May 29, 2012
No simple answers on supply and demand in veterinary profession
Workforce data outdated, conflicting
By: Jim Downing
For The VIN News Service
National Academies Veterinary Workforce Study to be released Wednesday
Veterinarians are concerned that their numbers may be growing more quickly than the market for their services, judging from 300-post message board discussions on the Veterinary Information Network (VIN) and statements by the leadership of the American Veterinary Medical Association (AVMA).
The worries are fueled by reports of seemingly permanent declines in business at many clinics, survey results showing that finding jobs is getting more difficult for new veterinarians and the fact that enrollment at U.S. veterinary colleges increased 13 percent from 2001 through 2010. Soaring student debt adds urgency to concerns about the profession's financial sustainability. On the other hand, AVMA surveys continue to find salaries for practice owners and associates outpacing inflation, suggesting that on average, the market for veterinarians' services remains healthy.
Is there an oversupply problem? And if so, how serious is it? Frustratingly, those questions can't be answered with confidence because of a lack of reliable data. The last comprehensive workforce study of the profession was released 13 years ago. While the AVMA, the federal government and industry groups have published more up-to-date information, their figures have large uncertainties and gaps. Furthermore, each measures the market for veterinary services differently, so results can't be compared against one another.
Better information may be on the way. A long-delayed National Academy of Sciences report on the veterinary workforce is scheduled for release Wednesday. In addition, the AVMA Executive Board in October committed $5 million to a multi-year economic strategy program. Dr. W. Ron DeHaven, AVMA's chief executive, told the VIN News Service that the effort may include a workforce study.
In the meantime, here's a look at the available figures and what's missing in the answers to three questions raised frequently in discussions of supply and demand in the veterinary workforce:
Is growth in the number of companion-animal veterinarians outstripping growth in the market for their services?
The information needed to answer this question is straightforward: a regular census of the number of companion-animal veterinarians; and data on the size of the veterinary service market over time. Both are available but the estimates are shaky. The market-size figures are particularly confounding.
Counts of companion-animal veterinarians (and other types of veterinarians) are published annually by the AVMA and are considered the most definitive numbers available. The professional association notes, however, that it does not have a complete count of all veterinarians in the United States. As of December 2011, the AVMA estimated that U.S. veterinarians hold 98,083 jobs, including 48,544 positions in private clinical practices that focus on companion animals. But for roughly 18 percent (17,475) of the 98,083 jobs, the organization lacks type-of-employment information. At least some of these unknown positions are in private companion-animal practice, but it's not clear how many.
More sources exist on the size of the market for companion-animal veterinary services. At least four different surveys track consumer spending on pet medical care. However, they measure the market in a variety of ways and their estimates don't necessarily correspond.
• AVMA Household Survey: Every five years, AVMA surveys tens of thousands of U.S. households. The results provide an estimate of household spending on veterinary care as well as other pet-related products and services, including pharmaceuticals and food, that are purchased through a veterinary practice. The most recent results are from the 2006 survey; figures from the 2011 survey are scheduled to be released later this year.
• Bureau of Economic Analysis (BEA) National Income and Product Accounts data on "Veterinary and Other Services for Pets": This federal estimate, part of an annual survey of the entire U.S. economy, is based on responses from a survey of veterinary clinics and other pet-care businesses. The Bureau of Economic Affairs does not disclose how many businesses it surveys in this category. Because this survey tracks spending on pet-related services and products that are purchased outside veterinary clinics as well as all spending within veterinary clinics, it should arrive at totals greater than those in the AVMA household survey, which counts only clinic purchases. However, the spending totals estimated in the BEA survey results are between 9 percent and 21 percent lower than those estimated in the AVMA survey.
• BEA National Income and Product Accounts data on "Veterinary Services": Every five years, the BEA releases an estimate of the subset of expenditures for "Veterinary and Other Services for Pets" that is made up by "Veterinary Services" only — defined as products and services that are purchased in or through a veterinary clinic and associated with the provision of veterinary care. While the types of spending assessed in this survey are roughly comparable to those counted in the AVMA household, the BEA results are at least 23 percent lower. Figures from 2002 are the latest available from this survey; figures for 2007 spending are scheduled for release in 2014.
