Few veterinarians are currently experiencing what they had come to expect — double-digit increases in their veterinary practice's gross, and the sagging U.S. economy is largely to blame.
That comes from a report by Brakke Consulting, Inc., which finds that pet owners are cutting back on veterinary care with 46 percent of those surveyed characterizing their financial health as worse in 2008 than in 2007.
The report, titled Economy and Pet Care, was conducted in October and November 2008 using surveys of 1,500 dog and cat owners and 225 small-animal veterinarians. Released last week, it predicts average transaction charges will barely grow by year’s end and a large segment of the profession will register declines in business.
That analysis appears in line with government reports released on Tuesday showing the U.S. economy coming to a screeching halt, with consumer incomes shrinking, jobless claims skyrocketing, housing starts plunging and huge drops in demand for big-ticket manufactured goods. Predictably, consumer spending also dropped, but when factored alongside falling gasoline prices, economists say Americans reluctance to open their pocketbooks seems even worse.
The doom and gloom doesn’t end there, with economists predicting that the nation’s longest recession in a quarter century will roll well into 2010. What’s feeding such a stormy forecast? Tuesday’s report from the Bureau of Economic Analysis shows the overall economy, as measured by gross domestic product, in decline at an annual rate of 0.5 percent in the third quarter of 2008. Analysts predict GDP also will fall in the first and second quarters of next year before making a small rebound next summer.
If that’s correct, this will be the longest-running recession since the Great Depression.
So what does that mean for veterinarians? “It has everyone spooked,” says Tom McFerson, CPA, ABV, a partner with veterinary consulting firm Gatto McFerson in Santa Monica, Calif.
In response to clients’ concerns about the economic health of their businesses, Gatto McFerson started a monthly report
tracking the gross revenue of 60 veterinary practices in California. During October 2008, numbers show the economy took a “turn for the worse,” McFerson says, with the usually-recession resistant veterinary profession feeling the heat.
For practices in Northern California, one-month gross revenue dropped almost 10 percent in October compared to October 2007, with the numbers adjusted for price increases. Although Southern California practices remained flat, specialty hospitals fell hardest with a 13.57-percent revenue loss in October, when compared to the same month during the previous year.
“October was tough,” McFerson says. “Everyone was down across-the-board. But what really got hit hard were the specialty hospitals; they were down double-digits. And that makes sense. Animal owners are thinking that if it’s not critical, it can wait, and it may be that general practitioners are keeping more cases.”
Whether or not that’s true remains to be seen, yet there’s little doubt that the downturn is affecting DVMs. The Veterinary Information Network’s (VIN) Economic Impact Survey
, released last month, reflects information gleaned from 469 veterinarian members and shows one-third of all respondents reported less revenue in 2008, compared to 2007. Regionally, practices in the northeastern United States were hardest hit.
More than half of veterinarians surveyed believe the current economic situation will be “detrimental” to their business. Yet while most don’t foresee layoffs in their practices, some predict salaries will decrease.
VIN plans to come out with new numbers tracking DVMs’ economic health and attitudes in early 2009.
McFerson, who’s preparing at press time to come out with a November report, expects the next few months to be rough considering the continued dismal revenue trend of his clients in the profession.
“There’s all sorts of anecdotal evidence from our clients, who say there are layoffs, an increased number of bounced checks and more pet owners using services like CareCredit,” he says. “In 25 years of business, we’ve never seen anything like this. We’re just telling people to hunker down, conserve their money. Hopefully, things will pick up by May.”
Slightly more upbeat is VIN consultant Jon Dittrich’s quarterly Bow Wow Jones report
, which tracks the gross earnings of his client practices. While there were clearly down or stagnant months in 2008 — March and August especially — the Bow Wow Jones registered 6.7-percent growth for 2008’s third quarter, compared to 6.9 percent registered during the same time last year.
Yet for the year, the Bow Wow Jones averaged just 4.5-percent growth — a 35 percent drop compared to the 6.9-percent growth rate of 2007.
“We see the veterinary service market having repeated ‘heart attacks’ in revenue,” writes Dittrich in his report. “I have never seen such gyrations in revenue before.
“I think we have a much worse time to come,” he predicts.