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New studies assess recession
National Report - While veterinary practices may not be as recession proof as previously believed, new studies say they still fare better than many other markets.
NATIONAL REPORT —While veterinary practices may not be as recession proof as previously believed, new studies say they still fare better than many other markets.
Veterinary medicine was one of the lucky markets during the recession, according to a new report from Sageworks, a North Carolina financial analysis firm. Along with human dentistry, veterinary practices have been treading water during the last four years of economic turmoil. The percent of sales change among the practices surveyed by Sageworks dropped steadily over three years since 2006 — with the biggest decrease of about 4 percent from 2007 to 2008. But increases of about 1 percent were noted from 2008 to 2009.
Those figures were backed by a 2010 American Animal Hospital Association (AAHA) State of the Industry Report, which found that gross revenue increased by 1.4 percent among more than 2,000 practices surveyed from 2008 to 2009. Those practices that fared poorly, did so to the extreme, the study notes.
"While 68 percent of the practices studied experienced an increase, 32 percent had a decline in gross revenue," the study reports. "The degree of decline suffered by 32 percent of the sample was significantly greater than the increase experienced by the 68 percent segment."
The majority of practices that reported increases saw jumps of about 5 percent in revenue. About one-third reported revenue increases of more than 10 percent, according to the study.
Overall, veterinary practices posted positive sales gains while maintaining strong profit margins, according to Sageworks, which notes that many practices cut back on payroll and advertising services to keep costs at bay.
Average client transactions were fairly flat from 2008 to 2009, with less than a 1 percent increase, notes the AAHA study. Patient visits also were flat, with about half of the practices surveyed reporting increases and about half reporting decreases. Patient visits picked up at many practices about mid-year — around the same time national retail sales trends began to improve.
Increasing patient visits triggered new growth and a return to the 5 percent to 10 percent annual rates experienced prior to the recession. This can be achieved through better compliance, the AAHA study concludes, adding that veterinarians are missing opportunities to increase visits by not facilitating better compliance.
For example, "very low" numbers of canine and feline heartworm medications were purchased from veterinarians in 2009, and few owners who purchased medications from veterinarians bought a year's supply. Third-party sellers could easily be blamed, but the study notes that even aggressive estimates indicate that only about 10 percent to 15 percent of heartworm medications come from non-veterinarian sales. The point? The compliance numbers are stil abysmal even when you add this percentage to the compliance rate.
More information about how fee increases impacted the veterinary profession during the recession will be analyzed in AAHA's next fee reference guide.