Table of contents:
THE CORPORATIZATION OF THE VETERINARY INDUSTRY.
Veterinary Care in Canada, Europe and the rest of North America is big business.
In January 2017, MARS Corporation bought Veterinary Centres of America (VCA), a publicly traded company, listed on the Nasdaq Stock Exchange, for $9.1 billion US. VCA at the time owned around 800 veterinary facilities throughout Canada and the USA. It additionally owned the second largest veterinary laboratory business in North America, Antech Diagnostics, and other veterinary related business entities including Sound, an animal diagnostic imaging company, a pet care operation (Camp Bow Wow) and a host of other firms servicing the veterinary industry. Before buying VCA, MARS had in 2007 acquired Banfield, the other major corporate entity operating veterinary facilities in the USA, which is based now out of Washington State. In a potential July 2018 transaction, Nestle Corp, sought to buy the Alberta based Pet Food company, Champion Foods, for around $2 billion dollars. The figures involved in these transactions gives one an appreciation of the type of money involved in the veterinary industry at the present time.
So why are these large corporations entering the pet care world?
One of the answers, at least, is because these veterinary businesses are relatively recession proof and they are also profitable. Accessing data on the profitability of privately owned business entities can be difficult but in 2017, VCA was a publicly traded company, listed on the Nadsaq Stock Exchange. It announced at that time, year-end gross profits for the 2016 financial year of almost $600,000,000 ($600 million) for its shareholders. Its most profitable business segment, as described in its 2016 year-end statement, and for several years before that, was its laboratory arm, Antech Diagnostics. VCA's overall profit margin from its laboratory division was over 51%, as reported in its final publicly available financial statements. With its purchase by Mars Corp, VCA however was taken private and so financial information of this nature is no longer readily available from the company. The American Veterinary Medical Association (AVMA) estimated, in 2017, that 10-15% of the approximately 28,000 veterinary facilities in the USA are owned by either large corporations such as MARS or by smaller ones, that typically own between 10 and 100 clinics. It is predicted that this percentage of corporate ownership will increase steadily over time and so one has to ask what effect will this corporatization process have on the veterinary profession and also on the public’s ability to access quality and affordable veterinary care for their animals.
According to reports from veterinarians and various writers in the industry, the large corporations are actively targeting general veterinary practices with revenues in the $1-3 million range with offers to purchase. These offers to purchase apparently often come with a premium that competing individual veterinarians who might want to buy the practice for themselves seldom can match. However, those premiums are creating great opportunities for veterinarians near retirement age who have worked hard all their lives and who now want to cash out by selling their business for the highest price. In many cases those veterinarians, near retirement, often stay on for a while and provide initial continuity to the practice after they have sold them to their new corporate owners.
In addition to buying already established smaller practices, the larger corporations have become dominant players in the specialty referral centres, owning it is estimated 40% of such veterinary referral facilities across North America. They have done this either by buying large competitors already dominant in this field or by building brand new facilities from scratch. These large corporate entities are now by far the major employer of specialist veterinarians on this continent. These referral centres usually also provide 24-hour emergency services to both the general public and to surrounding general veterinary practices. For the local general veterinarians this provision of out-of-hours care is a huge bonus as it allows them to download their onerous responsibility of out-of-hours animal care onto the referral centres and it significantly improves the quality of life for themselves and their families. For the referral centres it means that they are kept busy in providing services outside of regular office hours and it creates an ongoing relationship between themselves and the general veterinarians they partly rely on for referrals.
These large referral centres are truly functional small animal hospitals staffed by registered veterinary technicians and a combination of both general and specialist veterinarians. They also have a sizable component of non-veterinary trained administrative support staff. The facilities have many of the tools available in human tertiary care hospitals such as ultrasound, CT and MRI scanners, echocardiography, fully equipped operating rooms etc. The veterinary specialists who work at these facilities range from surgeons, cardiologists, neurologists, oncologists, internists, dermatologists, ophthalmologists, radiologists etc. Each of these specialists are highly trained. After completing their basic undergraduate degree and then a four-year veterinary school programme, they have gone on for an extra 3-4 years of further training in their specialty discipline. All of these specialty programs are accredited solely from the USA and many of the specialists working in Canadian facilities may have taken some of their training south of the border before sitting their final board examinations or they have been fully trained in the USA. Currently as of 2019, the American Veterinary Medical Association (AVMA) recognizes 22 specialty groups in veterinary medicine. Considering the manpower, the size of the buildings, many of which exceed 20,000 sq. feet in size and the equipment needed, these referral centre operations are not inexpensive to build and maintain. Despite this, these operations are highly profitable for the companies that own and run them as prior financial statements available to the public confirm.
Even though the overall numbers of visits by pet owners to veterinarians has been declining for a number of years, the percentage of visits to these referral facilities are increasing. This may because the surrounding general veterinary practices are referring owners there for advanced diagnostic and procedural services only available at these specialist centres. It may also be that general veterinarians, compared to times past, are more inclined to refer on their more complicated cases to “specialists”, rather than looking after them themselves. This may be in part, because pet owners are demanding those referrals, perceiving that the “gold standard” care available from specialists will be in the best interest of their animal. That may or may not be the case. Many general veterinary practices are also giving up providing out-of-hours care to their clients. Therefore, if a pet develops an emergency medical problem outside of regular veterinarian office hours, owners have little choice as to where they can go, except to the local 24-hour emergency, specialist, referral centre.
So what are the benefits to veterinarians in having a specialty referral centre based in their community? There are many. They are able to receive help on their complicated cases from the specialists either by phone or they can send patients on for an in person local consultation. They are also able to delegate, what most consider, their onerous out of-hours practice coverage to these referral centres. They may in the future have the opportunity to sell their practices to one of these corporations when it comes time to retire. All in all, the majority of general veterinary practices are happy to have a referral centre in their community.
For many younger veterinarians, especially if they are a specialist, corporate practices offer good benefits, some flexibility in the hours they work, and a chance to enjoy a balanced lifestyle. Considering that the number of women entering veterinary medicine is increasing, this flexibility is especially attractive to them, especially if they are interested in starting a family. In addition, newly graduated veterinarians, unlike their older brethren, are also less interested in owning their own clinics or in the day to day administration of a practice. That means that if they plan to work at a corporate facility, they won’t have to worry about taking out further loans on top of their already high student debts loads in order to buy their own clinic down the road.
What are the advantages for the general pet owing public in having a specialty referral centre locate in their community? These centres allow owners local access to specialized care for their pets, something that would not often have been available to them previously, as this type of care typically was only provided at the animal hospitals associated with the universities that trained veterinarians. In Canada, that included places such as Saskatoon, Calgary, Guelph, Prince Edward Island or Montreal. That is no longer the case as these specialized referral centres are becoming increasingly common throughout Canada, especially in the western Provinces where they employ staff members from near by university centres. Pet owners are also guaranteed that they can access 24-hour care for their pets, something which their regular veterinarians are often no longer offering. Specialty centres usually also send out prompt summaries of the care provided by them to the responsible general veterinarian so that continuity of care is optimized. So what is there not to like for the pet owning public about this increasing Corporatization of the veterinary industry and the increasing role that specialized referral centres are playing in the care that pets are receiving?
Those issues with be looked at in the upcoming sections on Corporate Monopolies and the Cost of Veterinary Services.