On October 21, 2015, the third AVMA Economic Summit drew more than 200 veterinarians, academicians and economists to Chicago for the one-day meeting. Led by Michael Dicks, PhD, the team of doctoral level economists gave presentations that outlined the economic state of the profession and the results of ongoing data collection and analysis.
The meeting began with an overview of the current macro-economy, then in turn covered the market for veterinary education, the market for veterinarians and the market for veterinary services. Comprehensive reports in each of these areas will be released by the AVMA throughout 2016, and they are available by subscription.
History of the Summit
In August 2011, Dr. Rene Carlson, at that time the AVMA President, announced AVMA Executive Board actions directed at strengthening the economic foundation of the veterinary profession. Among these actions was the approval of an Economic Vision Statement to drive a national veterinary economic strategy: “Veterinary medicine is a personally and financially rewarding profession.”
To achieve this vision, the Executive Board approved a number of actions, the most important of which included:
• establishing a Veterinary Economic Strategy Committee, composed of AVMA members, to advise and recommend strategies to the Executive Board on economic issues;
• creating a veterinary economics division at the AVMA;
• setting aside a $5 million National Economics Strategy Reserve Fund to fund tactical plans and programs consistent with the national strategy;
• developing an economics communications plan including, but not limited to, a web presence, to disseminate information and resources regarding economic issues.
The Veterinary Economics Strategy Committee is charged with:
• recommending studies and approaches to develop data and information valuable to the development of effective strategies to advance AVMA strategic economic goals;
• recommending summit meetings and conferences among key economic influencers and stakeholders, and providing assistance in their implementation, with the purpose to elevate and expand the profession’s ability to identify problems and opportunities, and develop strategies involving other organizations and individuals;
• recommending actions to develop and deliver information to the veterinary profession that will improve the profession’s business knowledge, acumen and financial success.
Among the important work of the Veterinary Economics Strategy Committee was the release of the 2013 US Veterinary Workforce Study: Modeling Excess Capacity, which definitively squelched previous reports of a shortage of veterinarians. This workforce study reported that in 2012, there was significant excess capacity for veterinary services, and that this was highest in equine practice (23% excess capacity), followed by small animal (18%), food animal (15%) and mixed practices (13%).
As this sobering news was digested, the AVMA Veterinary Workforce Summit was held by invitation in September 2013. discuss the issues and opportunities related to veterinary economics. Many ideas were shared, and participants agreed that additional valid data needed to be collected and shared to give a clearer picture of the veterinary profession, including the need to better track the supply and demand of vets and services.
Early in 2014, the AVMA Veterinary Economics Division began data collection of employment levels, practice capacity and consumer behavior. This data was used to determine which factors are playing a role in the veterinary economy and what can be done collectively to address them. In October 2014, the AVMA Second Economic Summit drew about 200 stakeholders to Chicago, and an annual event was born.
2015 Summit Yields Advice for Equine Practitioners
In his overview of the current macroeconomic conditions, Michael Dicks, PhD, reported that there is a strong chance of another recession occurring in eight to 18 months. He said there is a 10% chance of this occurring in eight months, and an additional 5% chance for every month after that. He advised putting cash aside now to weather what he projected to be a shortlived, shallow slow-down in the economy. Dicks explained that one of the drags on the economy’s performance is the falling rate of labor force participation, which has resulted from a combination of retiring Baby Boomers and the late Millennial generation’s entrance to the workforce.
Lisa Greenhill, PhD, Associate Executive Director at the AAVMC (American Veterinary Medical College Association), presented data indicating that the number of veterinary students is increasing: 3,586 were enrolled in 2015, versus 2,281 in 1995. Greenhill reported that this is due primarily to strong demand for a veterinary medical education, and only in part due to financial pressures on veterinary schools from decreased state and federal support.
The majority of applicants (66%) desire to enter private practice, and 37.5% want to be equine veterinarians. These people decide they want to be veterinarians at a very young age; they are truly following their passion. 57.4% decide on a veterinary career before the age of 10 years, and 78% before the age of 16 years! The applicants are still the brightest and the best: Their average GPA is 3.56 and they have 1,654 contact hours in the profession at the time of application. 86.7% of applicants are female.
Although half of the applicants are moderately or extremely concerned about their ability to pay off student loan debt, 10% reported they were willing to pay $500,000 or more for their veterinary education. Greenhill reported that most applicants have poor financial literacy, and further reported that research shows that an increase in financial literacy, as could be added through educational efforts at an undergraduate level, rarely results in a concomitant increase in good financial decisions until people are at least 40 years of age. In addition, more affluent young people are not as likely to make good financial decisions as those less well-heeled.
