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Veterinary Costs: Where Does Your Money Go?

October 2018 by Dr Mike Pownall, DVM
Originally a farrier, Dr Pownall's interest in equine lameness led him to attend the Ontario Veterinary College, graduating in 2001. In 2002 he and his wife, Dr Melissa McKee, started McKee-Pownall Equine Services. Their organization is represented by 3 equine veterinary clinics with 12 vets and 20 support staff spread across the Greater Toronto Area. He is also a partner with Oculus Insights offering business management and education to veterinarians throughout the world.

We love our horses. We love the companionship, the lessons they teach us, the ability to compete and the joy of new foals. There is a universal appreciation of the horse shared by all horse people, and even those that just like to watch them in a pasture, racing, or in the show ring.

At the same time, there is a concern amongst horse owners and trainers that the costs involved in having a horse are becoming more and more expensive. One area of concern are veterinary costs. There isn’t an equine vet anywhere in the world who hasn’t heard from their clients that their prices are too high.

As a veterinarian I can speak on behalf all of my peers that we wish we could do what we do for free. We hate seeing horses not being vaccinated, or the care for a sick horse compromised because of costs. At the same time, we get very frustrated when we hear clients vent about our exorbitant fees like we were increasing our prices to become wealthy on the back of sick horses.

The truth is far from that. Regardless of where veterinarians are in the world, they are amongst the lowest paid professionals based upon education and salaries received. On top of that, recent research from the UK has identified that equine vets have the most dangerous non-military related job. Finally, veterinarians suffer rates of depression and suicide far above rates in the general population. All this is to say that veterinarians are not getting rich in the profession.

So, if equine veterinarians aren’t living the high life of yachts, exotic travel and lavish meals why is veterinary medicine so expensive?

To answer that question let’s examine what goes into the cost of delivering veterinary care. There are several buckets of expenses we can explore including salaries, cost of medications and supplies, equipment purchases, insurance, vehicle and fuel.

Let’s break down some of the more common costs as a percentage of each dollar received from a client.
Generally, the most expensive cost for any veterinary practice is the cost of labour. This includes veterinarians, technicians or nurses, receptionists, management, etc.

The cost of labour typically runs between 42-50% of each dollar received. Most vets are making approximately 18-22% of their total billings, with specialists working in hospitals receiving a lower percentage because of the added costs of extra support staff, the facility they work in and the efficiency of their work-flow since they don’t lose countless hours driving to farms.

At first glance, 18-22% of billings can seem like a lot. If your horse has had several joint injections, or had multiple radiographs taken to help diagnose an injury you might be mentally calculating how much your veterinarian was paid for a recent visit. While there are some procedures that are more expensive than others, most procedures are much cheaper than the examples used.

The biggest factor that an ambulatory (travelling) veterinarian has to deal with are the countless hours spent driving around the countryside to and from clients’ farms.

In our own practice our vets spend upwards of 30% of their time driving. When they are driving they are not seeing patients and so they are not getting paid for that lost time. Any farm call fee that is charged tends to only cover the vehicle and fuel costs.

Another cost not typically seen by clients is the time spent writing medical records. This is another example of time a veterinarian spends that is not billable. When all the hours a vet spends attending to a patient, driving from farm to farm, talking to clients about their animals and writing medical records are considered, most equine veterinarians are working 60-80 hour weeks.

When we consider that the salaries paid to veterinarians are amongst the lowest paid to a professional and the hours spent at work are amongst the highest, it is easy to see this is one of the real challenges facing the equine veterinary industry.

Why would an equine vet want to work twice the hours their small animal colleagues do for less pay? It doesn’t take very long for many equine vets to make the jump to companion animal practice where they work fewer hours, have minimal after hours work and are paid more. If anything, equine veterinarians should be paid more than small animal vets.

After compensation for vets and support staff, the next most expensive cost in a veterinary practice is inventory - that is, medications and medical supplies.

The cost of stocking enough medications and supplies to cover any foreseeable need will cost a vet practice approximately 20-30% of their total revenue, or turnover. Why is this so high?

As much as any veterinarian would like to state that all they sell is their knowledge and skill, we still need to dispense anti-ulcer, wound and eye care medications as well as antibiotics, vaccines, hormonal therapies, etc.

Veterinarians in most countries are in a unique situation in that, not only can we prescribe medications, we can dispense them as well. This is certainly convenient for our clients because they can get all of their medical care and supplies in one spot, especially when the veterinarian is coming to the farm. They have a full pharmacy in their vehicles for any needs.

Some items like joint medications or antibiotics are sold fairly frequently, whereas other items are rarely used but are carried in the vehicle of the ambulatory vet just in case. No vet wants to be driving back to the clinic to get a bag of iv fluids to treat a colic. Another way of looking at it is no client or patient wants the vet to leave the farm to get extra supplies; they rather we treat the animal now.

Then there are all of the hidden costs involving veterinary inventory that clients don’t see. One example are the costs associated with medical supplies like needles, syringes, scrub material, and disinfecting solutions that we carry but don’t tend to charge for. There is a significant cost to all of these items.

Afterwards, when we use up bottles of medications and syringes, we can’t just throw them into the garbage, we need a specialized (and costly) service to remove our hazardous medical waste.

One last comment on the expense of carrying medications and supplies stock is that if veterinarians could mark-up their inventory to appreciate a fair return, they wouldn’t care so much about this category. The reality, however, is that vets face growing competitive pressure from online pharmacies and tack stores, so they tend to reduce the price of their dispensed medications to compete.

Additionally, most veterinarians and practices don’t have sufficient size to purchase great quantities to receive bulk discounts from suppliers so there is very little profit margin on any of the medications or supplies vets carry.

Between vet and staff compensation, stocking and carrying medications and supplies we have accounted for almost 70% of expenses and we haven’t even discussed the numerous smaller categories like insurance, rent, utilities, vehicles, equipment repair, bank charges, bad debt, etc. The total of these categories can be close to 20% of expenses.

When we add interest on loans and taxes, the majority of equine veterinary practices are seeing net profit ranges of less than 10%. Not bad I guess. It’s not Apple or Google profitable, but certainly more profitable than fast food restaurants or grocery stores. Except we are not done yet...

Consider the expensive equipment your veterinarian uses. That amazing digital x-ray system likely cost between US$ 50,000-60,000. That sleek, compact digital ultrasound was only $20,000 cheaper. In other words, having the necessary equipment to diagnose and treat horses is very expensive!

Some, if not most, of the leftover 10% in after-tax profit is used to lease or finance equipment. Not much is left over to save for a rainy day or pay the practice owners a return on their substantial investment.
Most veterinarians did not get into the profession to become rich. It takes a smart person to get into vet school so, if wealth was a goal, there are other professions we could have chosen that are far more lucrative.

We love animals and helping people, and, to a certain degree, there is reward in that itself. Hopefully, the examples given have revealed that the equine veterinary profession is not a particularly profitable profession. The sad truth for veterinarians and horse owners alike is that, although it may seem expensive,  veterinary medicine, is mostly an underpriced service.

In the face of daunting veterinary bills horse insurance is an excellent option. Too often we see clients that want to do the best for their horses, but feel so guilty that they cannot because of the cost. As veterinarians we get that veterinary diagnostics and treatments for their patients is expensive, so we highly recommend insurance for these unexpected costs.