The veterinary profession has weathered much change over the past 100 years, from focusing on horses and farm animals to being multifaceted. Many contemporary veterinarians grew up reading the James Herriot series of books, which regaled us with stories about his life as a young veterinarian and later in his career. His romanticized versions of veterinary medicine, in which he cared for all genres of animals during often-trying circumstances, led many of us into the profession with a rose-colored, adventurous outlook.
Today, veterinary professionals are found in research, human health care, pharmaceutical development, sales and marketing, universities, food inspection and pet food science, along with small and large animal practice. We also are managers, operators, vice presidents, chief medical officers and CEOs in multiunit veterinary groups. We have served as governors, legislators and even astronauts. Despite the diversity in our roles, we are primarily thought of as the immediate caregivers of companion animals.
Even with all those avenues available, our entrepreneurial spirit led many veterinarians to open their own practices with dedicated teams serving communities of pets and clients. Their businesses are integral in local ecosystems and provide long, stable careers for other veterinarians and the paraprofessionals supporting the hospitals.
However, despite the long-storied tradition of veterinarian-owned practices, a shift has occurred in the past 25 years.
The Future of Ownership
Over the previous quarter-century, veterinary practices and veterinarians have become increasingly engulfed in business aggregates. To date, about 25% of practices are in groups funded mostly by private equity. The phenomenon has grown as hospital owners looking for an exit strategy find no buyers among their associates and colleagues. Thus, the cash sale or even partial equity sale to a corporate group is attractive, lucrative and easily brokered.
One theory posits that the price of buying into or opening a practice is cost-prohibitive for younger DVMs due to rising tuition. There is also concern about their need for advanced medical training after graduation due to changes in curricula that often do not provide extensive surgical training.
Private business ownership is daunting in the face of such challenges. Let’s face it, owning a business requires marketing knowledge and human resources skills. And then there are myriad duties involving advertising, accounts payable, accounts receivable, supplies, payroll, facilities and equipment maintenance, bookkeeping, and client relations. Today’s market also requires a business plan to source loans before building a practice or buying one. All this leads to a lessened desire to enter ownership.
Along with the consolidation of veterinary practices, many veterinarians opt to work as an associate or employee DVM. Unfortunately, if the trend continues, the lack of veterinarians owning and managing practices will lead to nonveterinary professionals making more crucial decisions about leadership, operations, management and, potentially, medical care.
Most veterinary consolidators are led by business professionals, not veterinarians. The CEOs, chief operating officers and board members often come from human enterprises such as medical sales and supplies, hospitality, food service and finance. This is often their first foray into veterinary medicine.
While we welcome the business acumen, knowledge and experience of those executives, veterinarians are well-equipped to lead veterinary groups. However, more often than not, they are relegated to chief medical officer roles and have limited input into operations and the management of veterinary teams. Simply put, veterinarians are being sidelined in veterinary medicine.
What Can We Do?
How do we combat the decline in veterinarian ownership and leadership? Complacency is our foe. An obvious avenue is imperative: practice ownership with veterinarians making the medical and management decisions. One popular solution involves hybrid models for veterinarians who wish to own a practice but not take on the entire burden of running a business. While such a step might require partnering with a private-equity company for the capital investment, veterinarians lead and manage their hospitals without a large outlay of cash or huge bank loans.
This shared debt and profit model typically makes the home office the majority owner, with a 51% to 60% stake, and gives the veterinarian-owner the remainder. The partner DVM enjoys the benefit of ownership, often in a newly built or remodeled facility in which they have input on the design and interior décor. The DVM hires the staff members and sets up the hospital with the support of the home office. Partner DVMs work as solo practitioners until the business can support a second, third or fourth DVM.
The earning power is generally higher for owner veterinarians than employee DVMs. The latter group typically earns a base salary and 15% to 25% of production. After five years, the employee veterinarian might earn from $500,000 to $1 million. While such pay is admirable, owner DVMs in a 60/40 model can see potentially three or four times as much through production and distribution.
Another perk of shared ownership is the ability to grow equity in the business, supporting an exit strategy with significant income. Of course, as a practice grows with additional employee DVMs and services, the profit and equity also can increase for the owner DVM.
That is the difference between being an employee veterinarian with a high salary and an owner DVM. In the end, the hospital can be sold to an associate, continuing the veterinary ownership legacy. That is wealth building.
The Fork in the Road
Our industry is nearing a crucial point. Outside investors’ interest in veterinary medicine demonstrates that we have an extremely lucrative and attractive product. Our profession is called recession- and pandemic-proof.
The U.S. pet care and veterinary industries are expected to grow by more than 6% a year through 2027, combining for sales of $305 billion. Veterinary care is about 27% of that total. We should take note of the substantial growth with an eye toward recapturing veterinary hospital ownership and leadership.
Veterinarians have worked long and hard to attain our esteemed standing among other professionals. The revenue generated by veterinary teams is massive, and we should not be lured by rising salaries offered by outside investors.
Without ownership of our profession, we cannot partake fully of the generated wealth. If we continue to say we’re “not in it for the money,” we will forsake ourselves of wealth that is earned by us and not returned to us. If we do not insist on veterinary leadership and ownership, we also forsake the animals we took an oath to protect. If we continue to be blinded by higher salaries and promises of shiny perks, our profession will no longer resemble the caring profession we know it to be but instead will become an HMO-type business bought and sold at the whim of outside influencers.