A Personal Opinion
A few weeks ago I promised to talk about the costs of running a veterinary hospital, and why the costs to clients are what they are, and why most clinic owners are not raking in money hand over fist, even when people think that they might be.
Any information I write here is my own opinion only and is based on my own experiences and what I have seen in my time as an employee and now as a practice “owner”.
When I write “owner” in parentheses understand this is because my family and I actually pay the bank for the privilege of working in my “own” hospital. I don’t draw a salary, and my family draws a minimal amount a week for our day to day expenses. We make a loss. That’s a pretty extreme example, but it is OUR reality.
Personally I have been a vet for 28 years. I have worked in private mixed practice, private small animal practice (UK) in the nineties and have had FT jobs and locummed in Perth, Singapore and Sydney (small animal) also in the nineties. I have worked in University administration (Director of Continuing Veterinary Education and Veterinary Trust) in the early 2000s. I spent most of 2003-2015 in University small animal emergency and critical care (Murdoch). I ran a small animal home euthanasia service, called Epitaph, before I had my son, and I provided bereavement support for owners and continuing education on end-of-life issues, euthanasia and bereavement in Perth and Adelaide. I had a brief stint in corporate small animal practice prior to purchasing our Hospital.
So I have seen a lot of things and a lot of types of veterinary practice over the years. I have worked in the best and in the worst.
While I can and will use hypothetical examples of situations to discuss costs, the only Clinic I will provide specifics on is our own, because it’s the only one I have any right to discuss publically.
The BIG elephant in the room is that when you walk in to a Veterinary Hospital you are walking in to a business.
This bears repeating.
Veterinary hospitals and clinics are a BUSINESS. They are usually a small business, run by families, employing a small staff who also have families. Veterinary businesses pay taxes, and provide jobs. They employ or contribute to the employment of vets, nurses, office workers, cleaners, kennel hands, groundsmen, gardeners, bookkeepers, accountants and lawyers.
They are small cogs in the huge wheel that is our national economy.
They happen to be businesses in a field that is steeped in STRONG emotion and love. And are usually owned or run by deeply caring, good hearted humans trained, as Animal Doctors, to care for species that are not-our-own. That’s really pretty cool. But they ARE still businesses. With many, many, many bills to pay and obligations to meet.
These business owners, like all small business owners, usually put their house or any assets on the line to try and ensure a better future for their families.
It is true that there is, increasingly seen these days, corporatisation of veterinary care. Whether that is good or bad for clients and pets is not part of today’s discussion. Certainly, for my part, “James Herriot” might be turning in his fictional grave, but times change and “James Herriot” was lucky to have penicillin.
Now, on to the second, marginally SMALLER elephant in the room?
Pet owners have to pay for the medical care of their animal.
There is no Medicare for pets. There never will be. No matter how many keyboard warriors get on Social Media and claim that pet ownership is a right, and that Vets are a rip-off and that the ‘Government should do something’, it is NOT a right, we are not rip-off merchants and the government never will.
We live in an amazing country where those of us lucky enough to be employed pay a % of our income as a levy which partly funds our amazing Medicare system.
It is not free to run, but it does offer us, as individuals, free, or almost free medical and surgical care. Our medical care is INCREDIBLY expensive. Most of us just don’t see the costs involved.
If we attend a bulk billed GP, we just wave our Medicare card on the way in and keep our purses tucked away in our bags on the way out.
What we don’t see is the cost of that consult being sent to the government so that the Practice can pay for its building mortgage or rent, it’s staff, it’s doctors, it’s medical malpractice insurance and so on and so on.
Likewise, when we go for private imaging, X-rays are generally fully covered and therefore ‘free’, and Medicare contributes to a portion of other procedures such as ultrasounds and CT or MRI. If these things happen when we are in hospital they are completely free to us, but the government (using our levy contributions) is wearing the cost.
Human healthcare in Australia is not free, the costs are just usually invisible.
Veterinary care in Australia is not free. The costs are just highly visible.
The first thing to know is that the COSTS to a business owner of running a veterinary hospital vary from clinic to clinic. These costs will depend on things such as:
Is the real estate mortgaged or rented?
Are the rents high or low?
Where is the clinic located? Rent/ mortgage in South Perth will be higher than rent in Kelmscott.
Is the real estate owned or still mortgaged?
Have they been in business, in the same building for thirty years and paid off their real estate now?
Are their loans all paid off?
Have they just bought an existing business and it’s realestate?
Are their loans massive?
Are they a ‘start up’ practice who only owes the bank the cost of the loan for the building fit out and equipment, or did they purchase an existing business, which means they will have paid a significant sum for ‘goodwill’.
How much equipment does the business operate, and is it up to date?
What sort of vet are they?
Are they someone who, medically, prefers a ‘wait and see’ approach, and relies on experience and instinct, or has their personal career and experience shown them that ‘wait and see’ sometimes becomes ‘wait and bury’?
