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Economic recovery still bumpy for veterinarians

After first-quarter gains, California veterinary practice revenues slip in April


June 8, 2010
By: Jim Downing
For The VIN News Service


Economic Recovery?

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The veterinary sector’s economic recovery continues to be rocky, according to new data from a monthly survey of California clinics.

After March figures showed the first strong year-over-year improvement since last June, business at the state’s veterinary practices was down in April compared with a year earlier. For the month, average revenue at small animal practices, adjusted for price increases, dropped 1.8 percent in Southern California and 2.7 percent in Northern California. At the state’s specialty and emergency clinics, adjusted revenue fell 4.6 percent in April.

The figures are based on a survey of 150 small animal and specialty clinics by Gatto McFerson Certified Public Accountants LLP, a Santa Monica-based financial services firm that specializes in veterinary practices. Gatto McFerson adjusts its revenue figures for price increases — for instance, a hike in the amount a practice bills for a certain procedure — in order to give a better picture of year-to-year changes in the amount of business a practice does.

Partner Tom McFerson said California clinics’ average revenue, adjusted for price increases, remains below pre-recession levels.

“We've come out of the trough, but we've still got a ways to go,” he said.

In 2009, according to the survey data, California small animal practices enjoyed year-over-year growth on average through the first half of the year. But business was down in the second half of the year.

McFerson said it’s not clear what’s behind the uneven returns.

“The big thing everyone's saying is that there's no consistency,” he said. “You'll have a big day and you'll get excited, and then you'll have a day where you have nothing.”

Specialty, referral and emergency clinics have on average fared much worse than small animal practices over the past two years, according to the Gatto McFerson numbers. Year-over-year revenue fell 20 percent for these clinics in November 2008. Since then, the declines have shrunk but the subsector has yet to post a month of year-over-year gains.

One reason for the poorer performance at specialty clinics: With fewer clients to go around, general practices may be holding on to more borderline cases, said Dr. Karen Felsted, a veterinarian who serves as chief executive officer of the National Commission on Veterinary Economic Issues.

“I don't mean to imply that's bad medicine — I think there are a range of cases that you could refer or keep in-house,” Felsted said. She noted that the decision can be driven by the interests of both the general-practice veterinarian, who wants a larger share of the bill for a given case, as well as the client, who anticipates paying more for the services of a specialist.

Other measures of the veterinary sector’s financial health also show a halting recovery.

The first-quarter Bow Wow Jones report — a survey of 50 clinics nationwide by practice management consultant Jon Dittrich — indicated that the veterinary sector had a strong March, with year-over-year revenue rising 2.5 percent.

March was only the second month of positive returns at Bow Wow Jones practices since December 2008. That strong result followed year-over-year declines of more than 10 percent in January and February. Overall for the first quarter, revenue was down 6.6 percent.

Dittrich, a Veterinary Information Network consultant, said preliminary data from April suggest the growth seen in March has continued — the opposite of what the recent Gatto McFerson report suggests. But like McFerson, Dittrich said many of his clients continue to report a slow, uneven recovery.

Second-quarter Bow Wow Jones figures will be released in early August.

The Gatto McFerson and Bow Wow Jones surveys do not cover clinics owned by chain operators such as VCA Antech Inc. and Banfield, The Pet Hospital.

Publicly traded VCA reported a 1.6 percent drop in same-clinic revenue in the first quarter of 2010. It was the company’s sixth consecutive quarterly decline but a modest improvement over the 2.7 percent first-quarter drop a year earlier. By contrast, from 2004 through 2007 VCA reported same-clinic revenue growth of 4.9 percent to 6.6 percent annually. The chain owns 492 animal hospitals in 40 states.

Banfield is owned by candy giant Mars, Inc. The privately held company does not disclose financial information.
 




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 news@vin.com.



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