This post is sponsored by the American Veterinary Medical Association.
Dr. Michael R. Dicks is the Director of Veterinary Economics at the American Veterinary Medical Association (AVMA) and has, for the last three decades, advised groups around the world from the USDA to foreign governments on food and farm policy. Dr. Dicks sat down with us to discuss how the economics of the veterinary industry are changing and what the future holds.
Question: How is the employment market for veterinarians changing and what focus specialties will experience the most change in terms of growth and salary in the next ten years?
Answer: The market for veterinarians contains a number of separate markets: companion animal, mixed animal, food animal and equine, educational employers, state and federal government, non-profits, industry and others. Each of these is changing differently. However, as population and the human-animal bond grow and various factors increase the risk of disease, the need for veterinarians likely will outpace the supply. The real question is, can the veterinary profession turn that growth in need into a growth in demand?
Q: What does a student need to know before pursuing a career as a veterinarian?
A: Future veterinarians must have informed, realistic expectations about their future careers. Professional satisfaction depends on the expectations you have and your ability to meet those expectations. The greater the difference between expectations and performance, the less satisfied you will be, with vast difference leading to serious health issues. Satisfaction is strongly associated with income, but it also depends on hours of work.
It is also important that private practitioners, and anyone that aspires to become a business owner, learn how to make money. That doesn’t mean that a practice owner has to make every decision a profit-maximizing decision, but they need to know how every decision will affect profit so they can make a well-informed decision.
Q: What actions can current veterinary students and recent graduates take to help minimize their debt-to-income ratio?
A: The value of an additional 1000 in annual income over the career will offset roughly 25,000 in debt. And $5,000 in sales are needed to generate $1,000 in income. So the debt problem is also an income problem. While the profession should make every possible attempt to develop strategies to reduce educational costs (or at least hold them constant), focusing on increasing sales may be far easier. Thus, veterinary students should spend time identifying strategies that aid them in improving production.
Q: What resources are available to all veterinary practitioners to help gain a better understanding of the financial impact of their career?
A: We have developed a Net Present Value table that practitioners can use to measure the lifelong value of their DVM degree. We are in the process of developing a tool that will allow veterinarians to develop debt repayment strategies as well as demand enhancement strategies that will allow them to measure the impact of each strategy on the NPV. This tool will allow veterinarians to identify strategies to improve the value of their degree.
Q: How can private practices increase their profitability while still being conscious of their clients’ needs?
A: Profitability is only one side of the income coin. Total income is determined by both the profit per unit and the number of units. Price is one of the main links between these two components. If you raise price to improve profitability, you will reduce the number of units sold (clients). More importantly, prices may have already been raised sufficiently to truncate demand and move from an elastic price (where an increase in price will lead to a loss of total income) to an inelastic demand (where an increase in price will increase total income). With roughly 20% of dogs and 40% of cats unserved by veterinarians and many pets visiting the veterinarians only once per year, the question is how to turn this need for veterinary services into paying clients. Identifying the elasticities for specific services will be a critical component of improving the demand for services and the incomes of veterinarians.
Q: How will attending the AVMA Economics Summit benefit practice owners and other business-focused veterinarians in their day-to-day operations?
A: In 2013, we constructed an overall model of the veterinary workforce both to understand what data was available and what was needed. In 2014 we took this workforce model apart and began to analyze each of the independent but vertically related veterinary markets (education, veterinarians, veterinary services). In 2015, we have turned our focus on developing a measure of economic performance for the profession and demand enhancement strategies to improve that economic performance. While we will again provide an update of the economics of the veterinary markets at the AVMA Veterinary Economic Summit on Oct. 21, we will also provide analysis of risk strategies (pet insurance, wellness plans, etc), economics of zoonotic disease monitoring and prevention, price elasticities of veterinary services and financial guidelines for companion-animal practices. This year’s summit will provide veterinarians with the first insights into possible strategies to turn need into demand for public and private practice.
Get more information from AVMA’s Exploring Veterinary Economics series of articles addressing a variety of economic issues facing the veterinary profession.