Rising vet med costs amid tariffs, hiring costs, create challenges

On the surface, things look good financially with $41.4 billion expected to be spent in the U.S. this year on veterinary care and sales of pharmaceuticals and other products through veterinary clinics. The forecast, from the American Pet Products Association, comes after successive increases of $35.9 billion in 2022, $38.3 billion in 2023, and $39.8 billion in 2024.

But a deeper dive reveals that amidst all this growth, veterinary practices are facing major financial challenges, for myriad reasons, from hiring costs to tariffs.

Leslie Boudreau, BASVT, RVTg, CVPM, SPHR, PHRca, hospital administrator of the AAHA-accredited Animal Hospital of Huntington Beach, California, current vice president and incoming president of the Veterinary Hospital Managers Association (VHMA), discussed concerns she is seeing as well as hearing about from colleagues across the country.

The top concern? The rising cost of hiring veterinarians.

“DVMs really have total control of the market right now,” said Boudreau. “I know the American Veterinary Medical Association says we have plenty of them but there is a maldistribution with more going into government, military, relief work, and industry. The cost to hire a veterinarian has risen exponentially—even over the last six months, especially when new veterinarians don’t have the skillset and take hand holding and mentoring and inefficiency for the six to 12 months to get up to speed.”

Included in that concern is “bouncing” by veterinarians—those that are hired, mentored, build up a clientele and, at the end of their year-long contract, “bounce” to another practice offering a hiring bonus and then do it again there, she explained.

“Almost every one of my colleagues locally and in four different management groups across the country is hiring, looking for veterinarians whether part time, full time, or multiple vets or they face shortening their hours or closing on certain days.”

Alternatives are expensive, she said. She is regularly approached by recruiting firms often shopping one candidate to many practices with an incredibly high recruitment price and wanting an incredibly high salary. She’s also approached by services offering to bring foreign veterinarians into the U.S.—if the hospital pays for all the legalities, moving, and service fees.

Other rising prices also concern her. Among them:

• Uncertainty surrounding tariffs that leaves hospitals worried about the resulting costs of products and raw materials from overseas as well as the cost of doing business, the “white goods” needed such as gauze and syringes.
• Insurance costs that range from California’s employment practices liability insurance to a new requirement by her hospital’s IT provider to carry a separate insurance rider against cyber attacks. While floods and fires are not impacting insurance costs in Orange County, the selection of insurance companies offering coverage there is limited.

As owner of PantheraT Veterinary Management Consulting of Dallas, Texas, Karen E. Felsted, CPA, MS, DVM, CVPM, CVA, noted that she, too, is seeing financial concerns among clients. We asked her what her top three were.

Economic uncertainty

“It is very difficult to plan for the future when the future is so unpredictable,” Felsted said. “Crystal balls are never guaranteed but it is a much more chaotic environment right now.”

Declining visits

A decline in visits “has been going on for a year and can only get worse with the economic uncertainty and the significant recent decline in consumer confidence,” Felsted noted. “People who are worried about money cut back on spending and, for many pet owners, veterinary care is not an essential.”

Staff shortages

Felsted said the ongoing difficulty in finding veterinarians and registered technicians is still a challenge. “However, if visits continue to decline or practice owners are spooked by the economic uncertainty, hospitals may elect to put off hiring.”

Dealing with the challenges

“We’ve started to price shop more,” said Boudreau. “Since the hospital is a small, privately owned practice without buying power, we have joined several buying groups to gain leverage in pricing. We’ve also had to change the products we had been loyal to and to look at generics and other things to help us lower inventory costs.”

Boudreau said the hospital has limited its medication options for clients, for example, carrying just one heartworm prevention and pushing off options to its online store where it makes less money because of the middleman cost.

In looking for ways to compensate for rising financial challenges, Boudreau said they found that the hospital had paid over half a million dollars for credit card processing fees in 2023 – money that was not their revenue. “We are just collecting and being charged it,” she said.

Because of that, an email went out April 1 explaining that those clients who wanted to use a credit card would have to pay a convenience fee to cover the cost starting May 1.

“Within 30 minutes, a handful of upset clients were responding, some saying they would take their pets elsewhere,” said Boudreau. “But they will find that everyone else does that as well or will be soon. Businesses cannot continue to absorb the rising fees. If you use a credit card, you are going to pay a fee. We have to look at these creative ways to save money.”

Felsted advised that hospitals may want to “hunker down financially until we have a better understanding of the long-term impact of our government’s new policies.”

She suggested that hospitals:

• Focus more than ever on client service and giving clients the care and service they want to keep revenue coming in.
• Establish an emergency/rainy day fund or review the existing one to see if it needs to be increased.
• Tighten up spending.
• Consider paying down debt more than required.
• Talk to their financial institution to see if they should open a line of credit.

Communicating with clients

Pet owners are very concerned about the cost of everything, said Felsted. Continuing to significantly increase veterinary fees may cause damage to a hospital’s long-term relationships.

“Absolutely discuss payment options with pet owners but remember that the money borrowed still has to be paid at some point,” she said. “Focus on finding a medically appropriate solution that fits their budget.”

“Economics of rising costs and decreased profits are hitting everybody pretty hard right now,” said Boudreau. “Veterinary practices have to get creative and look at everything within their control.”

Photo credit: ©imagedepotpro via Getty Images Plus

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