Corporate Veterinary Medicine
Coming to a Clinic Near You?
By Laura Thill

The small independent practice is alive and well. But as more professionals strive to improve the quality of their life by balancing family and personal interests with their careers, corporate animal health continues to be a growing trend.

Multi-practice corporations are not new in animal healthcare. VCA Animal Hospitals (Los Angeles, Calif.) began consolidating veterinary practices over 20 years ago. Later Banfield (Portland, Ore.) followed suit, according to Ken Cook, regional director of operations, PetDRx Veterinary Group Inc. (Brentwood, Tenn.). Today, more and more business-minded leaders in the veterinary industry, such as Cook, are doing much the same on a smaller scale.

In its third year of business, PetDRx includes 23 California-based clinics and anticipates steady growth in the future. “We see the opportunity for this in every state,” says Cook. PetDRx is publicly owned by a group of health insurance investors who recognized the potential for veterinary clinics to consolidate in much the same way as physician practices have. “They see the opportunity to bring veterinary medicine to the point where human medicine is, and they want to be in on the [ground floor],” says Cook.

“[Our approach is to] purchase or build a 24-hour emergency and/or specialty clinic, and then purchase [independent] clinics in the area” Cook explains. “We drive the business within that family of veterinary practices. The time demand on a vet in a one-doctor practice is incredible. But, when veterinarians work in groups, it becomes less stressful, and they can provide better quality care for their patients.” By consolidating, clinic owners save money on overhead expenses (e.g., staff, facilities, equipment, etc.) and they increase their buying power, he adds.

In addition, when the need arises, general practitioners can consult with, or refer patients to, specialists at the emergency/specialty clinic, he continues. “So, it’s better for the doctors, and that means better care for the patients.” And, the emergency clinics do remain open for after-hour care, he adds. In fact, some veterinarians have carved a niche in emergency medicine. “Some veterinarians make well over $100,000 working six or seven night shifts each month.”

The term “corporate” does not mean that veterinarians check their creativity and problem-solving skills at the door, Cook continues. “Our doctors maintain their individuality,” he points out. “We do not set corporate protocols or a formulated, cookie-cutter approach. So, different doctors [at PetDRx] may have different ways of doing something.”

Case in point
Going “corporate” can work on almost any level, as one South Carolina-based veterinarian has proven. Frank Batten, DVM, and his son-in-law, Steve Thomas, chief financial officer, have grown their operation from one to seven clinics, including an emergency clinic, in two years. “The business side of [veterinary healthcare] has always been an interest of mine,” says Batten. “When I graduated from the University of Georgia’s vet school in 1972, I practiced with [another veterinarian] for three years. Then I opened my own clinic. Five years later, I opened a second clinic, but later sold it.”

Batten’s interest in operating a multi-practice business was sparked by the trend set by VCA about 20 years ago, he notes. Since then, he has witnessed Banfield’s corporate growth as well, particularly as it has accelerated in the last 10 years. Following Thomas’ marriage to Batten’s daughter, the two formed a corporation in 2007 and purchased their first clinic that June. “Steve and I would have conversations about this,” explains Batten. “I was at a point in my life where I was looking for some change. We have since bought four more clinics and have merged a couple of others as well.” In addition to running the business, Batten continues to practice medicine today, partly because of the need for veterinarians in his area. “Our emergency clinic covers 45 veterinarians.”

“We have [moved forward] more quickly than we expected, because the opportunity arose,” says Thomas. “We expect to acquire about two practices per year in the future. As long as we can maintain excellent quality of care and this remains a good value for us, we will continue to move forward.” Thomas is quick to point out that the trend toward consolidation predates – and will outlast – the current recession. “This has been a trend for some time,” he says. “VCA has grown strictly through acquisition.”

Why it works for the vets
Experts surmise that veterinarians are attracted to corporate work settings for a couple of reasons. The biggest appears to be quality of life. Both male and female practitioners are looking to reduce the stress traditionally associated with running one’s own practice, says Cook. Yet they want to maintain the same income level.

It stands to reason, then, that as fewer vets show an interest in owning their own practice, independent practitioners may have more difficulty selling theirs. “As more baby boomers look to retire and can’t sell their practices, corporations will become a viable exit option,” says Dr. John Tait, president, American Animal Hospital Association. “The limited options, especially for larger practices, [due in part] to a surplus of supply over demand, have led them to seek out purchasers who are well capitalized.”

In addition, today more than ever, more women are graduating from vet schools and don’t necessarily want to work full time, Cook points out. “They would like to be able to juggle family life with their profession,” he explains. “If three women vets [job-share] at one location, they each must work only a third of the time and [thereby] improve their quality of life.”
Indeed, the number of female students appears to have surpassed that of male students, according to the most recent employment surveys by the American Veterinary Medical Association (AVMA). Based on its 2008 survey of graduate students from the 28 veterinary schools nationwide, about 77 percent were female. That’s based on a 95 percent response rate, notes one AVMA source. Similarly, in 2007, based on a 76 percent response rate, 79 percent of graduates were female. In 2006, the response rate was 78 percent, and about 77 percent of graduates were female.

