Table of contents:
THE COST OF VETERINARY SERVICES.
Veterinarians are very sensitive when it comes to public criticism of the high cost of their services. That sensitivity is quite understandable, as they have a right to be paid well for their expertise and the vast majority of them work hard and do a good job for their clients. However, despite the decreasing number of visits by pet owners to veterinarians over the past several years, the amounts billed by the veterinary industry to clients continues to rise each year. How does one explain that and what is driving those increased costs?
What then can be accounting for the increased prices? There are several potential reasons.
POTENTIAL CAUSES OF INCREASED PRICES
1/ The increasing specialization of the veterinary profession and the nature of their training.
Increasing numbers of veterinarians are taking extra training beyond their basic DVM degree to obtain speciality qualifications. Specialist care is more expensive compared to other levels of care, as extra laboratory and advanced diagnostic tests are generally ordered. Specialists also increasingly work at facilities where on site access to advanced tests and procedures are available. This increases the likelihood of such items being utilized, especially if those tests and procedures are promoted during specialty training and are part of the clinical protocols that specialists frequently follow.
2/ The 24/7 specialized referral hospital.
Specialized veterinary care is generally provided at corporately operated veterinary referral hospitals. These referral facilities are open seven days a week and 24 hours a day. Veterinary care, outside of regular office hours, is increasingly being provided at these facilities, especially in urban areas. In many large cities after 5 p.m., pet owners have little choice for accessing care other than these 24 hour clinics, as they have established a virtual monopoly on the provision of overnight veterinary services. In an out of hours emergency situation therefore, a pet owner has few if any options for where they can go for care or for a second opinion. They either have to commit to pay for what is being recommended or decide to take their chances and wait to see their own veterinarian the following day. The majority of pet owners are unwilling to take a risk with their pet's health by delaying and usually end up footing the bill. As a result, veterinary costs in cities in Canada where these 24 hour specialized facilities exist, such as Vancouver, Edmonton and Calgary, are believed to currently have the highest costs for veterinary care in Canada, even though Edmonton, for instance, is currently not even in the top ten most expensive cities to live in, in this country.
3/ The use of Protocols/Clinical Practice Guidelines (CPGs).
It is becoming increasingly common for specialists to use clinical protocols when seeing a companion animal. Those protocols generally specify what a veterinarian should do for an animal that presents with a certain problem to their facility. Every patient however, is an individual with specific issues and while there are pros and cons with using clinical protocols, they should only be used as a guide for what may be the optimum practice. They should never be adhered to religiously or used to justify recommendations that may not be in the best interest of the particular animal being seen. Ordering protocol driven, invasive, gold standard tests or procedures may be quite appropriate when the circumstances involve a young animal, with a remediable condition, who has many potential years of life ahead of them. However, the best care for many geriatric or terminally ill animals is often not the Gold Standard test or procedure outlined in a particular protocol. Instead, what many pet owners want in such situations is counselling with regards their pet's prognosis, advice as to how best to keep their beloved pets comfortable and what factors to consider when it comes to thinking about euthanasia. For a multitude of reasons however this is often not happening, with the result that 70-80% of the life time costs for a companion animal's veterinary care are generated in the last few months of its life, similar to what is happening in human medicine. Additionally, if a veterinarian simply recommends the gold standard that is in a protocol and fails to discuss all the reasonable available options for investigating and treating an animal, the owner is being denied informed consent. The result is that the best care is not necessarily being provided to that specific animal and the owner often ends up with a final bill that is much higher than was warranted.
4/ How veterinarians are paid.
Commission or productivity based payments to associates is a widespread practice in the veterinary industry, especially in specialty clinics. The income of those veterinarians, paid on commission, is on average 14% higher than those who get paid by salary. Under this production based system of payment, a veterinarian is awarded a percentage of any fees that they generate for a clinic and that includes a percentage for the tests and procedures they have convinced a client to agree to and whatever medications they have dispensed to an owner, before they leave the clinic. It may also include a percentage of the cost of any food an owner buys during that visit. A number of studies from the world of human medicine have shown that changing the mechanism of physician payment from a salaried to a commission or production basis results in increased costs for the system. Should the world of veterinary medicine be any different? If in fact this practice is not a driver of pet owner costs in veterinary medicine, one has to wonder why associate veterinarians and the facilities they work at are so loathe to publicly acknowledge that this method of remuneration is widespread in their practices.
5/ Mark Up Rates in Veterinary Medicine for Medications and Laboratory tests.
When it comes to mark ups in veterinary medicine, a recent article in the veterinary business magazine, DVM 360, gave the public some insight into the profit margins involved. The typical cost charged to clients for laboratory tests and medications reflects a two to two and a half-time mark-up over what the veterinarian pays to purchase the test or medication, plus an additional handling fee charged to the owner for any medication the veterinary clinic dispenses. Generally, owners should be fully aware of what any diagnostic and lab test is meant to be for before they authorize it. That is part of informed consent. When it comes to medications, if cost is more important for a pet owner than convenience, they are then better off asking the veterinarian for a prescription, if it is appropriate, rather than having the medication dispensed at the clinic itself. The cost for many medications, when filled at a low cost pharmacy such as at a Costco or at a Superstore, can be 3-4 times less expensive, than having them dispensed at the veterinary clinic, especially if they are for a generic as opposed to a brand medication. The reason for this lower price is that, in many Provinces, pharmacies serving the general public, have government mandated limitations on what they can charge, while veterinarians are exempt from those limits when they dispense their own medications. Hence the higher cost of medications at veterinary clinics. Some may say that veterinarians know the drugs used in veterinary medicine better than a pharmacist at a Costco dealing with medications for humans but is this a safe presumption to make? Pharmacists can check with a veterinarian if they have concerns or questions regarding filling the prescription they have received to ensure the safety of the pet in question, just as they do when they have concerns regarding prescriptions for humans. In my opinion all pet owners should be offered a prescription by their veterinarian for medications that are commonly available at community pharmacies and which are also used by humans when one is needed. Obviously when a medication is specific to veterinary medicine and not available at a community pharmacy, then the medication should be dispensed by the veterinary clinic. It is my impression however that most owners are not aware of the option of obtaining a prescription for a medication from a veterinarian when their pet needs one.
