Veterinary associates: Still think you can buy a practice someday?
Corporate consolidation in the veterinary industry impacts a variety of players, and I recently discussed its effect on independent clinic owners. I also provided some food for thought on the likelihood of antitrust regulators intervening to protect smaller competitors such as individual owners, partnerships and smaller corporate consolidators.
Now let’s discuss the segment of the veterinary universe that’s by far the most dramatically impacted by corporate consolidation: associate DVM employees. I’m not talking about the folks who’ve sold their businesses and are working their way toward retirement or clinicians who never aspired to practice ownership in the first place. Corporate ownership generally doesn’t concern these subgroups.
No, the movement toward practices owned by venture capital and corporate roll-ups most concerns those entrepreneurial veterinary graduates who long to control their own workplace either alone or in partnership with other DVMs. These are the doctors who a generation ago would have moved toward ownership within a decade of graduation.
Who are these practitioners being tossed about in the current cyclone of corporate practice acquisition?
They’re relatively young and new to the concept of nitty-gritty practice ownership. They’re hesitant to pursue ownership on any terms until they feel comfortable both with medicine and with personnel management.
They’re burdened with astounding student debt and reticent to take on additional personal financial liability. They rarely have a personal balance sheet that might entice a bank or other lender to loan them the million-plus dollars often needed to buy a clinic.
They recognize that the window of opportunity for starting a family closes very quickly after one emerges from eight years of college and perhaps a year or more of postgraduate training. If family is a priority, young vets may not be immediately interested in taking on the burden of practice ownership that inevitably involves much more than a 40- to 45-hour work week. (Freedom from an “owner’s schedule” is something corporate clinics frequently offer, along with fairly generous vacation and sick time benefits.)
While not universal, these traits are common enough to explain why there’s an abundant supply of professional employees for corporate-owned veterinary practices. The marriage of debt-burdened, recently graduated doctors with corporate practice consolidators that can offer competitive salaries, predictable work schedules and modern facilities seems made in heaven—for the roll-up companies.
As time goes by …
As corporatization expands, veterinary associates—both those working in independently owned practices and those who “choose corporate” for the lifestyle benefits—watch time speed by. With each passing year, would-be clinic owners make small inroads into personal and student debt, but they simultaneously watch practice prices rise faster and faster, increasing well ahead of inflation rates. The more incrementally credit-qualified these docs become, the geometrically higher hospital prices go. Economics constantly seem to move the goalpost for this group.
And, of course, with every corporate acquisition there are fewer desirable clinics available to purchase. As the law of supply and demand holds, the prices for high-quality clinics rise as the number of independently held practices falls. And when prices are high, only the most creditworthy have the luxury of bidding.
Who gets first crack at ownership?
Imagine you’re a practice owner, either a midcareer practitioner with a clinic that’s recently doubled or tripled in value or one who’s simply preparing to retire. You’re being aggressively courted by multiple corporate suitors aching to purchase your business. The venture capital offer prices are delectable.
But you hesitate briefly. You think to yourself, “I’ll bet my senior associate would like a shot at buying this place instead of becoming an employee of a big veterinary company.” Then you get real: “Nah, she’ll never get a loan for the whole thing without me helping finance, and there are three big companies ready to give me cash.”
The ‘commoditization’ unfolds
Now consider again that large group of hopeful entrepreneurial associates who’ve found themselves with a costly degree and shockingly limited options. Some might call them the collateral damage of “progress.” I call what has happened to them the “commoditization of the DVM.”
I speak with these “commodity” doctors pretty much every day. They ask me to review their employment contracts, and when we discuss the offers they’re considering, I hear the same choruses:
“I have several offers, but the pay is basically identical—a base salary and an opportunity for a ‘bonus’ based on my production.”
“My vacation time isn’t really paid, because I have to work harder when I come back just to make my base. It’s really just three weeks unpaid ‘you don’t have to show up’ time.”
“There’s no actual health insurance; they just give me a small taxable ‘stipend’ so I can go out and buy my own.”
And I’m often asked, “How did it happen that every job is nearly the same?”
Though I always try to be upbeat, I frequently have to tell these job seekers—both those with an entrepreneurial bent and those who simply hope to maximize their pay and benefits—the same thing over and over: “When virtually all the positions are in the hands of a few employers, your degree becomes a commodity.”
And all the time I’m thinking to myself, “The independent guys who would’ve paid you more—to get your smile or your punctuality or your commitment? I’m afraid they’ve all moved to Florida.”