Industry Response Link V. Welborn, DVM, DABVP 1 Industry Response A Practice Owner’s Perspective Link V. Welborn, DVM, DABVP 2 formulas Q = f ( P; Y, n, Z, X, …) εp ≡ ∆Q Q ∆P P ∆Q P ∆Q P = × = × ∆P Q Q ∆P ∂Q P εp ≡ . ∂P Q εY ≡ ∆Q Q ∆Y Y ∆Q Y ∆Q Y = × = × Q ∆Y ∆Y Q ∂Q Y εY = ∂Y Q 3 $140,000.00 $130,000.00 $120,000.00 $110,000.00 Debt and Income: New Graduates Real Mean Debt $100,000.00 $90,000.00 $80,000.00 Indexed Real Mean Income (RWI) $70,000.00 $60,000.00 $50,000.00 $40,000.00 4 Debt Double Whammy • Unintended consequences of graduate/professional loan programs • Can borrow full out-of-pocket cost of graduate study (tuition, fees, books & living costs) – For some students, extent of debt is not tangible – Enabled universities to transfer more of the cost of education to students when funds from other sources decreased 5 Return on Educational Investment for Veterinarians Food Animal Average Industry/ Commercial Uniform Services College/ University -$71,462 $427,608 $286,108 $126,973 -0.4 3.5% 2.4% 1.1% -2.1% -3.5% -3.8% Break-Even Age MALE post-65 35 38 46 post-65 post-65 post-65 Net Present Value $41,480 $694,563 $509,396 $301,152 0.4% 4.8% 3.5% 2.1% -1.5% -3.1% -3.4% 58 33 35 39 post-65 post-65 post-65 Mixed Equine FEMALE Net Present Value Return on Investment Return on Investment Break-Even Age -$281,993 -$463,350 -$502,357 -$234,019 -$471,343 -$522,386 6 Future of Applicant Pool? • VMCAS applicants survey: 7% indicated they would pay $750,000 or more to attend veterinary school • Some surely will make a different choice when ROI information is publicized – Median debt of 2014 medical school graduates= $180,000 – M.B.A. graduates, adjusted for inflation, owed roughly the same in 2012 as in 2004 7 BLS Highest paying occupations: 20 occupations with the highest median annual pay in 2012 Physicians, some dentists This wage is equal to or greater than $187,200 2012 MEDIAN PAY Psychiatrists $173,330 Family practitioners $172,020 $154,650 Pediatricians $148,160 Nurse anesthetists $145,240 Dentists, general $130,280 Petroleum engineers Architectural and $124,870 engineering managers $122,530 Air traffic controllers Computer and $120,950 information systems managers $119,480 Marketing manager Veterinarian $84,460 Veterinary $30,290 Technicians Page 38 Table 12. Professional income of veterinarians in private practice by ownership status, 2011a Mean ($) Owner Associate Median ($) Owner Associate Food Animal Exclusive Food Animal Predominant Mixed Animal Companion Animal Predominant Companion Animal Exclusive Equine Other Total Private Practice 159,803 114,690 124,051 136,681 166,926 143,959 96,824 $149,394 89,854 82,162 79,858 92,987 96,605 80,528 97,429 $94,683 136,000 100,000 100,000 112,000 136,000 112,000 76,000 $124,000 76,000 76,000 76,000 76,000 88,000 76,000 88,000 $88,000 10,973 5,541 4,750 6,919 8,780 9,168 12,562 3,516 (95) (117) (285) (161) (234) (196) (17) (1,105) 6,352 3,308 2,881 5,725 1,773 3,057 11,541 1,262 (48) (37) (160) (85) (448) (148) (14) (940) Standard Error ($) / Usable Responses Owner 2013 AVMA Report on Veterinary Compensation AmericanVeterinary Medical Association Associate a Weighted estimates based on the AVMA membership. Page 110 Table 74. Professional income of veterinarians by specialty board certification, 2011a DVM Only Mean ($) 112,529 Anesthesiologists 138,916 Behaviorists Median ($) 100,000 130,000 n Standard Error ($) 1,505 Usable Responses 2,511 11,746 14 n n n Clinical Pharmacology n n n n Dental College n n n n Dermatology 158,375 $142,000 26,577 8 Emergency and Critical Care 137,636 $124,000 19,786 11 Internal Medicine 139,008 $124,000 7,704 65 Lab Animal Medicine Microbiologists 178,520 146,729 172,000 130,000 6,015 14,530 109 12 n n n Ophthalmologists Nutrition 160,000 n $148,000 24,166 9 Pathologists 158,333 148,000 6,212 91 AVMA Report on Veterinary Compensation American Veterinary Medical Association Poultry 132,000 124,000 9,845 15 Preventative Medicine 121,366 112,000 3,978 118 Radiology 202,310 $184,000 33,606 13 n n n 163,239 $148,000 11,440 61 Theriogenologists 140,300 112,000 15,619 20 Toxicology 153,682 136,000 13,623 9 Sports Medicine Surgeons n Veterinary Practitioners (ABVP) 162,829 $124,000 22,684 49 Zoological Medicine 117,000 100,000 12,486 12 a Weighted estimates based on the AVMA membership. n Insufficient number of usable responses. Future for Veterinary Colleges? • Applicant/seat ratio could fall below 1:1 within 5 years given current conditions, & could threaten the viability of some colleges • Current demand exceeds the supply for seats – Future supply likely to exceed the demand • No relationship between education costs & salary • No significant difference in incomes between colleges • Most consumers & employers don’t seem to differentiate between graduates from different veterinary schools • Will veterinary colleges with lower tuition begin to overtly market their value proposition to prospective students? • Will new disruptive models of veterinary education develop? 