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Veterinary nonprofits: unfair competitors or worthy charities?

Controversy surrounding subsidized practice plays out on public stage


April 21, 2014
By: Jennifer Fiala
For The VIN News Service



Photo by Kiersten Atkinson
Alabama regulators have held administrative hearings since January concerning Dr. William Weber's ownership of a spay-neuter nonprofit. The case is expected to resume next week.
Does an Alabama veterinarian truly work for a spay-neuter nonprofit or is he acting as a front so the clinic can operate legally?

The question is part of a national debate about charitable veterinary care and whether the donations and tax breaks nonprofits receive make them unfair competitors for veterinarians in private practice.

Hearings recessed Thursday in Montgomery concerning the Alabama State Board of Veterinary Medical Examiners (ASBVME)'s case against Dr. William Weber, a 76-year-old veterinarian who faces two administrative complaints filed by regulators late last year. They allege that Weber's ownership of the Alabama Spay/Neuter Clinic in Birmingham is a farce in part because it’s tax-exempt under Internal Revenue code, section 501(c)(3), which precludes any one person or group from owning it. Non-veterinarians own the nonprofit’s building and medical equipment.

The arrangement, authorities say, skirts state regulations that bar non-veterinarians from owning veterinary practices. They contend that Weber, who runs a private hospital in nearby Irondale, has barely set foot in the spay-neuter clinic since taking the title of owner in 2010.

Hearings are expected to resume April 29.

Regulators with Alabama’s state board aren’t alone in their view that some low-cost and charitable veterinary practices abuse their nonprofit status to the detriment of small businesses. Across the country, a turf war is being waged as veterinarians in private practice perceive nonprofits impinging on their businesses, using tax breaks, donations, volunteers and government support to offer services at cut rates.

If low-cost veterinary care isn’t limited to the needy, what results is unfair competition, critics say. Alabama regulators are taking the fight a step further by alleging that high-volume spay-neuter clinics do not meet the profession’s standard of care.

Mark Nelson, office administrator of the Alabama Spay/Neuter Clinic, estimates that 10,000 or so animals come through the practice a year. A veterinarian might perform 30 to 40 spay and neuter surgeries in a single day.

State regulators frown upon that statistic.

“Unfortunately, the combination of procedural methods required and the daily surgical demands of veterinarians has resulted in an unacceptable number of patients developing complications, some life threatening,” states one of the ASBVME complaints.

Board members did not elaborate or respond to VIN News Service inquiries.

For his part, Weber, choosing his words carefully, said: “It’s like arguing capital punishment or abortion — you’re going to get opinions split down the middle. There’s a lot riding on this case."

By all accounts, that’s not exaggeration. If the ASBVME wins, Weber could lose his license. Such a decision also could spell death for the Alabama Spay/Neuter Clinic and three other nonprofits in the state like it.

“How all this plays out will have some big implications, not just for Alabama but for the rest of the country,” an attorney involved in the case said, speaking on condition of anonymity. “I shouldn't be talking while this is ongoing.”

The ASBVME began investigating Weber’s ties to the nonprofit in 2012. Three years of failed legislative attempts to both outlaw and protect spay-neuter clinics have followed.

Infighting has splintered Alabama’s profession at a time when some residents in the state view veterinarians as protectionists rather than doctors dedicated to the health of animals.

"If these clinics are shut down, we are going to have an influx of dogs and cats and many more euthanized," wrote Katherine RouLaine of Tuskaloosa on a Facebook page devoted to tracking the ASBVME's case against Weber. "Why does it always have to be about money?"

With the public's glaring eye fixed on the profession, the Alabama Veterinary Medical Association (ALVMA) decided last spring to oppose the ASBVME’s crackdown on spay-neuter nonprofits. A group of veterinarians who disagreed with that stance responded by creating the Alabama Veterinary Practice Owners Association, which supports ASBVME efforts.

In June, Dr. Robert Pitman sued the ALVMA when the association made its membership a requirement of ASBVME appointments. The ALVMA nominates three candidates for board seats, ultimately selected by the governor. The lawsuit is ongoing.

Pitman, a practice owner in Athens, is finishing out his second ASBVME term as its president. He did not respond requests for comment.

During a meeting last summer, ALVMA Vice President Dr. T.C. Branch expressed dismay over the controversy. “It’s tearing apart our profession,” he said.

