Goodbye Family Vet

Is the local, family-run veterinary clinic a fading business model?

Big Business

Animal medicine is a big business that looks a lot like its human counterpart.

Pets are a part of the family and more people are willing to go into debt to pay for their animals’ care.

• Americans spent a record $147 billion on pet products and services last year.

♦ Veterinary clinics have become increasingly attractive to investors. About one-quarter of primary care clinics and three-quarters of specialty clinics are now owned by corporations.

This 25% of independent clinics that are now corporate owned, are generating 50% of all veterinary revenue.

Experts estimate that 50% of clinics will be corporate-owned by 2025, generating >70% of the industry’s revenues.

• Many veterinary offices have been replaced by hospitals outfitted with expensive M.R.I. machines, sophisticated lab equipment and round-the-clock intensive care units.

Dogs and cats often see highly trained specialists in neurology, cardiology and oncology.

♦ This high-tech care has spurred a booming market. Veterinary prices have soared more than 60 percent over the past decade.

Private equity firms and large corporations have bought hundreds of facilities around the country, an acquisition spree reminiscent of what happened with doctors’ offices.

From 2017 to 2022, private equity spent $45 billion on deals in the veterinary sector.

• Private equity firms say their investments are giving clinics and other providers the capital they need to buy better technology, and that they are improving efficiency. And in many cases, corporate chains can offer their employees better workplace benefits, such as health insurance.

Prices have gone up partly because of the rising cost of drugs, vaccines and other supplies, as well as paying workers in a tight labor market.

♦ Because of more advanced medical offerings, pets today can survive serious illnesses, like cancer, that would once have been unthinkable.

As corporate managers push clinics to become more efficient profit centers. Vets are often paid based on how much money they bring in, creating an incentive to see more pets, order more tests and upsell wellness plans and food.

♦ The result is an increasingly unsustainable situation for animal owners, most of whom don’t have pet insurance.

The vet industry is attractive because it’s mostly made up of small, privately owned businesses that corporations can buy and consolidate into larger chains. And it’s mainly a cash-based business: Unlike in human health care, veterinary customers typically pay out of pocket, rather than rely on third-party payers such as insurance companies.

• In some cases, private equity firms and other corporations buy community clinics from the veterinarians who own them for two, five or even ten times their value. Then the firms roll them up into a larger chain of clinics that can corner a regional market.

♦ It’s a strategy that can push other private owners out of the business.

Private equity’s foray into the human health care industry in recent years has drawn public outrage and legislative scrutiny as firms have been blamed for increasing prices, slashing services and shuttering hospitals to maximize shareholder profits.

Now, some veterinarians and advocates are sounding the alarm that private equity’s entry into the pet healthcare industry could lead to similar results.

Some states (Minnesota, New Jersey, New York and North Carolina) already have laws that prohibit non-veterinarians from owning veterinary practices.

Inevitably some corporations will find ways to get around state laws.

Be aware

Some private equity-backed chains buy veterinary practices and do not rebrand them under the chain’s name. As a result, you are likely to not be aware of the ownership change.

It can appear you’re getting care from your local vet when in fact their private equity owners are pushing them to bring in more money.

Large price increases should cause you to wonder. And also, you may want to hold your wallet tightly.