Are they someone who offered the BEST medicine first, and then allows the client to decide whether they want to proceed, and if not, has a plan B, C or D up their sleeve to offer?
Or are they a vet who ALWAYS assumes that the owner wants to keep it cheap, so routinely gives a couple of injections, and only goes further if the pet declines?
Do they keep up on their ongoing education?
Do they diagnose over the phone?
There are no rights or wrongs here (well there might be in my opinion) just different methods of practice, and styles of medicine that might move a clinic towards being perceived as ‘cheap’ or towards being more ‘expensive’ to the outside eye.
Something else that can affect the ‘perception’ of value by a client, is how strictly a clinic adheres to the Veterinary Surgeons Act and to our Poisons Act (Western Australia).
These acts are very clear on what constitutes a valid Veterinary-Client-Patient -Relationship (VCPR), and therefore when it IS or is NOT professionally appropriate for us to dispense scheduled medications.
The Health Department of WA oversees our right to dispense and prescribe, and there are rules attached to that right. And that right can be taken away from us.
Some vets adhere to these rules very very carefully (I am one of them). Some are more relaxed about them.
Some vets make a MEDICAL decision to require to see their patients more regularly to monitor their response to treatment, or any progression of disease, before they will continue to dispense or prescribe medicines.
For example, requiring three monthly exams for heart disease, six monthly exams and blood tests for seizure patients etc (I am one of them).
Some do not. Some vets continue to dispense for YEARS without seeing the patient. This is neither appropriate or professional, but it happens.
Some vets will regularly sell SCHEDULED medicines over the counter to clients with whom they have NO valid VCPR, and will draw a large amount of income from doing so, all the while seeming to be the ‘good guy/girl’ and to have the owners ‘best interests at heart’. Those vets are often very popular, probably believe they are doing a good thing, but are often acting contrary to our Veterinary Act and Poisons Act. You will have gathered that I am NOT one of them.
Do the vets follow the ‘One Health’ guidelines on the use of antibiotics? They should.
Do they recommend cytology and cultures so the correct antibiotic can be chosen? They should.
Do they refuse to just hand out antibiotics until infection is proven? They should.
But Vets who try to adhere to the guidelines that are now in place to help decrease the rate of antibiotic resistance, and therefore help protect HUMAN health can be perceived as price gouging by clients, when another vet might not try to follow the guidelines.
In summary, the above are examples of things that can affect the ‘perception’ of cost by an owner.
Now, on to where the costs come from. ALL business that are brick and mortar based have certain things in common….this is clearly not an exhaustive list.
Mortgage and rates
Replacing holidaying staff
Workers compensation insurance
These might apply to any number of service type industries.
Then in retail you could add:
Stock on hand
Cost of written off stock
Cost of theft of stock
Transport of stock
And so on.
In Veterinary hospitals you might add:
Increased Workers Comp payments
Professional indemnity insurance
Professional membership insurance
Continuing education costs
Vehicles (large animal)
External pathology suppliers
Software and computer costs
Cost of purchasing and maintaining clinical equipment (laboratory equipment, Radiology equipment, ultrasound, CT/MRI (specialists), surgical equipment, surgical lights, surgical tables, anaesthetic machines, critical care equipment, oxygen cages, fluid pumps, machines that go ping, kennels, stables, paddocks etc……you get my drift.)
If you run an emergency centre your utilities costs are much higher, because the power is never off, and you staff-costs are much higher, because you are never closed. In addition your staff get paid more, due to working on weekends, overnights and public holidays. Generally emergency centres have much higher need for volume of equipment (pumps etc) and need to keep the modernity of the equipment up.
The Australian Veterinary Association advises that the current average profit margins in a brick and mortar Veterinary Hospital is between 5-15%
So for every $100 you spend with your vet, between $85-$95 goes towards all of the costs listed above, and the balance ‘might’ be profit after tax. So your Vet might see $5-$15 of that available to reinvest in the business, pay down loans faster, or have the occasional holiday ????
Mobile Vets can offer much, much lower fees, and have substantially higher profit margins, because their overheads are tiny in comparison. There are some significant limits to the services they are allowed to offer as a mobile vet, and therefore they often need less equipment. There are some OUTSTANDINGLY good mobile vets, and there are some who are mobile because they are simply unemployable. Choose wisely.
So back to brick and mortar.
In our case our profit is minus zero. I am frank with those who ask us about why we don’t make any money. Those who know me know the absolute full truth.
Those who come to our hospital know it’s not because we are too cheap. We are not cheap. We are, indeed, more expensive than our predecessor. Our overheads are higher amongst other reasons.