ALVMA President Dr. William Bledsoe said he formed a task force last year, trying to get input from all sides. It didn't work. "This whole issue has caused quite a stir."

Public subsidies targeted 

The tug of war between nonprofits and private enterprise isn’t unique to veterinary medicine. Complaints are prevalent among many business groups and professions, so much so that the House Committee on Ways and Means held hearings in Washington, D.C., last year about whether to tighten tax laws on charitable operations.

John Palatiello, a public affairs consultant and president of the Business Coalition for Fair Competition in Reston, Va., was one of many to testify. He praised the work of nonprofits but argued that tax-subsidized organizations shouldn't be allowed to earn profits on activities that are similar to those of a for-profit, taxpaying business.

“For us, the issue is nonprofit organizations, including charities, which operate in direct and unfair competition with for-profit, tax paying private businesses,” he told the committee. “Nonprofit organizations unfairly compete with private, for-profit businesses by engaging in commercial activities, but not paying taxes.”

So far, Congress has not acted to reform the tax code stipulating nonprofit exemptions. But that hasn’t shielded nonprofits from scrutiny at the state level.

In 2010, one of New Jersey’s largest nonprofit veterinary practices lost a state grant funded by dog license fees after the New Jersey Veterinary Medical Association (NJVMA) let government officials know that the practice had expanded its services to include wellness care.

As a result, the New Jersey Department of Health found People for Animals, a 501(c)(3) with locations in Robbinsville and Hillside, to be in violation of the grant’s terms.

“We were offering wellness services, and the grant restricted us to only doing spay-neuter surgery, with the state regulating our prices,” recalled Jane Guillaume, executive director. “We were not able to be solvent with those restrictions in place.”

People for Animals had been receiving a grant of $80,000 to $100,000 a year. The organization elected to forgo the subsidy and keep its wellness program, which seems to have more than made up for the lost public funds.

The nonprofit’s tax return shows that People for Animals brought in more than $2.4 million in revenue for the year ending June 30, 2012, up nearly $300,000 from the previous year. The nonprofit employs 12 veterinarians.

“If they’re pulling down seven figures, that’s a big operation,” NJVMA Executive Director Rick Alampi said. “And somehow they still claim to be a 501(c)(3)? I don’t get that.”

Guillaume attributes the uptick in earnings to the nonprofit’s growth in services. She defended the move to expand beyond pet sterilization by pointing to the group’s mission. “Putting a dent in overpopulation and animal suffering, that’s our focus,” she said.

Spay and neuter surgeries there run $110 to $140 for dogs and as low as $55 for feral or free-roaming cats — surgeries that could cost three times as much at veterinary practices that don’t receive tax breaks, donations or government subsidies to offset the price of care.

Asked how the private sector can compete with those prices, Guillaume said she believes nonprofit and private veterinary practices serve different populations. She pointed to People for Animals’ “no frills” fee schedule. The nonprofit does not automatically send patients home with post-operative pain medication or Elizabethan collars, for example. Those cost extra.

“Clients aren’t going to get the same level of service here that they might at a private practice; we don’t treat illness or disease, and we’re not full-service,” she said. “We do high quality, high-volume spays and neuters at low cost on uncomplicated, young and healthy animals. We also offer low-cost vaccines, microchipping, fecal testing and preventative-type health care.”

But many veterinarians in private practice rely on those services to get clients through their doors on a regular basis. Most veterinarians and veterinary organizations concerned about the encroachment of nonprofit organizations acknowledge the need for low-cost veterinary care. What irks them, they say, is the fact that many nonprofits, People for Animals included, do not impose any financial means criteria on clients.

“You can be Bill Gates and have your dog spayed there,” Alampi said.

Guillaume doesn’t want to turn away potential clients, no matter their financial status. She said she’d rather help those truly in need but believes even the wealthy forgo veterinary care because they are unwilling to pay what it costs in the private sector.

“I don’t want to offer spays and neuters to someone who pulls into the parking lot in a Humvee,” she said. “But I also believe that an owner’s income level does not translate to how much they’re willing to spend on their pet.”

Most patients, she said, are “animals that haven’t been in a home in years or have never seen a veterinarian.”

“The vast majority of our clients are from low-income and urban areas,” she said. “We provide services for thousands of feral cats each year as well, which many veterinarians refuse to serve at all. We don’t impose residency requirements or income qualifications. We help anyone we can.”

