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Sunday, December 2, 2012

The Harsh Reality Of Veterinary Charges

Jennifer sent me this email, and since she is planning a career in veterinary medicine I thought it would be a good discussion for her and others to read.  I also think that my veterinary readers will be able to chime in with their own thoughts.

What really persuaded me to go back to school and begin my career in this field was that my previous vet charged me $1600 to neuter and spay 2 labrador puppies. An INSANE amount. She had been our vet for years, but had always bartered services with my parents (whom own a business and lived next door) When I became an adult, I wanted to be responsible for my own. Never did I ever imagine it would cost me almost two thousand dollars within the first 6 months of owning and caring for my first two puppies. I did not ask what the costs would be prior because most clinics charge $100 and I figured $300 max for private practice. When I picked them up and was told the balance for the day, I almost had a heart attack. How in the world could someone charge that much and justify it? But apparently, it's legal. I paid, being 19 and not really having a clue about contesting things. When I went home and told my mom, she flipped out and called the vet. She justified it with the cost of the surgery, providing medication, the cones, and other miscellaneous items. So, we decided to seek out a new vet. I found one close by, made an appointment for a check-up and yearly vaccines. The vet visit for each animal (I had 4 total, my 2 dogs and my parents' 2 dogs) was $50. And then rabies vaccine for each was $50. I really don't see how that could be justified either? I could understand $50 per visit for your entire pet family, and then each individual vaccination. Anyway, point of the story is, this made me decide to become a veterinarian.. NOT to make a fortune, but to prevent this. I love my dogs as if they were my children, and I now own an alpaca farm. If I had to pay $100/animal per visit, I would need a second income just for this. Many people cannot afford this and can barely afford to seek our medical attention for themselves. I really want to provide care and not turn anyone down.

Jennifer, I certainly appreciate your desire to help pets and their human families.  I'm not intending to be harsh or to discourage you, but I also think that a bit of a reality check is necessary here.  If you go into business thinking that your office visit charge will be $50 for an entire family of pets and design your pricing structure to match, I will predict that you will go bankrupt within a year of business.

Let's look at pricing of spays and neuters.  First, you need to determine what you're going to include in your packages.  Are you going to do spays with injectable anesthetics (ketamine, Telazol, etc.) and no monitoring?  Then you can get away with charging $100, but you will be taking sizeable risks with your patients that could be avoided with the right care.  Do you want to be a high-quality vet who is going to require pre-anesthetic blood testing, ECG, pulse-oximeter, IV catheter, pain medications, and safe gas anesthesia?  Then you're going to have to charge $300-400.  In fact, I read an analysis a few years ago on the "true" costs of a spay if you were doing the high-quality care and monitoring currently recommended.  That surgery should really be $600-800.  Similar surgeries such as removing bladder stones can cost $800 or more, yet are performed similarly to a spay and may not take any more time.  Admittedly I am a bit surprised that your vet averaged $800 for the two surgeries, as that is far above the typical cost to clients.  However, that is what the surgery should be and the only reason more vets don't charge that much is because spays and neuters are often shopped by clients looking for the best deal.  But I will promise you that there is no way that you can charge $100 and have the same care and services done by the vets doing a $800 or even $300 spay.

Let's look at the office visit charge.  Here in Georgia I have a $40 office visit charge for the first pet and $30 for each pet after that on the same visit.  And my practice is very average in our charges.  I know local practices who charge up to $60 for an office visit.  New Jersey has a higher cost of living that this area, so $50 for an office visit is not unreasonable.  If you compare this to human medicine, veterinary office visits are about 1/3 to 1/2 of what our human colleagues charge just to walk in and be examined.  Since most people only pay the copay they don't understand the true charges at their own doctor.

There are many, many charges that go into operating a business.  First and foremost you have to charge for your time.  Yes, this is actually the single most important thing you have to offer...your knowledge and expertise.  If you are an average veterinarian you will have $150,000 in loans to repay, which means a few thousand dollars per month.  That doesn't take into account your own salary and trying to cover rent/mortgage, food, car, etc. As an employer you also have to have both liability insurance for your clinic as well as worker's compensation for your employees.  You will likely have to cover health insurance.  Social Security tax?  Half of that comes from the employer, not the employee.  You will have rent and utilities on the building.  You will have salaries to pay.  You will have malpractice insurance as well as insurance on your building.  You will have a ton of expenses in equipment and facilities.  A single blood analyzer can cost over $10,000.  There will be far more cost than you realize.  If you don't charge appropriately you will quickly go out of business.

What about the dog who swallows a sock and will die without surgery?  Yet the client can't afford to pay more than your office visit?  You're looking at around $1000 or more for a simple surgery of this kind.  Will you turn that person away or will you do it anyway and just write off the cost?  That's not an unreal situation, as it's one I specifically faced just three days ago.  If you treat everyone regardless of their ability to pay you'll be losing money left and right and will go out of business quickly.

Jennifer, it's very admirable that you want to help everyone, not turn anyone away.  I also appreciate that you want to make things very affordable.  But inexpensive prices mean you're going to have to cut corners or eliminate services.  You can't have a high-quality veterinary practice and charge $100 for a spay or $20 for an office visit.  In order to charge the prices you want you may not be able to be the kind of vet you want to be.  Your dream may not be compatible with reality.

I would strongly recommend a few things.  First, take a basic business economics class at a local university or community college.  You're not going to get any of that in vet school and it may really open your eyes.  Find a vet that is successful and practices the kind of medicine you see yourself doing, regardless of how much they charge.  Ask to mentor with them and have them concentrate on teaching you the business of veterinary medicine.  Also, start reading Veterinary Economics magazine online or get a free subscription.  This journal discusses the financial and business side of the profession and will give you a lot of good information.  Lastly, consider paying a veterinary consultant for an hour or so of their time just to give you an idea of what you're going to have to consider when starting a practice.

Most small business fail in the first two years of existence, including veterinary practices.  The main reason for going bankrupt is under-charging and not understanding how to run a business.  With some education and pre-planning you can have a better chance of being successful.