11 Lost Economic Opportunity $4500 per capita Gap 7.5% Reduction In Per Capita GDP 6 year gap = $5.1 trillion 12 Demand for Veterinarians 2000-2014 $250,000 Real Annual Income ($2014) $200,000 $150,000 2006 2000 $100,000 2014 $50,000 $0 0% 10% 20% 30% 40% 50% 60% 70% Percent of Veterinarians 80% 90% 100% 13 Times Have Changed • During the recession, incomes of practice owners dropped, but associate’s incomes didn’t • However, base salaries for new associates were adjusted down • Lower base salaries for associates today allow practice owners to take less risk in hiring which is positive for veterinary employment 14 PA R T N E R S F O R H E A L T H Y P E T S R eversing the Decline TA B L E 1. C ommon Reasons W hy Pet Owners Don’t Use Professional Veterinary Care* % who “completely agree” or “somewhat agree” Survey category and question Perceived need for preventive care Routine veterinary checkups are unnecessary Would only go to a veterinarian if pet is sick or injured Cost Costs of routine visits are higher than expected Would probably switch veterinarians if I found one that was less expensive Stress of visiting a veterinarian Pet dislikes going to the veterinarian Just thinking about taking my pet to the veterinarian is stressful Reliance on the Internet Internet is the first option when the pet is sick or injured 2010 Survey 2014 Survey Trend† 24% 22% -4% 33% 32% -3% 53% 59% +11%‡ 26% 32% +27%‡ 45% 30% 51% 38% +13%‡ +27%‡ 39% 48% +23%‡ * Results of Bayer Veterinary Care Usage Studies, 2010 and 2014. †Relative percentage increase or decrease. ‡ Statistically significant (p<0.05). Cost of Care has a Perception Problem • Most independent primary care practices: – inherited their fee structure • More sophisticated practices: – compilations of inherited fee structures • 1999 KPMG Megastudy & NCVEI- one message stuck: increase fees- average of 5% per year last 10 years • Price & Income Elasticities would be very beneficial • We must leverage technology to extract and normalize data from practices. • Win-Win: provide more care with increased revenues & profits • Regardless, communication of value is key PET POPULATION GROWTH IS FASTER THAN PROJECTED GROWTH IN SMALL ANIMAL VETERINARIAN SUPPLY Cumulative growth over time starting from 2014 % Growth from 2014 20% 18.8% 18% 16% 14% 12% 9.7% 10% 8% 6% 4% 2% 0% 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Pet Population Source: AVMA Small Animal Veterinarian Supply *Assumes growth is consistent with observed growth rates from 1991-2011 Need to better understand the implications of generational and cultural attitudes toward veterinary care among future pet owners. © 2014 Banfield All Rights Reserved 17 UNDEREMPLOYED OR OVERWORKED? 20% of veterinarians report wanting to work an average of 12.7 hours LESS per week ~ 79,649 over-utilized hours per week 1991 Veterinarians 14.3% of veterinarians report wanting to work 12.2 hours MORE per week © 2014 Banfield All Rights Reserved 18 18 2014 Capacity Survey Results Excess Capacity by Practice Type Food Animal 2/3 of veterinarians <1% improvement Companion Animal Equine 2014 Mixed 2012 Other Private Practice 13% U.S. Total, Private Practice 17% 0% 10% 20% 19 Pressure on Practices Providing care that is perceived to be expensive & many consumers can’t afford Challenges recruiting & retaining staff due to opportunities outside the profession Clinical Practice Indivisibility of labor (worsened by extended hours), equipment & facilities Worsening educational debt will increase stress for associates working more hours than they wish Good News • CBO projects increases in median household incomes and consumer spending • Pet and livestock numbers are projected to grow • Growth in # of veterinary graduates will decrease • Overall excess capacity seems to be improving • Veterinary compensation is increasing • Increasing knowledge about veterinary economics will be a consistent trend 21 Break Time 22