She added by email, "It's not our organization's intention or desire to compete with neighboring veterinarians for clients."

Whether the nonprofit unfairly draws clients away from private practices is a matter of opinion.

Owners of practices near People for Animals did not respond to interview requests, but a board-certified surgeon in Robbinsville said competition from the nonprofit is squeezing the area's general practitioners.

“It’s really unfair competition,” said Dr. Daniel Stobie, chief of staff at NorthStar VETS, an emergency trauma and specialty center. He contends that if nonprofits were driven by pure altruism, People for Animals would be based in neglected pockets of Trenton and Newark rather than in suburban areas already served by private veterinary practices.

“No veterinarian in the state of New Jersey would have a problem if they were only providing services to people with no money,” he said. “Our practice has a foundation that helps people who can’t afford care, and we verify their income to see if they qualify for assistance. I don’t see why People for Animals can’t do that as well.”

Nonprofits proliferate

Ron Vera, an attorney in California, agrees. He battled nonprofits more than a decade ago on behalf of San Diego Veterinary Medical Association, which sued the San Diego County Department of Animal Services in 2002 for hosting rabies vaccination and wellness clinics.

Vera and the association lost their case. Then-San Diego Superior Court Judge Janis L. Sammartino ruled that the animal control agency’s duty to protect public health by way of subsidized veterinary care trumped claims that it violated state regulatory code by interfering with private business.

“… The county’s actions appear to be a valid exercise of its police power authority,” Judge Sammartino wrote. “The police power authority exists to protect the general welfare of the community. Sick infected dogs received in shelters, with or without a manifestation of symptoms, infect other animals and impact a broader community.”

Vera is not convinced. Reflecting on the decision recently, he said, “Nonprofits and local governments perform veterinary services under the guise of public health, but they’re just trying to enhance their revenue.”

California’s nonprofits extend beyond San Diego, dotting nearly every major city in the state. Expansions are under way for the East Bay SPCA in Oakland, which advertises full veterinary services. Reduced pricing is extended to those who demonstrate financial need or hardship and are on some sort of documented government assistance.

That’s not true for all SPCA sites in the United States, which are individually operated, according to SPCA International. An hour-and-a-half drive northeast, the Sacramento SPCA, too, is planning an expansion but does not restrict its low fees to the needy.

Feline sterilization costs, at most, $45. Spay and neuter surgeries for dogs range from $50 to $130. Other services include vaccinations, declaw procedures, microchipping and heartworm tests and medications.

Valerie Fenstermaker, executive director of the California Veterinary Medical Association, said there’s an upside to nonprofits transitioning to clinical practice. More veterinarians than ever now work in shelter medicine, and that provides animals with better medical care.

Unlike in Alabama, California regulators do not restrict the ownership of practices to licensed veterinarians. Nonprofits are required to obtain premise permits from the California Veterinary Medical Board, which imposes quality controls and random inspections.

Even so, it’s tough for small business owners to compete with nonprofits, Fenstermaker said.

“If SPCA owns a full-service veterinary practice, they can get donations to buy equipment, they have volunteers and they get tax breaks,” she said. “… It makes some of our members pretty crazy, but there’s nothing we can do about it.”

Various veterinary medical associations have pushed to level the playing field but have been unsuccessful.

During the early 1980s, the Virginia Veterinary Medical Association sued the Virginia Beach SPCA when the nonprofit began sponsoring low-cost spays and neuters, alleging unfair competition. When the association lost its case, it pushed a requirement into the state’s practice act precluding non-veterinarians from employing veterinarians, thereby making it impossible for a non-veterinarian to operate a practice.

The condition was challenged in court, where a judge ruled it to be unfair.

Also during the 1980s, veterinarians in Michigan challenged the Michigan Humane Society’s 501(c)(3) status with the IRS, alleging that the nonprofit’s move to offer low-cost spay and neuter surgeries was in violation of its charter.

The IRS denied the claim. Since then, the Michigan Human Society has expanded its offerings to include low-cost vaccines, wellness care, microchips, dentistry and other surgical procedures.