Those who come to our hospital know that it’s not because we offer a low standard of care. We offer experienced, caring veterinary medicine. I try and be the best I can be with every patient. My two casual vets are incredibly experienced and caring individuals with high levels of empathy. Our hospital motto is “Modern Medicine, Country Care”, and I try and practice by that every day.
Again, I can only use our clinic as an example, of what the biggest expenses would be, and why we make no money, so I will.
Our clinic was purchased by us in September 2016. On paper it was a very profitable practice. It had been originally set up in the mid-eighties, as a horse hospital, expanded to include small animals a few years later, and then purchased by our vendor about ten years prior to our purchase. It was a mixed practice with a heavy proportion of horse work, and a lot of small animal work. The vendor was a popular horse vet. They agreed via email and verbally to work with us part time after purchase, and not to compete. This made good business sense.
We borrowed a total of $1.7 million dollars to buy the real estate, the goodwill, and the equipment that was left with us. We borrowed for a 6 yo Landrover (remember, mixed practice in a semirural area) paid an additional $30k for the existing drug stock, and approx $30k in stamp duty. The existing small animal facilities were basic, but the hospital structure itself is good, if eccentric, in construction.
No matter which way you look at it, that was a ‘shit load’ of money to borrow. And that has to be repaid.
Now in our case we discovered that there were many reasons that the practice was previously highly profitable that would not be able to continue under our stewardship. Certain things had to change. This upset several clients, who subsequently left.
In addition at least approximately 30% of the goodwill we borrowed for turned out to be worthless, as the vendor never came to work with us and, in my naivety, I had not purchased their mobile phone number with the business. Many clients potential custom (included in the goodwill) never eventuated, and in fact from the moment we took over, the gross income per month fell by approx 40%. There was not enough work to pay the bills from the beginning.
Three months later a large, heavily marketed, vet hospital opened that shares a geographical client base with us, and that has strong local contacts in our community. Many clients from our goodwill base went to them without ever actually trying us at all after the change of ownership.
We are left with an amazing clientele who are literally absolutely fabulous. But, just not enough of them. And this is why, in our personal instance, we do not make a profit.
So……In summary if we use our own hospital as ‘Clinic A’ and an (extreme) hypothetical ‘Clinic B’ you will see why costs can vary to the client.
1.5 full time vet equivalent.
Established 35 years ago, currently third owner.
Largely Decreased client base compared to purchase date value and loan value.
Employs and pays for fully qualified nurses
High standards of care, high use of single use needles, syringes, scalpels etc.
Individually sterilised Instrument packs.
IV fluids for all anaesthetic procedures longer than 30minutes.
Diagnostics offered and recommended early.
Follows the ‘One Health’ recommendations
Insists on valid VPCR in order to dispense or prescribe scheduled medications.
Costs variably approximately $12000 per WEEK to keep the doors open. Owner draws no salary. No profit for Family Trust.
1.5 full time vet equivalent
Established 35 years ago, never sold, so same owner.
Paid off mortgage years ago
Built clinic from scratch so no goodwill loans to repay.
Doesn’t update equipment, so no equipment loans, just maintenance.
Stable client base
Uses unqualified handling staff not trained nurses, therefore lower staff costs.
Re-use of single use items (needles, syringes, scalpels)
Theatre packs shared between patients.
No IVFluids recommended or offered in surgery.
Diagnostics only offered or recommended AFTER no improvement on empirical therapy.
Does not follow the ‘One Health’ recommendations
Does not insist on valid VPCR prior to selling scheduled medications
Costs approx $3000 to $4000 per week to keep the doors open. Owner draws salary, and Trust/company makes a profit.
So, using our examples, Clinic B can afford to charge their clients MUCH less than clinic A and will still be making a profit.
Clinic A MUST charge higher, in order to simply keep the doors open, the staff employed and the service available and yet makes a loss currently.
These are just extreme comparisons, and there are many shades of grey in between, however when clients speak of vets who charge less ‘caring more’ this is simply not true.
While ‘cheap’ vets may care very deeply, so do ‘expensive’ vets.
It just costs the more expensive ones much, much more to run their businesses, and their profits are much, much lower.
So in fact, often, the ‘cheap’ vets might be the ones making more money as profit.
I hope that this helps people understand more about why Veterinary care costs what it does, and why your vet is likely not rolling in bank notes when they get home at the end of the day.
Most of us go in to business (instead of remaining an employee) to make a difference. We all have different dreams for our hospitals. Mine is to create a space that people enjoy, and is warm and comfortable, where we share a cuppa with our clients, and where the dogs can have a play in our agility space. To create a practice based on good solid medicine, but that also has warm, country heart. And in fact we have clients who travel more than an hour to visit with us, which is incredibly humbling.
Vets go in to business in order to have some control over how we practice our science and our craft, and to provide a more stable future for our families (ah the irony).
We don’t go in to business to get rich.
If you made it this far, well done.
Thanks for reading.
Love ya guts x