• American Pet Products Association National Pet Owners Survey: Since 2001, the industry group has published annual estimates of the market for "Veterinary Care," which includes spending on veterinary services and prescription drugs but excludes spending on food, over-the-counter medications and other supplies often purchased at veterinary clinics. This categorization is the narrowest of the four surveys and results in much lower figures for total spending.
The market-size estimates from the four surveys differ by many billions of dollars. They do corroborate each other in one important respect: All show consistent long-term growth after adjusting for inflation. Looking at inflation-adjusted revenue per veterinarian (see chart at left), the APPA survey and the BEA annual survey data show a modest increase over the past decade. This trend suggests that when averaged across the entire country, spending on veterinary services for pets is growing more quickly than the number of companion-animal veterinarians. The latest estimates from the AVMA household survey and the BEA Veterinary Services category showed a decline in revenue per veterinarian, but these figures are now out of date by six years and 10 years, respectively.
Variation in the estimates from the different data sources has caused some people using the figures to reach overly dire conclusions about the profession's financial health. One such person was Dr. Paul Pion, president and co-founder of VIN, which is the parent company of the VIN News Service. In a 2011 speech to the California Veterinary Medical Association, Pion presented an estimate indicating that revenue per companion-animal veterinarian declined 35 percent in real terms from 1991 to 2010.
Pion reached this result by mixing market-size data from different surveys. His starting point was taken from the AVMA Household Survey ($7.2 billion in 1991) while his end point ($14.5 billion in 2010) was calculated as a rough average of the 2010 APPA survey result ($13.4 billion) and a figure provided by a spokeswoman for Banfield Pet Hospital ($16 billion). With this apples-and-oranges comparison, Pion concluded that the market for veterinary services grew just 26 percent in real terms between 1991 and 2010, an alarmingly low rate of increase next to the 114 percent jump in the number of companion-animal veterinarians during the same period. Comparing apples-to-apples changes the conclusion: AVMA household survey data show a 128 percent real increase in the veterinary services market from 1991 to 2006, while the BEA "Veterinary and Other Services for Pets" figures indicate a 198 percent real increase in consumer spending from 1991 to 2011.
In an interview, Pion said he knew his calculations were based on numbers from different sources and always acknowledged that fact in presentations. But, he said, “I never imagined that they were measuring such different things.”
Presented with the information in this article, Pion said he was struck by how little is known with confidence about the state of the veterinary economy. For the sake of the profession, he said, “I hope your analysis is right and mine was wrong.”
It's important to note that all four estimates used in this analysis count only revenue — they don't attempt to assess changes in the costs of running a veterinary clinic, which influence profitability. However, salary data from the AVMA's biennial compensation surveys also suggest that pay for companion-animal veterinarians is continuing to rise in real terms. From 1999 through 2009, average compensation for the companion-animal-exclusive veterinarians responding to the surveys increased from $101,740 to $130,476 in inflation-adjusted 2011 dollars.
for larger view
The survey has a low response rate (21 percent in 2009), which means that response bias could have a large influence on the results: For instance, veterinarians whose salaries have been increasing may be more likely to respond to the survey than those whose pay has stagnated or dropped. In addition, average salary figures don't capture the wide range of compensation for companion-animal veterinarians: Half of companion-animal-exclusive veterinarians made less than $97,000, while 10.1 percent made more than $202,000. Board-certified specialists tend to earn substantially more than non-specialists, for instance, and male companion-animal veterinarians tend to have higher salaries than their female colleagues with equivalent years of experience.
How have prices for veterinary services changed relative to inflation in recent years?