The nonprofit brought in nearly $8.9 million in contributions and grants for the year ending Sept. 30, 2012, and reported more than $22 million in net assets in its tax return. During the fiscal year, Michigan Humane Society’s three charitable veterinary hospitals performed 11,796 spay and neuter surgeries and tended to the medical needs of more than 68,000 animals.

The NJVMA’s Rick Alampi insists that nonprofit veterinary medicine has turned into big business, padding the pockets of a few who operate in the name of charity while pushing out private practitioners trying to run a small business.

At a minimum, he’d like to see financial means testing required of those of seek veterinary services from nonprofits. But he acknowledges that imposing such requirements is an uphill political battle.

“Legislatively, this is a very tough lift,” he said.

Public unsympathetic

Nowhere is the contentious nature of spay-neuter legislation better exemplified than in Alabama, where veterinarians were lambasted in the media late last month after senators blocked a bill aiming to legally protect the existence of four nonprofit clinics in the state — the same nonprofits being challenged by the ASBVME.

The bill’s passage could have prevented the ASBVME from enforcing its veterinarian-only ownership rule on nonprofits and silence assertions that high-volume sterilization constitutes substandard care.

While supporters of the state board momentarily gained a legislative victory, it’s all but lost the profession’s greater battle for public good will. Various opinion pieces have pegged those who opposed HB 141 as greedy veterinarians rather than practitioners trying to protect animal health or maintain fairness among business sectors.

A political cartoon recently featured on AL.com shows a figure labeled “hard-core veterinarian” conspiring with a senator and a lobbyist dubbed “good ol’ boy politics.” They are wearing Elizabethan collars, or E-collars, on their heads.

The cartoon accompanies a column titled “Dogs play dirty politics with spay/neuter bill deserve ‘cone of shame.’” It begins by chastising a state senator who’s accused of siding with regulatory board veterinarians to defeat the measure.

“Keep your dirty, filibustering paws off the spay/neuter clinic protection bill,” opinion writer Joey Kennedy began. “I’m looking at you, Sen. Paul Bussman. The GOP state senator from Cullman is in cahoots with a few ‘hard-core’ money-grubbing veterinarians who oppose nonprofit spay/neuter clinics and are looking to block the protection bill from coming to a vote in the Senate.”

Dr. Christopher Rehm, a practice owner in Mobile, wrote a letter in response to AL.com, published April 7. He noted that some privately owned veterinary practices provide low-cost spay and neuter surgeries at or below the cost of what nonprofits charge.

He also pointed out that private veterinary practices are licensed and inspected by state regulators.

“These Alabamian, privately-owned clinics and their veterinarian owners answer to the State Board of Veterinary Medical Examiners,” he wrote. “There is no oversight nor regulation of the nonprofits with the exception of the employed veterinarian whose license is at risk and who can simply be replaced. This does not protect the public, and most importantly it does not protect pets!”

It’s unclear whether surgeries performed at Alabama’s four nonprofit spay-neuter clinics have spurred consumer complaints.

No matter how you look at it, private practitioners are losing, Rehm said during a phone interview.

“It used to be that veterinarians were pretty well respected,” he said. “But people wanting to get into the veterinary turf have made us look like gougers, and we’re on the defensive. The irony is that most of us don’t even think like business owners. We’re thinking, ‘How little can I charge for that spay and still be able to go to the grocery store?’

“We spend a lot of time trying to save clients money and protect the health of animals,” he added. “And I don’t think that story is being told.”

Dr. Gary Weitzman, president and CEO of San Diego Humane Society and SPCA understands. Having spent 15 years in private practice, he supports restricting the nonprofit’s services to those who are financially disadvantaged.

“For me, it’s pretty straightforward; we need to be taking care of needs-based work,” he said. "... We’re the safety net for the underserved or for those who can’t participate in the regular private world of animal care."

During fiscal year 2012-2013, veterinarians performed 7,456 spay and neuter surgeries for the San Diego Humane Society as well as the San Diego County Department of Animal Services, which sits on the same campus. The nonprofit reported more than $17 million in support and revenue during the same time period.

Weitzman is part of the Society of Animal Welfare Administrators, a membership organization for nonprofits that he says is in talks with the American Veterinary Medical Association about how to mend private practice and animal shelter relations.

“We’re all in this together doing the same work,” he said. “As a vet and head of a shelter, it breaks my heart that there’s a divide in our profession. All of us should now be working together to repair that rift to better care for animals and their people."




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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