Pet owners are facing significant increases in veterinary bills, which can substantially complicate medical decisions they make for their pets and negatively impact their finances. According to the Bureau of Labor Statistics, the price of urban veterinary services rose by 7.9% from February 2023 to February 2024, more than 2 1/2 times higher than the average of all consumer items. Over the last decade veterinary care costs have soared over 60%. Because huge veterinary costs are often unplanned for incidents or illnesses, pet owners without pet insurance can face daunting bills. Putting off preventative veterinary care often results in serious health issues being discovered later, resulting in higher treatment costs. A 2023 Forbes Advisor poll found that 63% of pet owners said inflation had made it harder to pay for unexpected vet expenses.
Experts cite a number of reasons for the increased costs, including a shortage of veterinarians and technicians, increased labor and diagnostic test costs and practice consolidation and ownership of practices by large public corporations and private equity firms. Currently, a third of the nation’s 30,000 veterinary clinics are owned by large chains, who have seen huge profit opportunities for investors. According to John Volke of Brakke Consulting Firm, a veterinary management consulting firm, 75% of specialty practices, such as emergency and surgery care, are now owned by large corporations. Some private equity chains buy community-based practices without rebranding them, so often consumers are unaware of the ownership change. Consolidation has also increased competition for veterinary staff, which has increased costs for consumers. Because corporations and private equity investors have more resources to purchase clinics from retiring veterinarians, it then becomes more difficult for young veterinarians to take over a practice.
As pet ownership soared during the COVID-19 pandemic years, private equity made those years ripe for investment in veterinary practices. Unlike human health care, which involves the complications of payment delay and medical insurance, pet care is largely a cash-based business, as most owners pay out of pocket rather than relying on payment by medical insurance companies.
Equity buyouts of veterinary practices are reshaping the landscape of animal care, and there is concern that investor focus on profitability will increase the number of recommended procedures and tests and further increase costs for consumers. A study published in the Journal of Veterinary Medicine found that veterinarians employed by large corporations experienced more pressure to generate revenue than independent practices. Conversely, those working in independent practices reported higher levels of job satisfaction.
Most states require that a veterinary practices be owned only by licensed veterinarians, so investors often own a practice through ownership of a management services organization (MSO), which then provides overall management, staff and facilities, leaving to the veterinary practice itself only the clinical treatment of pets. Veterinarians are often employed by the MSO as a “medical director,” a separate role that allows them to be an employee of the MSO and an equity investor in the MSO itself.
MSOs provide greater purchasing power and more efficient centralized management, and some veterinarians create their own MSOs to preserve the independence of their practices. However, the greater resources available to large veterinary chains makes it harder for individual practices to compete with them. Corporate chains can offer employees better schedules, salaries and work benefits. Advocates of independent veterinarians believe that corporate owned practices drive up prices for consumers, suppress market competition and skirt the laws that prohibit veterinary practices from being owned by non-veterinarians.
Corporate ownership of other parts of the pet industry has also increased. Among the companies owned by investors are PetSmart, Thrive Pet Healthcare and ASPCA Pet Insurance. The corporate giant Mars Inc. known for its candy brands, now is the largest consolidator of pet care companies in the U.S. Early this year Blackstone, Inc., a major asset management firm acquired Rover, the nation’s largest online platform for pet sitting and dog walking.
Trade regulators such as the Federal Trade Commission (FTC) have begun to take notice of certain anti-competitive veterinary acquisitions and are being urged by independent veterinarians and consumers to do more. Recently the FTC required JAB Consumer Partners to divest some of its veterinary clinics as a condition of its approval of a multi-billion-dollar purchase of two multi state veterinary care chains. Unless federal and state regulators take action to limit corporate acquisitions of veterinary practices, investor ownership of veterinary clinics will continue to surge, as equity investors expect continued growth in the pet industry.