When the last comprehensive study of the veterinary workforce was released in 1999, there was concern in the profession that prices of veterinary services had not kept pace with inflation. From 1972 to 1996, veterinary prices lagged inflation by roughly 25 percent, according to figures presented in the 1999 study. At the time, the cause appeared to be an abundance of veterinarians: "It is likely that supply pressure has led to excess capacity and subsequent downward price pressure in this industry," wrote the authors of the report, which was prepared by the consulting firm KPMG for the AVMA, the American Animal Hospital Association and the Association of American Veterinary Medical Colleges.
for larger view
Since 1997, the trend has reversed. According to data from the U.S. Bureau of Labor Statistics (BLS), the Veterinary Services price index has increased 108 percent, compared with an increase of 40 percent for the Consumer Price Index, a common measure of economy-wide inflation. Veterinary services appear to have increased in price more quickly than human medical services. The BLS price index for “All Medical Care” rose 71 percent from 1997 through 2011, while the index for “Physicians’ Services” increased 53 percent. The Veterinary Services price index is calculated from survey data on the prices of services provided by veterinarians and their staff, as well as the prices of products associated with patient care, such as pharmaceuticals, that are purchased in veterinary clinics.
Is the gender shift in companion-animal medicine having a significant influence on the effective supply of veterinarians by increasing the percentage of veterinarians working part time?
From 1997 to 2011, the percentage of companion-animal veterinarians who are women increased from 36 percent to 55 percent. A widely held assumption — articulated, for instance, in a recent paper by Harvard Business School researchers — is that many of these female veterinarians work part-time to be able to devote more time to raising children. If that is the case, then as the proportion of female companion-animal veterinarians grows, the average hours worked for all veterinarians would fall somewhat, effectively slowing the growth of the veterinary workforce. The 1999 KPMG study predicted that this effect would be the main driver behind a reduction in the average hours worked by all companion-animal veterinarians from 44.4 per week in 1999 to 42.2 per week in 2012 — a 5 percent drop.
According to the most recent AVMA compensation survey data — which, again, are quite uncertain — the average hours worked by companion-animal veterinarians have fallen roughly as predicted, to an estimated 41.7 per week in 2009. However, the decline appears to have been driven as much by a drop in the hours worked by male veterinarians as by the increase in the number of female veterinarians.
for larger view
The KPMG report anticipated that female companion-animal veterinarians would be averaging about 38 hours per week in 2012 (taking into account all employed veterinarians, part-time and full-time), compared with roughly 49 hours per week for their male counterparts. AVMA survey results suggest that female companion-animal veterinarians are working around 40 hours per week — slightly more than was predicted in the KPMG survey — while their male colleagues are averaging roughly 44 hours per week, about five hours per week fewer than was anticipated. Thus, while the gender shift in companion-animal medicine is contributing to the reduction in overall hours worked in the profession, it appears to be having a weaker influence than was expected.
These figures on hours worked are uncertain for several reasons. As previously noted, the AVMA compensation survey has a low response rate, so the results may be influenced by response bias. In addition, the calculation of the hours-worked averages involves a number of assumptions that likely introduce inaccuracies (see note in chart).
If the analysis is generally accurate, it would provide support to anecdotal reports (for instance in VIN message board discussions) from female veterinarians early in their careers who had expected to work part time but are reconsidering because of heavy student debt.
“It's a question that my husband and I talk about frequently,” Dr. Karen White, 28, a 2010 DVM graduate, said in an interview. White is an associate in two practices — one general, one emergency — in Columbus, Ohio, and averages 40 hours per week between the two jobs. Her scheduled educational loan payments are $1,500 per month for the next 20 years.
“It's a scary proposition, and it's definitely impacted our plans to have a family,” White said. “I had always kind of pictured that when I had children I would go part time, but it’s starting to look like that’s not going to be a reality."
Questions may linger indefinitely
With funding shortfalls generating pressure at veterinary colleges to raise tuition and increase enrollment, the question of how many veterinarians the U.S. market can sustainably support is likely to remain the subject of debate in the profession for years. The upcoming National Academy of Sciences workforce report is expected to provide a new synthesis of existing figures and expert opinion. But unanswered questions are sure to remain because of uncertainties in the available data. While it is possible to make survey data more reliable, doing so often is costly because the effort requires a labor-intensive attempt to follow up with the people who did not respond. The question is whether organizations doing the surveys are willing to bear the expense.
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 email@example.com.
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