14 April 2023 Leave a comment The Onward Vet Resources and Veterinary Blog
Gone are the days when it was common for a veterinarian to start their own practice and then pass it down to a family member or sell it to another doctor. Now, the changing dynamics of veterinary care trend toward consolidation and corporatization, as larger companies acquire smaller practices and integrate them into their network.
This progression was further accelerated by the COVID-19 pandemic, with big players taking advantage of increased market opportunities spurred by the pet boom.
What does it mean for independent practices and the industry’s future? While veterinary consolidation benefits such as improved productivity and efficiency are welcome, the effects of decreased competition and other changes raise valid concerns.
Here are some of the veterinary industry trends and implications of consolidation to consider.
What Is Driving Veterinary Consolidation?
According to the 2022 Animal Health Industry Overview by Brake Consulting, consolidator ownership of veterinary practices in the U.S. is estimated at 75% of specialty and emergency hospitals and 25% of general practices. This aggressive takeover in recent years is due to several factors.
It goes without saying that economies of scale are one of the most significant advantages for corporations. By consolidating multiple practices into a single entity, corporations benefit from increased efficiency through centralized administrative functions. The bargaining power of bulk purchasing also results in cost savings for the corporation as they have more leverage when negotiating contracts with suppliers, insurance companies, and other third-party vendors. These savings lead to cheaper services for the end consumer.
In addition, larger corporations have the resources to invest in advanced technologies, research and development, and employee training and development, which can ultimately lead to better patient care.
As the economic impact of the pandemic continues to affect the industry, many smaller practices are seeking the stability and support of joining a larger corporate entity.
Concerns About Consolidation in the Veterinary Industry
While it is natural for businesses to evolve in the pursuit of profitability, it is important to acknowledge the potential negative impacts of veterinary consolidation.
One of the biggest concerns is the effects of decreased competition. As large consolidators acquire more and more practices, they may dominate the market and limit options for pet owners seeking veterinary care. This may also result in higher prices and a decline in veterinary service quality, as consolidators may prioritize cost-cutting measures and efficiency over holistic care.
Independent veterinary practices often have unique approaches and specialties that may not be available at larger corporate clinics. These practices may disappear with increased veterinary consolidation, leaving pet owners with fewer options for personalized and specialized care for their pets.
As this veterinary industry trend continues, all stakeholders need to find a balance between the benefits and the need for a competitive and patient-centered healthcare system.
Regulatory Considerations
Fortunately, there are regulatory bodies that monitor and regulate the industry, ensuring that practices operate within legal and ethical boundaries.
In the U.S., the Federal Trade Commission (FTC) is responsible for enforcing federal antitrust laws and promoting competition in various industries, including the animal health industry. Other regulatory bodies include state veterinary medical boards, which oversee the practice of veterinary medicine within their respective states.
Both organizations and independent practices must ensure compliance with various licensing requirements and practice standards in the process of veterinary consolidation. For example, the Hart-Scott-Rodino Antitrust Improvements Act requires companies to report proposed mergers or acquisitions to the FTC and the Department of Justice for review. The Sherman Antitrust Act also prohibits companies from engaging in anticompetitive practices, such as price fixing or market allocation.
The above and additional regulations are vital in protecting the well-being of patients, clients, and the public at large.
Types of Consolidators in the Veterinary Industry
The strong growth in demand for veterinary services makes the industry an attractive venture for outside capital, with several players eager to get in on the profits.
Each type of veterinary consolidator has its own approach and strategy for growth, and the impact on the veterinary industry may vary depending on the type of consolidator involved.
For example, private equity firms, which have emerged as a popular option for consolidation, often acquire smaller practices and then work to streamline operations and increase profitability to achieve a return on their investment.
The corporate consolidator’s mission is slightly different, aiming to expand its reach and increase market share for the long term.
Regional consolidators, on the other hand, operate in specific regions and focus on acquiring practices within those areas.
These companies often have significant resources and can offer benefits such as shared services and centralized marketing. However, veterinary consolidation is not a one-size-fits-all process, and understanding the differences will help independent practices make partnerships that align with their own growth strategies.
What Does This Mean for Independent Practices?
There are many challenges ahead as this veterinary industry trend continues, but this doesn’t necessarily spell doom for the niche players who seek to contend against larger, corporate goliaths.
To stay competitive, independent practices must prioritize the quality of care they provide to their patients and focus on building strong relationships with their clients. Additionally, offering highly specialized services, such as holistic or alternative therapies, will set you apart from veterinary consolidators that may be more focused on the bottom line.
24% of respondents in one study said they spend more on their pet’s healthcare than their own, showing just how much people care about their animal companions. Personalized, high-quality care is a significant selling point to these pet owners.
Additionally, investing in technology is crucial, as it streamlines operations, improves financial efficiency, and enhances customer experience.
Technology Will Continue to Dominate
As the veterinary consolidation continues to reshape the industry, it is expected that the industry will become more technology-driven.
Consolidated veterinary practices are adopting new and advanced technologies to improve their efficiency, lower costs and improve patient care. For example, telemedicine enables veterinarians to consult with pet owners remotely, thereby reducing the need for physical appointments, lowering costs, and improving access to veterinary care.
Similarly, electronic health records and remote monitoring tools help veterinarians monitor the health of their patients in real time and intervene when necessary, which can improve treatment outcomes.
Future-Proof Your Business
Overall, every player can thrive in a consolidated market by staying informed and equipped for the ongoing industry transformation.
Onward Vet offers a comprehensive suite of resources and tools designed to support clinics and animal hospitals in this changing landscape. From business administrative solutions to client management tools, our veterinary management software is here to help you take your practice to the next level.
Schedule a demo today to learn more about how we can help your practice navigate the challenges of veterinary consolidation.
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