Questioning business models used in Veterinary Science

In the January/February 2020 edition of The Veterinarian I published an opinion piece requesting a discussion on the business model used in Veterinary Practice in the Western World. This piece was written because I perceived that the mental state of the profession was showing signs of breaking apart with over 30 per cent of responses to an AVA survey indicating there were mental or psychological issues adversely affecting the profession and practitioners were leaving the profession after only 5 years in practice.

The same survey also advised that employee veterinarians were overworked and underpaid even though veterinary charges have exploded in recent years to such an extent that my clients are now advising me they cannot afford to bring their pets to a veterinary clinic unless it is a last resort.

This, I believe, is becoming an animal welfare issue because animals are not being presented while ill. However, conversations with veterinarians in small animal practice all tell me that they are all extremely busy. So what is going on?

When I look at the white boards detailing surgical cases scheduled for the day, I only see only two or three operations scheduled even in multi-man practices. On a veterinary chat online-forum recently practitioners advised they allow 30 minutes per consultation every day. When calculated out that means a maximum of up to 14 consults per day/vet (8.30am – 5.00pm with 15 minutes for morning and afternoon tea and 1 hour for lunch). So, if consultations are charged out at $80.00 income will be 14 x $80.00 = $1120.00 This is not going to pay the bills for one veterinarian with 0.5 FTE of a vet nurse. 

Over the years, to increase income, greater use of laboratory diagnostics, radiography and in recent years CT scans have crept in to augment diagnostic abilities and improve treatment outcomes. Another source of income has been the dispensing of scheduled drugs. Traditionally these have been charged out at 50 per cent margin (100 per cent mark-up). Added to this is now added a dispensing fee and holding charge. A recent drug a client received was charged out at $48.50 for a $9.50 drug I could buy from the wholesaler. These quadrupling of charges is also helping the income streams.

Let us now look at surgical charges. Surgery is a very highly skilled technique which takes many years to achieve competency. It is not developed in young graduates (or even in some old graduates!) so it is difficult to charge large amounts when performed by recent graduates, even though they may take twice as long to do routine surgery. (At the other end of the career the same thing happens. My surgeries took much longer to do just before retirement than at my peak.) Surgery is so difficult that Practitioner Boards are now preventing veterinarians from performing some operations if they do not have specialist qualifications. This is also adversely affecting income streams.

In summary we have a business model which is restricting income from consultations. Adding costs for laboratory and sophisticated equipment (which only just returns a profit if used on all patients). And are restricted in performing complex operations which require high skills and for which high fees are justified. We are also charging huge amounts for drugs available on the internet for a fraction of the price.

The veterinary schools have traditionally been blamed for this situation through inappropriate student selection, training and /or skills acquisition. I am now going to add a further controversy by saying, don’t blame the Vet Schools. They are taking advice from the Veterinary Schools Accreditation Committee (VSAC). 

Most veterinarians would never have heard of this committee, but it comprises five to six members who visit every Australian Veterinary School about every five years and assess what is being taught, how it is managed, and the quality of graduate being produced. During the twentieth Century it also advised the Schools of the requirements of the veterinary profession for graduates who were satisfying the needs of the client! 

Let us think about that for a minute. Did I just suggest that the profession should think about what the client needs? It is one thing for a committee to look after the requirements of the profession, but should it also be looking outside of that box? Well yes, I think it should. If there is a demonstrated decline in the mental health of the profession. The AVA is providing solutions to existing problems but not advocating for resolving the causes. Someone else must step up and advise at a very high level what needs to be done to resolve the problems. My argument is that the logical body to do that is the VSAC. They should have members who have a close relationship with government departments, Universities, and different sorts of private practices so they can advise from an experts’ viewpoint what the clients require from the veterinary profession.

Currently there are two business models commonly utilised. The clothing retail industry sells current fashion at thousands of percent mark-up initially, and as time passes, discounts the items at lower and lower prices. The food market sells at much lower margins (10-20 per cent) but turns over the same items many times a year to generate 200 per cent profit based on low margin, high turnover business model. This is the model used by the drug wholesale industry. (I managed Westralian Drug Co. for a couple of years) The question I pose is, what is best for the retail veterinary industry? Currently it is operating a high margin, low turnover, which is different from that used in previous centuries. In the twentieth century we worked long hours, saw lots of patients, did not charge very much, but still managed to retire comfortably. Some practice owners even became very wealthy. There are today some owners and corporates still generating large amounts, but it is coming at great cost to the individual veterinarian and the profession. We used to rate 3-4th among the respected professions. We now rank much lower because of our billing policies. 

It is my belief we should be asking the clients what their needs are and implementing their requirements if we are to solve our own problems in servicing those clients.

We then need to develop sufficient skills to fulfill those needs at a price the clients can afford.

Tim Mather BVSc GAICD graduated from Queensland Vet school and has a Diploma from Australian Institute of Company Directors. He is currently working with Skills Australia on Vocational Education and Training on the Industry Reference Committee and CSIRO in Animal Ethics. Over the years he has worked on all domestic species in over fifty practices in Australia and UK. Now semi-retired he is an OTV for Thoroughbred, Harness and Greyhound industries and works with AVA on Policy Council for Greyhounds, Sporting and Working dogs SIG. In between gigs he enjoys desert trekking, bushwalking, swimming and contract bridge.

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