Economic downturn hits veterinary practices

New VIN survey results anticipated

March 11, 2009 (published)
By Jennifer Fiala

Dr. Ann Shower is packing her bags for Hawaii, and she’s not going on a vacation.

In recent weeks, the mixed-animal practitioner from Macon County, N.C., has decided to close her mobile large-animal practice. The reason? Like millions of Americans, the recession has battered the veterinarian’s earnings with her equine clients and cut into her hours doing small-animal relief work. So she’s leaving her home, her husband and her life behind to take a job in Oahu, nearly 5,000 miles away.

“The discretionary funds of the people in my area have just dried up,” she says. “I can’t stick around for 100 people. I haven’t been paid in months.”

Shower admits other jobs exist in her area, but competition is fierce at a time when practice incomes are shrinking. Evidence of that is confirmed by statistics from the National Commission on Veterinary Economic Issues (NCVEI) as well as a Brakke Consulting study showing transactions at small-animal practices flat or falling. This month, the Veterinary Information Network (VIN) plans to repeat a membership survey that in November revealed a third of practices reporting negative revenue changes in 2008, compared to 2007.

The reality of those statistics are bolstered by new U.S. Department of Labor figures that show the nation’s unemployment rate rising to more than 8.1 percent, its highest since 1983. Experts predict the surge will send more Americans into bankruptcy and foster further cutbacks on discretionary spending.

Whether or not pet spending falls into that category is up for debate, as the the American Pet Products Association reports Americans dished out an estimated $11.1 billion last year for pet health care. But now with shelters bursting with unwanted animals (the American Society for the Prevention of Cruelty to Animals estimates that up to a million pets are at risk for homelessness due to owners' economic hardships) and some practitioners seeing more euthanasias than ever, experts contend that historical precedent might be shifting for veterinary medicine. 
Management consultant Gerald Snyder, VMD, forecasts that at least 15 percent of all veterinary practices in the country will close by the year’s end. While many consider that extreme, virtually no one denies that the economic downturn has eroded the health of veterinary practices, once considered recession resistant, as financially strapped pet owners face dumping their animals rather than taking them in for annual checkups and vaccinations.

The topic dominated a roundtable discussion at last month’s Midwest Veterinary Conference, where Ohio veterinarians expressed concern about their stability in a state plagued by the demise of manufacturing jobs and high foreclosure rates.

“I’m starting to think we need to add a new client titled Mr. and Mrs. Layoff,” says Dr. Gary Thompson, a consultant who co-owns veterinary hospitals in Southeast Michigan and Northwest Ohio. He shared that 2008’s fourth-quarter euthanasia numbers were up 15 percent compared to the end of 2007.

“We’ve got double-digit unemployment in our area,” he explains. “We had an entire staff meeting on ways to increase compliance. It’s our job to figure out a way for our clients to pay for veterinary care.”

Veterinarians and staff, it appears, aren’t immune to layoffs, either. The March 1 edition of the Journal of the American Veterinary Medical Association highlighted a recent NCVEI Web poll concerning layoffs of veterinarians. The results: Of 150 respondents, 5 percent confirmed that the recession caused their practice to lay off at least one veterinarian, and 16 percent stated that due to the downturn, their practice was considering it.

“Right now I’m hearing that veterinarians are losing their jobs, and I’ve never heard that before,” says Jon Dittrich, a VIN consultant. “I call it capitalistic Darwinism, where your marginal practices are going to go out of business.”

Dittrich’s quarterly Bow Wow Jones report, which tracks the financial health of his clients, shows earnings up just 2.9 percent in 2008, compared to 7.2 percent in 2007.

“It is very evident the worst recession since the Great Depression is upon us,” Dittrich says.

Grafton, Ohio-based consultant Marsha Heinke, DVM, CPA concurs, sharing data gleaned from her client’s practices during the Midwest roundtable.

“We looked at 108 practices and about 30 percent are down. Only 50 percent had real growth. I’ve never seen that before,” she says.

That news contradicts a CBS special characterizing veterinarians and veterinary technicians as top vocations in terms of growth and financial stability. The program, which aired Feb. 20, featured author Laurence Shatkin’s “150 Best Recession Proof Jobs,” which lists veterinary technicians as the No. 2 recession-proof career in terms of job openings (network systems and data communications analyists ranked No. 1). The news story also implies that technicians have an earning potential of $70,000.

The book ranks veterinarians No. 4.

“That salary, the ranking — it’s all laughable,’” says Nanette Walker Smith, head of the Veterinary Support Personnel Network (VSPN), a division of VIN that caters to an online community of non-veterinarian support staff.

Walker, herself a certified veterinary technician, says she first started hearing whispers of economic hardships in veterinary practices about eight months ago. Nowadays, she reads the words, “I’ve just lost my job because of the economy” at least once a week.

“We’re seeing a large rise in members whose hours have been cut back or laid off due to the economy. Others are concerned because they’re seeing the writing on the wall. The uncertainty is so huge,” she says.

Dr. Matt Verbsy, of Bellefontaine, Ohio, is anxious. While his practice’s growth currently remains flat, the owner expressed fears during the Midwest roundtable that he might have to make some personnel cutbacks.

“In my area, we have three manufacturers shutting their doors, and this feeds my client base,” he says. “I’m worried that come May or June, I might have to cut my associate back from the 30 hours she’s working to maintain the practice and some type of livelihood for myself. It’s not a good position to be in.”

Perhaps no one knows that feeling better than Dani Weber, DVM, solo practitioner and owner of Laurelwood Veterinary Clinic in San Mateo, Calif. With just 1,200 clients, the slump hit the practice’s finances hard. By January, the small-animal practitioner was forced to lay off one or her two technicians.

“In October and November, things just suddenly fell off a cliff,” she recalls. “February was so dire, there was absolutely nothing coming in, no one was making appointments. So I went on a vacation for five days.”

When she came back, she got to work, sending clients coupons and upping her ad space in the local newspaper.

So far, her efforts have paid off: “At the end of February, we grossed more than we did this month, last year. It was pretty dramatic.”

Dr. Michael Riegger, Dipl. ABVP, a consultant and practice owner in suburban Albuquerque, N.M., reports a 10-percent growth in February, and a 20-percent increase so far for March. He believes the downturn will separate up-and-coming practices from marginal operations.

“I don’t know any bad practices that are doing well,” Riegger says. “I’m probably as nervous as everybody else, but I know that there are certain niches that are struggling and ones that are doing better. Cancer, cardiology, orthopedics and internal medicine do not respect the recession. Instead, the wellness practices are taking a hit. Cruciates are the No. 1 procedure in North America. If you want to survive, I would learn how to do that.”

That advice contradicts anecdotal reports that specialty practices are hurting more than most. Dr. Paula Runte attributes a revenue upswing following months of negative earnings in her Houston practice to stress and internal cutbacks, not new services.

“I’m a feline practice, and when people get stressed out, their cats get sick,” she says, adding that she recently referred a client to the University of Pennsylvania’s veterinary teaching hospital for a kidney transplant. “Our net is up because we’re doing cost saving things."

Those belt-tightening measures include hacking overtime and inventory ordering — two moves that consultant Dittrich recommends.

Ohio-based practitioners agree that limiting stock is a good way to keep stave off wasteful spending and keep products and drug costs to a minimum.

“We have a tight and small inventory, and I have two young associates who I battle with over that,” says Dr. Tom Mann at the Midwest roundtable.

“I agree,” says Dr. Gary Thompson. “If it doesn’t cure ugliness or baldness, it’s not coming into our practice.”

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