The veterinary industry tends to be labeled recession-resistant because of consistent growth in pet owner spending and evolving attitudes about pets as family members. But veterinary practice performance data from 2022 shows more nuance to the story than meets the eye. The workforce shortage, higher inflation and a decline in disposable income all impact the delicate balance between pet owners and veterinarians.
Veterinary practices rode a wave of financial prosperity and client demand throughout 2020 and 2021 due in part to the COVID-19 pandemic. However, we started to see the wave morph into a steady river in 2022.
All that raises important questions:
- Was 2022’s modest performance a post-pandemic level-setting?
- Did veterinary practices dealing with workforce shortages and burnout reduce their capacity intentionally?
What the Numbers Show
Thanks to connections with thousands of U.S. veterinary practices, the data experts at Vetsource were able to aggregate vast amounts of transactional data and report on the state of the industry.
Let’s compare 2022 to 2021 at traditional general practices.
REVENUE
- Average revenue was up 5% in 2022.
- Every month showed revenue growth, with February being the highest at 9.8% and July the lowest at 1.9%.
- Average revenue per patient was up 10.6%.
- Service revenue growth outpaced product revenue growth.
VISITS
- Average visits were down 3.5% in 2022.
- Every month showed a decline in visits except for February, which was flat at 0.7%.
- Non-canceled appointments fell by 2.3%.
- New clients dropped by 16%.
- Lapsed patients (no transaction within the past 14 to 18 months) nearly doubled.
Essentially, general veterinary visits were down in 2022, but revenue was up. While 2020 and 2021 might have been exceptional periods due to the pandemic, comparing 2022 to pre-pandemic 2019 shows that many metrics are still slightly down.
It’s critical to note that the data presented here is for traditional veterinary practices. Pet health care has myriad options today, such as through retailers, vaccine clinics and telehealth, so the decline in visits might not be as drastic if we include those additional sources. Pet owners also might utilize new urgent care and emergency facilities if they can’t see their regular veterinarian.
Charging More
While veterinary practices averaged fewer visits in 2022, they maintained revenue growth via one key lever: price increases.
Price increases are necessary for any business and often reflect inflation. As the cost of doing business rose in 2022, including paying higher wages during the competition for employees, many practices passed along the expense to clients by raising the price of services.
Vetsource data suggests that the increase in patients and visits drove veterinary practice revenue in 2020 and 2021. In 2022, however, revenue growth appeared driven by price increases — nearly 9% overall.
The price increases were in line with those in other economic sectors, such as food, services and energy. Regardless, price hikes can do only so much and should not be the lone growth lever.
Pet Owner Behavior
Vetsource data shows that the average bonding rate, or the percentage of new clients returning to a practice, was 65% in 2022. As for forward-booking (scheduling a client’s next appointment at the end of the current visit), the average rate for veterinary practices was only 15% to 20% in 2022.
Considering the current climate of economic volatility and the threat of a recession, pet owners can absorb only so many price increases before sticker shock sets in. As a result, many of them look for less costly alternatives or abstain from traditional veterinary care. Because of price increases across many business sectors, a higher veterinary bill is one more expense for consumers to second-guess when managing their budget.
Given an abundance of choices, pet owners are taking control of veterinary care by shopping around. Their loyalty is more focused on the pet than the practice. An increasing number of pet owners are buying products outside their veterinary practice, as shown by a 7% decline on average in-hospital, product-only-purchase visits.
Advances in e-commerce experiences and shipping speeds certainly influence changes in pet owner behavior. For example, the market research firm Packaged Facts expects internet sales of pet products to reach $49.7 billion, or 45% of the total, by 2026, an increase from 16% in 2017.
What to Watch for in 2023
How will 2023 shake out for veterinary practices? Data trends point to the need for practices to focus on increasing patient visits and meeting clients’ evolving expectations, all while continuing to face staffing shortages and employee burnout.
We also should consider:
- Can practices shift from survival mode and refocus on the staff and client experience?
- Can they bring back lapsed patients and product purchases?
- How can they meaningfully improve efficiency?
Thanks to technological advances, veterinary practices have a plethora of options for boosting client engagement using tactics such as reminder emails, texts, app notifications and more. Also, pharmacy sales traditionally account for 25% of a practice’s revenue, making it important for hospitals to compete for the business and capitalize on their patient medical data and other advantages that third-party pharmacies do not have.
Lastly, the workforce shortage is a trend to monitor continuously. Practices must get creative and utilize technology to address staffing issues innovatively. The ongoing conversation about maximizing support staff is key to improving not only efficiency but also job satisfaction and the practice culture.
The veterinary industry has its challenges, as all business sectors do, but our ability to adapt and grow in the face of adversity for the sake of animal health makes our profession resilient and rewarding.