6/ Lack of Transparency of Veterinary Fees and Less Discounts.
It can be difficult for a pet owner to know, before they visit a veterinarian, what their potential final bill will come to. The Government in Alberta, for instance, tried to address this issue in 2017 with its Bill-31. That Bill basically wanted to allow veterinarians to advertise their prices for common services so that consumers could decide which veterinarian they would attend. Even with all things being equal, some veterinarians still charge more for the same services compared to another equally capable practitioner working in the same geographical area. However, the Alberta Veterinary Medical Association (ABVMA) seemed very upset at this Government proposal which allows pet owners to know in advance what potential costs they may be facing for their animal's care.
Clients can, during regular office hours and non emergency situations, decide to either pay for the services their veterinarians recommend or they can go elsewhere for a second opinion. Haggling over the price with your veterinarian can be done but rarely happens. Clinic administrators may also penalize their associates if they offer discounts without obtaining permission ahead of time, as a sample associate veterinarian contract from the Michigan Veterinary Association reveals. Realistically as well, veterinary practices like any other business are increasingly loathe to discount their services, as it is not a model that is sustainable in the longterm.
7/ How much profit is enough?
Like most businesses, veterinary practices want to make a profit. Some clinics try harder than others to do so. The level of profitability varies from practice to practice and is also determined by the type of practice involved. The typical gross profit margin for general veterinary practices before taxes and after everything else has been accounted for is around 10%. If a clinic generates $1 million dollars in gross revenues then it would hope to make a gross profit before taxes of $100,000 each year. However some clinics only generate 7-10% profit margins because of a number of factors. However, at specialty 24/7 veterinary clinics the profit margins are often significantly higher.
8/ Informed Consent or lack Thereof.
If, as the article suggests, the highest level of treatment is commonly offered to owners, then that means in some cases, pets may be undergoing more invasive and riskier tests and procedures than needed, if alternative options have not been discussed. Is then the current ideology, commonly promoted in veterinary medicine, that MORE DIAGNOSTICS = BETTER MEDICINE, reasonable and in keeping with the important principle in all healthcare which is, "Primum Non Nocere" or First Do No Harm? I would suggest that it is not.
Numerous studies, in fact, have shown that it is a thorough patient history and a physical examination that provides the most information for making a clinical diagnosis and not necessarily the advanced diagnostics that are frequently ordered. There are indeed some veterinarian outliers who question the current mantra that more tests means better medicine. If however, preferentially promoting the highest level of care is occurring, then this could be a major factor in the increased costs that the pet owing public are seeing.
9/ No Government Regulation.
There is no Government regulation of prices that veterinarians can charge the pet owning public, especially in those emergency out of hours situations.
10/ Increasing demands from the public for care similar to what humans receive.
There is no doubt that today's consumer is more demanding and less patient than one from generations past. However, it is unclear to me whether it is the demands from pet owners for advanced tests and procedures that is driving the changes we now see or whether, in fact, it was the veterinarians themselves who chose to provide these services because they realized the business opportunity that it represented. Whatever the reason, pet owners can now access the kind of care for their animals that many humans in this country can only dream of receiving for themselves.
11/ An Aging Pet Population.
Companion animals are living longer and just as with humans, older pets have more diseases such as diabetes, heart failure etc. With these illnesses comes the potential need for more medical interventions and therefore more costs for pet owners. It has been estimated that 70-80% of the total lifetime costs incurred by an owner for their pet's veterinary care are currently being generated in the final months of an animals' life.
IS PET INSURANCE THE SOLUTION FOR HIGH VET BILLS?
The veterinary profession is well aware of the increasing cost to pet owners of the services it is offering and the increasing difficulties owners are having in paying for that care. A brief look at the costs incurred by owners on the home page of a common pet insurer will verify the amounts that owners are regularly facing after visits to their veterinarians. Veterinary clinics are therefore encouraging pet owners to take out pet insurance to increase the likelihood that owners will go ahead with the recommended treatments and investigations, but that insurance is not inexpensive. Overall in Canada and the USA, only 10% of dog and 5% of cat owners currently have pet insurance. As an alternative to pet insurance, many veterinary clinics are partnering with financial loan companies who can provide almost instant approvals so that pet owners can go ahead with the recommended and often emergency treatment regimens for their pets. Those loans can be for sums as high as $25,000, depending on the medical problem. The annual interest rates on the loans may vary from 7-10% or more depending on the time frame they are taken out for. Time only will tell what an increasing use of pet insurance by pet owners will have on veterinary costs, but it it is my suspicion that it will not lead to a reduction in fees for the public.