Letter to dvm360: Pricing veterinary services is more complicated than article suggests

October 5, 2017
Larry Hawk, DVM, MBA

If practice owners held prices at or below inflation, wed all go broke, reader maintains.

I have just read “The pricing struggle” in the September issue of dvm360 by Drs. Rebecca Brake and Michael Dicks of the AVMA's Economics Division, which concludes that as a profession we should hold our prices at or below the rate of inflation. I have been at the highest levels of corporate veterinary medicine, manufacturing and animal-related not-for-profit work, and recently I have come to own and operate a successful veterinary practice. I believe I speak from an extensive career background that is unique in the profession.

The AVMA's latest study telling us all about consumer behavior related to price is one-dimensional and ignores most of what faces any owner of a veterinary practice. Let's first look at just a few items that drive pricing changes. In my practice, Antech has raised my lab prices an average of 6 percent every year for the last 10 years. That goes for every manufacturer and service provider I deal with and in some cases the increase has been far greater.

There has been tremendous consolidation of veterinary distribution and manufacturing companies, which has done nothing but drive cost of goods and services higher at rates far exceeding the rate of inflation. Prescription-related nutritional products from all the manufacturers have reached a point that the $100 bag of dog food is a reality despite bags and cans getting smaller to hide true pricing changes to the consumer. In my practice we have also raised our veterinary and technician wages at least 5 percent per year over the last 10 years to make sure we are competitive in attracting and retaining the best talent we possibly can.

At the same time let's also look at changes in the marketplace, from “Doc Google” to 1-800 PetMeds and more-including the AVMA president-elect's practice down the street promoting anesthesia-free dentistry despite the AVMA's position on the matter.

The very next article in your publication, about the Merck-Unfenced Pet Owner Paths research study on what prompts a pet owner to take various actions, raises more questions about the AVMA study. Just look at cat owners' preference for seeking information from online sources! The AVMA “experts” would probably say they do that because our prices in veterinary practice have gotten too high. If that is true why are there such stark contrasts between dog owners and cat owners using online resources? Do cat owners value their pets differently than dog owners do? I don't think so, but I have no study to prove that theory, just years of practical hands-on experience. If cats had diarrhea all over the owners' favorite rugs rather than in the cat box, I think the differences between cat and dog owners would be far less!

The article also blames practice management experts for telling us all to raise prices and relating that advice to decreasing client visits. Wait just a minute! Those same practice management experts also told us not to raise fees on price-sensitive services that could be easily shopped by consumers. If you followed that advice you wouldn't even be able to keep up with inflation because there's no possible way to raise lab prices and other less-shopped service fees to make up for the 60 to 70 percent of prices you're not increasing due to the shopability of those other services.

The AVMA experts are misguided to draw such simplistic conclusions regarding consumer pricing and practice profitability. With all the outside pricing pressures-including cost of goods and services, employee salaries and benefit costs, just to name a few-how can the AVMA “experts” possibly expect that I hold prices at or below the rate of inflation? That is a recipe for going broke quickly. It is also a recipe for making our veterinary wages less and less over time because we can't afford to pay living wages to our staff.

In the service industry, the price-value equation is not all about price. You can have the lowest prices and poor client satisfaction and therefore poor value despite your low prices. It is a dynamic marketplace out there, and the AVMA better start looking at all those factors and providing sound recommendations to its membership.

Larry Hawk, DVM, MBA

Auburndale, Massachusetts

AVMA member since 1978