Dicks reported that average tuition at the 28 U.S. colleges of veterinary medicine has risen substantially in the last 15 years, from an average of $10,549 in 1999 to $25,566 in 2015. If pure economic theory is true, applicant numbers should decline as the return on educational investment declines. However, James Lloyd, PhD, DVM, dean of the University of Florida College of Veterinary Medicine, emphasized that because veterinary medical education is not a commodity, but a differentiated product with a limited number of providers, classical economic theories are unlikely to hold up.
He emphasized that applicants are not making an economic decision, but one driven by passion. They are driven more by a sense of responsibility to give back to the world, and less by economic rewards.
He projects that applicants will continue to increase despite the increase of debt-to-income ratio. Lloyd stated that student debt is a critical issue and indicated that the high salaries afforded by practice ownership and specialty degrees could help mitigate the effect of repaying debt, as well as utilization of the available subsidized loan repayment programs.
Bridget Bain, PhD, reported on the supply of, and demand for, new vets. She stated that of 17,033 U.S. veterinarians who graduated between 2011-2015, 45% continued in advanced education as interns or residents. Her data shows that in the companion animal sector, as available jobs decreased, internship participation grew proportionally, and that this effect is reversing as more jobs emerge.
Bain reported that the wage gap between male and female vets starting their careers has widened since 2008, with average starting salaries for women about $5,000 less than those of men. At the same time, women’s mean debt and debt-toincome ratio exceeds that of men.
With regard to the effects of experience on salary, Bain reported that equine practitioners can expect a mean salary of $40,000 with one year of experience, but nearly double that amount ($72,000) with five years of experience. She also reported good news on unemployment: While the equine sector owned 10% of the total veterinary unemployment in 2014, only 2% of veterinary unemployment was in the equine sector in 2015! This resurgence in equine practices was borne out by the finding that 10% fewer equine practice survey respondents reported the desire to work more hours in 2015 compared to 2014.
Clinton Neil, PhD, a student in Agricultural Economics, presented intriguing information about the effect of increased density of veterinarians on income. His work showed that a 10% increase in the number of equine veterinarians in a county created only a 1.2% decrease in income per veterinarian, an effect that was similar in rural as well as more urban locations.
He also offered an opinion that previous reports on the negative financial impact of internships may be skewed by gaps in data, a changing cohort, changing nature of internships, and the difficulty in tracking earning potentials, both with and without advanced training.
Matthew Salois, PhD, reminded the audience that excess capacity does not always equal an oversupply of veterinarians, but may instead be thought of as a scarcity of demand. He offered the three standard economic options to offset excess capacity: decrease supply, decrease price or increase demand. He explained their relevance in the current veterinary industry. He said, “Due to the rising numbers of new graduates, decreasing supply is neither possible nor appropriate in a market economy.” Decreasing prices is not sustainable as a long-term strategy, he continued. Salois concluded that creation of increased demand is the most sensible approach, and he outlined recommendations to do so. He advised: Offer valueadded products and services that improve patient/client outcome, client convenience and practice revenue. Remember that first and last impressions are made by your staff; invest in them to be sure that client experiences are the best they can be. Increase transparency and communication with your clients to build a trusting, close relationship, as relationships are what keep your clients coming back. Remember that convenience is a huge motivator in today’s busy society.
Ross Knippenberg, PhD, reported that the data shows that there are very few veterinarians with high incomes who are highly dissatisfied with their careers, and more surprisingly, there are many low-earning vets who are highly satisfied with their careers. He explained new measurements of the concept of excess capacity, reported originally in 2013 to be 23% nationally in the equine sector. He explained that the concept of excess capacity can be defined as not being engaged in as many hours of work as desired, or completing tasks below one’s level of training. New methods of calculating excess capacity resulted in equine practice respondents reporting the following excess capacity in 2015: • 45% of respondents reported 0% excess capacity
• 6% of respondents reported 5% excess capacity
• 16% of respondents reported 15% excess capacity
• 17% of respondents reported 28% excess capacity
• 9% of respondents reported 39% excess capacity
• 1% of respondents reported 47% excess capacity
• 4% of respondents reported 73% excess capacity
This new method of measuring excess capacity calculates the 2015 national average equine excess capacity as 12.1%, a clearly more optimistic number than that reported previously by the 2013 US Veterinary Workforce Study: Modeling Excess Capacity. Knippenberg also reported that in 2015, the percentage of equine practices operating at full capacity was 45%, down slightly from 2014, but much improved from 2012, when just 33% of practices were fully utilizing their capacity.
Conclusion
The AVMA Veterinary Economics division has worked since its inception with over a dozen industry partners to collect data, build models, educate stakeholders, and develop and implement strategies to improve the economics of the veterinary field. The conclusions drawn and the strategies suggested are important to all vets. Equine vets are in need of economic strategies to counteract the effect of decreasing horse numbers in the U.S., and would be well served to take the recommendations offered at this summit to heart.
