is absolutely NOTHING to fear – its like saying “never.” So we can all see that the pet insurance industry has already started to shape the debate – it’s great for consumers it will protect against catastrophe (as long as you can pay your veterinarian all of the up front costs) and its great for veterinarians financially and they have nothing to fear. But there are those that disagree. Consumer Report reviewed pet insurance in July 2003 (Is pet insurance worth the price?) and were not kind to the pet insurance industry. The NCVEI report dismissed this report because “the focus of Consumers Reports appears to be keeping pet costs as low as possible.” Well that is to be expected as that is the raison d’etre for Consumer Reports as NCVEI’s is to “Ensure the Economic Future of Veterinary Medicine.” You can access part of this report at http://www.consumerreports.org/pets/0307vet2.html and look at a simple table they used to evaluate the various policies. We have designed a similar table that will roughly allow you to compare the cost of various pet insurance policies with the costs at your veterinarian based on your pet’s age and routine procedures that healthy pets should have performed annually. So now you know where your veterinarian is getting her information and who is giving it to them. So now lets look at the internet.

Pet Insurance and Cyberspace

As one might expect the internet is awash with data about pet insurance but I am not certain how much of it is truly unbiased “information.” When I googled “pet insurance” I got back 32,400,000 hits all of the top ones “paid sponsors” or advertisers and numerous duplicates of sites ostensibly to “review” pet insurance. While some sites do provide lots of very useful information about pet insurance and listings of costs, coverage, deductibles and co-pays there is no real hard analysis or comparisons of the policies on the most “polished” sites which leads one to believe that the sites are run BY the pet insurance companies. Instead of actually “reviewing” the pet insurance plans many sites just provide links to various pet insurance sites (which probably pay to be there) and then you can look at what that company has to offer and get a quote – hardly a critical “review” of pet insurance. The first two sites listed on google were http://www.petinsurancereview.com/ which, to its credit, does provide both positive and negative client reviews, and http://www.petinsurancereviews.org/ which provides useful information on pet insurance basics but no customer reviews. The site does however do a really “good” job of selling pet insurance – clearly a site provide by the pet insurance industry. A site that I like is http://www.organic-pet-digest.com/index.html. It genuinely looks at pet insurance plans, names it favorites and gives a reasonable breakdown of the packages – but like always one’s actual experience may differ from a simple point by point analysis. This site also gives a wonderful analysis of its two favorite packages “Pets Best” and “Quickcare” and is a good model for how anyone seeking pet insurance should compare companies and plans. Pet insurance, like human health insurance or the fine print on credit card agreements, is difficult to review, compare and analyze. Consumers can obviously compare prices (this is relatively easy but still confusing given co-pay options, exclusions, deductibles, policy caps and other fine print items), try to compare coverage (much more difficult given the same issues as above plus the nuances of each policy and company) and how easy it is to file a claim to get reimbursed. To see if pet insurance “might” work for you visit my web site at www.wvah.net, click on pet insurance and use our “calculator” to compare the value offer by any individual insurance policy against the costs that you might normally incur for a healthy pet at any given age on an annual basis. Your veterinarian may recommend more or fewer procedures based on your pets needs and where you live in the country. If you find this article helpful please lets us know and please feel free to tell us about your experiences with pet insurance. We will post ALL responses to help both consumers and veterinarians make informed decisions about pet insurance. Please be specific about what happened. For example tell us what problem your pet had, what company and type of pet insurance (just accident coverage or wellness and accident coverage) you had, how much was your deductible and co-pay, how much your vet bill was and how much, if any, was covered. Also tell us if you were denied coverage. Then you can editorialize and tell us if you happy or not with your coverage. My intention is to put together a comprehensive analysis of what is and isn’t covered, how mush is and isn’t covered, and which companies are doing the best job of “insuring” our pets. The ultimate goal is to help individual pet owners determine if pet insurance is right for them and provides the kind of “value” or “peace-of-mind” they are looking for when seeking pet insurance.

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America’s most recent recession has negatively impacted our entire economy and the fiscal health of every level of government and veterinary medicine sits at the confluence of these phenomena. In the 15 years I have been involved in hiring veterinarians for our practices I have never seen the response to our ads that I have seen in the last two years. For the very first time in fifteen years I have numerous veterinarians seeking work that are either unemployed, working part-time or doing relief work and for the first time in fifteen years are am truly interviewing them instead of them interviewing me. To be honest this breaks my heart. Our best and brightest enter vet school with the anticipation of finding meaning and financially rewarding (not lots of money but enough to pay off their student loans and live) work and sadly some students are struggling to find their first job. This lack of demand leads to lower starting wages and lower wages in general for veterinarians at the same time, according to the latest data from AVMA, that the average vet student’s debt has ballooned to $134,000. This is NOT sustainable! A recent article in BusinessWeek Magazine drives this point home: While salaries for advanced-degree holders has only increased, in real terms, by 1% between 2000 and 2009 the cost the college tuition and fees has increased an astounding 92% in the same time period – beating even the increase in medical care by an amazing 43% (source: Bureau of Labor Statistics), who would have thunk? For the most part men have abandoned careers in veterinary medicine (70 plus percent of all vet students are co-eds) precisely because of low pay and student debt equal to that of other professional schools such as medicine, dentistry, and law – professions that offer higher upside wage potential. While the new grads I talk to still say they would enter vet school this will not continue if the debt-to-income ratio continues to grow every higher. While the veterinary industry has just now started to acknowledge the elephant in the room (student debt) precious little has been done to address the problem and the problem will only get worse over the next decade. As states struggle to balance their budgets, funding for post secondary education will continue to decrease causing student fees to increase and student indebtedness to climb even higher. You only need to look at California with 30 percent plus increases in state school fees this year to realize that this is already happening in our vet schools. At Cornell out-of-state annual tuition for vet students is now north of $41,000.00 Despite the worsening situation with vet student indebtedness the veterinary industry has come up with very few “home grown” solutions other than pleas to the federal government for funding for feed animal veterinarians. If we really want to change that status quo we better start looking in the mirror for solutions. At our small animal hospital we are trying to address this problem in our own small way. Starting in April 2010 we added $.50 to every examination performed by our veterinarians. We added it only to exams because the general health exam is the portal into veterinary medicine through which every pet must pass before it receives the diagnosis, treatment and care it requires to stay healthy and the exam is the sole domain of the veterinarian. On each of our invoices we note that $.50 of this exam fee goes to support a scholarship fund for veterinary students as OSU. To date we have raised exactly $460.00 and only one client has even asked us about the charge. In the state of Oregon there are approximately 525 veterinary hospitals. If each hospital in the state added this small fee we have the potential to raise over $1,000,000 annually! Imagine if this was used as scholarships for OSU students. The benefits would be obvious: we would probably attract the best and brightest of students the state has to offer; students would graduate with significantly lower debt loads making them more capable of buying practices from older, retiring practitioners; and the overall reduction of indebtedness would likely reduce the financial pressure on all new grads. I sincerely hope this idea catches on in Oregon and every other state in America. This won’t “solve” the student loan debt but it is a first step to strengthening our profession and making it viable for the next generation of veterinarians.

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