An increase in female practitioners is not exclusive to veterinary medicine, says Batten. “I am also involved in some aspects of human medicine, which has a growing number of female doctors as well. So does the law profession.” Indeed, the influx of women vets appears to work to the advantage of his clinics. “Our clients are largely female – perhaps as much as 75 percent,” he says. In his experience, female vets tend to show their compassion more readily than their male counterparts, and his clients appear to appreciate this quality.

What this means for reps
The continued rise of corporate animal healthcare should not detract from the value of independent veterinary clinics, notes Cook. There are “plenty of clients,” which means plenty of business for independents as well as corporations, he points out.

Tait concurs. The growth of corporate animal health does not necessarily mean fewer sales for the distributor, he says. Rather, we are seeing “a redistribution of where these sales are coming from.” At the same time, as distributor reps help their independent vet customers market themselves better and grow their businesses, these customers should remain profitable.

But, Tait also anticipates that as smaller animal healthcare corporations continue to grow, “some will begin to centralize their purchasing and may bypass the distributor to work directly with the supplier.” That’s not to say there won’t continue to be a substantial role for the distributor rep. “Vets should be educated [by their sales reps] about what their distributor can do for them, in terms of service and rebates,” he adds.

“We always think of service as being most important,” says Batten. Along with this comes knowledge and promptness, he adds. “We use one sales rep because of her [broad] knowledge of the industry. She knows what each of our clinics has in the way of pharmaceuticals and equipment, and she can make recommendations on purchases.”

“Veterinarians want to stay on the cutting edge and know what [new technology] is coming out and how they can incorporate that into their clinics,” says Cook. They will continue to depend on their distributor reps to help them do so, he adds.

Sidebar:
Lessons from the Human Side: Big Shot for Little Company

Kaiser Permanente is big. The Oakland, Calif.-based healthcare provider has 32 medical centers, 421 medical offices, 14,000 physicians, almost 160,000 employees, and operating revenues approaching $40 billion.

Perhaps appropriately, Kaiser has a contract with a big med/surg distributor. Yet a little distributor in Anaheim, Calif., has carved out a niche for itself with the big provider. That’s because “we do something they can’t,” says Cindy Juhas, president of Hospital Associates. The company’s experience might serve as a lesson to small players in the veterinary market hoping to find opportunities with regional or national veterinary-care providers.

Juhas began her medical career as a sales rep for Dow Chemical’s Diagnostics Division. In 1982, she joined a Southern California med/surg distributor named F. D. Titus & Son. She advanced in the company and ultimately became vice president of marketing for McKesson’s primary care and integrated healthcare systems. (General Medical Corp., now McKesson Medical-Surgical, acquired Titus in 1995.) Later, she became vice president of corporate marketing for Henry Schein’s Medical Division.

But in 1998, she got the itch to return to her entrepreneurial roots, and purchased Hospital Associates, a $2 million distributor of equipment to hospitals and clinics. Today, the company has about $25 million in annual sales, with seven reps and 10 inside people servicing primarily California.

Juhas has always believed there’s room for companies that focus on one thing and do it well. In Hospital Associates’ case, that means selling equipment. “Our decision has always been to focus … on what has become our specialty and differentiator in the marketplace,” she says.

Opportunity knocks
Some time ago, Kaiser came to Juhas with a problem. The provider had simply run out of space in its warehouses in Northern and Southern California. Given the amount of new construction and rebuilding in which Kaiser is constantly engaged, the lack of warehouse space could delay the opening of a new clinic or other facility somewhere.

“They asked if we could assemble everything in our warehouse and deliver it directly to their sites,” explains Juhas. “We said, ‘Let’s give it a shot.’” Today, Hospital Associates does this for Kaiser in Southern California and has just started doing it in the northern part of the state as well. “It’s a complete turnkey service,” she says. “We realized there was a market [to provide this service] to other customers, so we started marketing it. ‘We do this white glove, turnkey delivery service. Are you interested?’ We found it was a huge hit.” In fact, Hospital Associates recently did the same thing for Los Angeles County-USC Medical Center, which moved into a $1 billion, 600-bed replacement hospital last year.

The point is this, says Juhas: Merely because a large customer has a contract with one of the big distributors doesn’t mean a small distributor can’t carve out a role with the customer.

“If you can show them you can save them money or time that the big guys can’t, you’ll get the business,” she says. “And I’m flexible enough that I changed my focus on a dime. Now we’re really good at what we do.”

The challenge is not only to develop and execute the service, it’s selling it to other potential clients, or at least identifying leads. That means sales reps may have to change their approach, and sell the value of service, not merely products.
“It doesn’t hurt” that Hospital Associates is a certified women’s business enterprise. Clients such as Kaiser appreciate that. “But they would never buy from us just because of that,” says Juhas. “Nobody does.”