September 3, 2009
Survey suggests recession spares many veterinary practices
Reports show specialty, emergency practices bear brunt of downturn
By: Timothy Kirn
For The VIN News Service
The present recession does not seem to be hammering veterinary practices universally, according to the most recent survey of Veterinary Information Network (VIN) members on the economy.
The 267-veterinarian survey found that 54 percent of practices reported a downturn in revenue from January to April 2009, compared to the same time last year. Sixty-eight percent reported a drop in client visits during the same period.
But 45 percent of practices reported an increase in revenues relative to last year between January and April, and 25 percent of practices had increases greater than 5 percent compared to last year. Thirty-one percent of practices reported an increase in client visits.
According to Dr. Karen Felsted, CEO of the National Commission on Veterinary Economic Issues, every survey designed to measure the economy has suggested a range of impact. Some practices are hurting, but others are weathering the downturn without a revenue decline.
The VIN survey numbers “are hanging together with what everyone else is seeing,” Felsted says.
The only definite casualty of the present economy may be the conventional wisdom that says that the veterinary profession is recession-proof. That old saw may be only partially true.
Dr. Mark Rishniw, VIN's director of clinical research, analyzed the survey answers and says the results do not contain any clues about why some practices have been more affected than others.
The survey compared practice size and regions of the country. Neither of those factors seemed to be definitively predictive, Rishniw says. There were differences, but they tended to be less than dramatic.
By practice size, the percentage of practices reporting a decline in year-to-date revenues was about 50 percent for single-veterinarian practices and about 58 percent for practices with four or more veterinarians.
About 90 percent of the practices with four or more veterinarians reported a decline in client visits, but so did better than 60 percent of single-veterinarian practices.
By region, the percentage of practices reporting a decline in year-to-date revenue ranged from about 45 percent for the Northeast to about 60 percent for the Southwest.
The VIN survey was not precise enough to examine specific states. However, the VIN News Service reached out to veterinarians in Michigan on the assumption that if practices anywhere were in trouble it would be in the state where the dominant industry — automobile manufacturing — has been particularly hard hit.
However, as with the survey, respondents stated that their practices are doing just fine.
“What I hear around the state is what you’ve been hearing from around the country,” says Dr. Paula Rode, president of the Michigan Veterinary Medical Association. Not all practices have been hurt. In her own practice in Chelsea, Rode says she has not had an appreciable decline in visits, though clients are more conscious of their pocketbooks.
Dr. Syed Samad practices in Detroit. He says that last year, he had fewer clients coming in. But this year is different. Samad has lowered his fees. While that was not easy, it has boosted his client volume. Word has spread in the neighborhood, he says.
“This year things are picking up,” he says. “I am not increasing my prices and people are talking to other people.”
Other surveys and barometers of the recession also show heterogeneity. Only one is decidedly different, a survey of practice data known as the Bow Wow Jones index.
Jon Dittrich, the practice consultant who puts together the Bow Wow Jones, suggests that the VIN survey may suffer from a little unrealistic optimism on the part of respondents, or a lack of candor.
“I am a little puzzled by your results,” says Dittrich, founder of Profit Profile Corp., Knoxville, Tenn., and a VIN consultant. “I talk to my folks. They say they are down.”
(The VIN survey asked respondents to check their actual revenue numbers before answering, though those who chose to respond were a self-selecting group.)
Dittrich says the often espoused notion that veterinary medicine is recession proof is a misnomer, and his Bow Wow Jones shows that revenues in veterinary practices have been experiencing slowed growth since 2006.
The Bow Wow Jones index shows a 9 percent growth in revenues for veterinary practices in 2006, relative to the previous year. In 2004 and 2005, the growth rate was around 7 percent. But in 2007, a relatively steady decline began. By 2008, the index growth rate had dropped to 4 percent for the year, which was almost equal to the inflation rate.
Then, at the start of 2008's final quarter, the Bow Wow Jones began to show a precipitous decline, and figures from the first three months of 2009 follow that trend: 6 percent in January, 7 percent in February and 4 percent in March.
“It’s not like all these practices are swirling around the economic toilet bowl, ready to be flushed down,” Dittrich says. “But there are people who say the veterinary profession is recession proof. I don’t believe that is true.”
Dr. Byron Farquer, a practice consultant in Oakdale, Calif., says what he sees suggests some practices are hurting. The ones that are struggling financially are the specialty practices and emergency clinics as well as the low-cost, high-volume practices. The average general practice often is doing alright, he says.
“The characteristic of those practices (that are not impacted) is that they seem to be more client-bonded,” he adds.
Revenues in specialty and emergency practices are down — about 5 percent to 8 percent, by Farquer’s estimate — for obvious reasons, he says. People have to worry about expense, so they wait overnight to take their pet to their regular veterinarian in the morning, or they let the dog limp instead of opting for orthopedic surgery.
On the other hand, people traditionally are willing to spend on some care for their pets, and figures from the last five U.S. recessions prove it, Farquer says. While gross domestic product declined, veterinary spending increased, he contends.
In 2001, for instance, gross domestic product declined about 0.8 percent. But veterinary spending increased almost 6 percent, Farquer says.
Farquer adds that figures he has collected from the general practices he works with in Northern California suggest that business is tracking about 2 percent higher this year, compared to the same time last year. In Arizona, business is down, but only a little.
The practices that Farquer knows are maintaining or improving their bottom lines are those making an effort to reach out to clients, he says. They are good about sending out reminders and notices of promotions. Some hold geriatric clinics or dental clinics.
Thomas McFerson, CPA, a practice consultant based in Santa Monica, Calif., says a survey he has been conducting regularly of California practices shows a similar picture to what Farquer describes: growth for small-animal practices, but not for specialty and emergency practices.
In June, McFerson tracked practice revenue figures from 115 practices in Northern and Southern California. He found that small-animal practices in both parts of the state had an average revenue growth of 8 percent to 10 percent for June 2009, relative to 2008.
Specialty, emergency and referral practices, however, showed average declines between 3 percent and 5 percent.
But those averages are simplifications, and as such they often do not mirror reality, which appears to be more varied, McFerson noted in an interview.
“We’ve got practices that are in the middle of the real estate bust and they are doing OK,” McFerson says. “Then we’ve got practices that are in the middle of the real estate bust that are not doing well.”
While the picture from surveys appears to show that the effects of the recession are mild, and somewhat varied, VIN’s Rishniw says that is better news than he was expecting.
This is the second economic survey VIN has conducted with its membership. The other survey dates back to October 2008. At the time, some thought that October was too early in the present economic crisis and that this latest polling would show much worse figures.
But it does not, Rishniw says. He expected to hear that more veterinarians were anticipating cutting staff, possibly associates and even salaries. But, as with the first survey, less than 20 percent of respondents anticipate taking such measures.
The survey is “a little more negative than the first one, but not a lot,” Rishniw says. "A limitation of this (and many other samplings, such as NCVEI data) is that it is self-selected and self-reported data. It isn't hard scientific data. But compared to what we expected to see, it would seem that things are not universally as bad as people think."
VIN News Service commentaries are opinion pieces presenting insights, personal experiences and/or perspectives on topical issues by members of the veterinary community. To submit a commentary for consideration, email firstname.lastname@example.org.
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