Salaries, benefits weigh on practice revenues

Experts estimate labor costs and benefits rank as top income eaters among the nation's veterinary practices.

Howard Rubin

The figures aren't all in, but National Committee on Veterinary Economics Issues (NCVEI) data shows veterinary incomes have risen 21 percent after a decade in decline while medical premiums spiked 20 percent during the last 18 months.

It's a trend hammering at the average practice's net, NCVEI head Howard Rubin says. Veterinary staff paychecks aren't escalating out of control, but coupled with rising premiums, they're putting a dent into the average practice's bottom line.

"We obviously need more time to look at this," he says. "We don't know how many practices out there are offering benefits, but we do know that the cost of medical insurance has gone up dramatically. The same goes for salaries. Technicians' pay is up 15 percent."

Between 1999 and 2001, the median professional income for fulltime private practitioners in the United States rose almost 6 percent to $65,000 annually, reports the American Veterinary Medical Association's (AVMA) economic survey of 6,895 veterinarians, published in the Journal of the American Veterinary Medical Association's (JAVMA) June 15 issue. Last year's graduates over all areas of private practice earned a mean starting salary of $46,339 a year, JAVMA Feb. 1 issue reports.

An overall view

Those costs don't include employee benefits, which averaged 2.9 percent of total income at 882 practices polled in the American Animal Hospital Association's (AAHA) Financial and Productivity Pulsepoints, Second Edition, 2002.

Add it all up, and the numbers point to increased staffing costs, Rubin reports.

"I think practice owners are having to pay more for their associates, especially the new graduates," Rubin says. "But we have to have more data before we can legitimately stand behind those statements."

Dr. Michael Thomas, AAHA's past president, offers anecdotal views of what he calls "changing times." The owner of seven Indianapolis-area veterinary hospitals says practice nets are declining as starting salaries for new graduates spike.

Can owners take the heat?

Dr. Michael Thomas

"They deserve to earn a good living, but we as practice owners must find them a way to be more productive, or we'll lose money every time we hire one of these new guys," he says.

While Thomas' views might ring true to date, the July 15 issue of JAVMA states otherwise. In its report on revenues, expenses and returns on resources for private veterinary practices, the 2001 median net practice income is $154,718 compared with $107,861 in 1999.

"No matter what the statistics say, I see the trend," he says. "It's a complex situation, a huge evolution that's almost becoming a revolution if you look at the changes taking place."

Employee compensation isn't the only practice issue in flux. While Rubin predicts salaries top the list of increasing practice costs, technology and diagnostics aren't far behind, he says.

Bells and whistles

AAHA's 2002 Pulsepoints figures show laboratory expenses eat an average 2.8 percent of a private practice's annual income, regardless of gross revenue. Patient volume is a major factor influencing those expenses, the report says.

Laboratory costs coupled with the high prices of technologically advanced equipment are killing small practices, Thomas says.

"My personal hot button is that we have too many facilities owning fancy diagnostic equipment that may not be needed," he says. "An ultrasound machine costs at least $20,000,"

"My crystal ball says these expenses just won't allow us to continue opening a practice on every corner, especially with changing vaccine protocols and Internet pharmacies stealing our bread and butter. A lot of the smaller facilities will eventually have to merge to create larger, more efficient practices."