Private equity investors have come for the nation’s veterinarians, and the picture is not that pretty for pet owners and for Fido and Fluffy and Polly the parrot.
Rising prices, consolidation, veterinarians who are employees and not owners, are all rising trends. It’s possible that your hometown vet is now owned by a big conglomerate like the Mars candy chain, with consequences including cookie-cutter treatment, higher rates of euthanasia, and more money going into the hands of private equity investors, and less to the vets themselves or the vet techs.
“In the last 10 to 15 years, P.E. has been getting its claws into our profession as well, a similar style to human medical,” Dr. Eve Harrison, a house-call vet who teaches others to be house-call or mobile vets, said in a Zoom interview. “It’s an industry in distress, and private equity likes to come in and invest and profit.”
She explained that vets are very prone to compassion fatigue, and that suicide is a huge problem. “We’re a bunch of people who are kind of entrepreneurial, but sometimes we don’t know what we’re doing,” she said. “So we’re absolutely ripe to be taken advantage of by private equity coming in and being like, ‘oh, we’ll show you everything — we’ll handle the back end, you just handle the veterinary stuff.’ And meanwhile, they take advantage.”
This is a pattern familiar to other parts of the healthcare landscape: Nursing homes, hospice, dentistry, emergency medicine staffing, even hospitals. Private equity owners come in and acquire practices or affiliate them into groups. Then they sell assets like real estate and ask the practice to pay rent. They charge management fees, and otherwise extract money in practices like dividend recapitalization (adding debt) to raise their payouts. Then the asset (nursing home, dentist group) is sold, often with a less advantageous financial position. The private equity investors tend to want to get out in three to five years.
Harrison said the private equity vet owners speak of “euthanasia quotas, how many appointments you have to see a day, how fast you have to see things and what medicines you should be pushing — just sort of reinventing the architecture of the profession.”
“Of course, the prices go up, but that money doesn’t get to the veterinarians or to the vet techs, who are doing the work and who make abysmal salaries, and yet are at the greatest risk of injury and work-based workplace hazards and things like that.”
Fortune wrote about this in its May 2024 report: “In 2018, annual rabies shots for one cat cost $27 at a New York City vet that operated independently, according to records obtained by Fortune. The vet, after selling the practice to a private-equity-backed company in 2022, charged $50 for the same rabies shot in 2024. Urinalysis for a cat cost $86 this year, up from $42 in March 2021, according to records.”
The big players
How widespread is private equity ownership? It’s a little hard to tell, since many of the private equity-owned clinics keep their original names, masking the presence of a corporate owner. The Freakonomics podcast discussed this in an interview with the head of National Veterinary Associates, Greg Hartmann, who said “All of our sites are locally branded. I think it’s a super interesting part of the veterinary profession, which is it’s very much a local business, very much a small business.”
But there are estimates: “Veterinary-industry insiders now estimate that 25 to 30 percent of practices in the United States are under large corporate umbrellas, up from 8 percent a little more than a decade ago. For specialty clinics, the number is closer to three out of four,” Helaine Olen writes for The Atlantic in a piece titled “Why Your Vet Bill Is So High,”
Among the big players, she wrote: “Mars Inc., of Skittles and Snickers fame, is, oddly, the largest owner of stand-alone veterinary clinics in the United States, operating more than 2,000 practices under the names Banfield, VCA, and BluePearl. JAB Holding Company, the owner of National Veterinary Associates’ 1,000-plus hospitals (not to mention Panera and Espresso House), also holds multiple pet-insurance lines in its portfolio. Shore Capital Partners, which owns several human health-care companies, controls Mission Veterinary Partners and Southern Veterinary Partners.”
In a 2023 report on veterinary medicine trends, KPMG wrote that prices are expected to go up as the veterinary market grows, as “the humanization of pets has turned pet owners into pet parents and the human-animal bond continues to strengthen. Pet parents now expect the same health care for their pets, high end diagnostics are becoming more prevalent.”
The report adds: “The veterinary sector has attracted substantial acquirer interest for several decades as large players have capitalized on the sector’s clinic fragmentation. The thesis is anchored around consolidating competitors to establish regional dominance, bolster scale, and enhance service offerings. M&A activity ramped up dramatically in 2021. Volumes have been pushed to new heights for private equity and strategic buyers for two compelling reasons: 1) buying a cash business like a companion animal practice is considered a safe, lucrative and generally recession proof investment – particularly to gain profit and diversify portfolios; 2) veterinary data is powerful currency to increase and influence pet parent/consumer engagement. Both will continue to drive valuations and numerous acquisitions will be centered around this thesis.
“As acquirers continue to drool over the veterinary sector, there are systemic challenges which progressed from being supply issues to a concerning demand challenge. Shortages of veterinary professionals on the one hand causing challenges with wait times, combined with the rising cost of care and relatively few pets being insured, is turning into an issue of pet parents deciding whether they can even afford going to the vet.”
A progressive talk show host and essayist, Thom Hartmann, recently wrote a piece titled “Is private equity as dangerous to your dog as Kristi Noem?” “The cost of veterinary medicine has been exploding since 2020, in large part because that was the year private equity firms began buying up vet clinics across the country. Once acquired, the clinics and pet hospitals are drained of assets by some of America’s most morbidly rich individuals. The simple result: higher prices for pet care.”
Corporate house-call chains
Harrison said there are also some big national corporate house-call practices.
“That’s where I come in, because I teach people how to start their own independent practices, where nobody tells you how to practice medicine, you care for the animal, and for the client, and there’s no middleman, no one to tell you what to do. There’s no one in the middle hiking prices up artificially.
“That’s big news now — this sort of house-call practice thing that’s going national. People are trying to make it look like they’re these cozy little independents, but it’s as private equity backed as anything else.”
Harrison said she’s concerned about another trend.
“People talk about Big Food, Big Pharma,” she said. “I’ve been using this language that I’m hoping kind of catches on: Big Euthanasia is now something to worry about. There’s ulterior motives, and quotas for for how much euthanasia should be done, for these companies that provide euthanasia in the home.
“They don’t call it a quota. But it’s like, if you don’t meet your numbers, you’re in trouble. Or you’re not pulling your weight on the team. When it comes to euthanasia, that’s not acceptable, in my opinion. It should be like in human medicine: Decisions around end of life have a lot of regulation. For better or worse, for us, it’s very, very routine. So we’re so incredibly vulnerable around that specific subject of euthanasia. That really scares me in my profession.”
Price and quality
Among the biggest issues in healthcare, human or veterinary, are price and quality. How has private equity’s role changed them?
“The price is definitely going up. That does not mean that the veterinarians or the veterinary teams are getting paid more, but prices are absolutely skyrocketing through corporate practice,” she said.
On quality of care, she made a distinction between general vets and specialists like neurologists, surgeons, behaviorists, even veterinary dentists.
“When it comes to like neurologists, internal medicine, they need a lot of equipment, like an MRI and like the surgical suite and everything,” she said. “So it’s it’s become more and more rare, that a specialist, especially in neurologists, internal medicine or surgeon, will be able to open their own practice without a private equity backer, to pay for the MRI. That’s huge, huge money, so most specialists now are employed by corporate practices.
“If specialty medicine is at a quote-unquote higher level, it’s kind of like ivory tower medicine that a lot of people can’t afford, even if they don’t really want to put their animals through that.
“On the general level, like there’s there’s sort of pushing of products and pushing of medications that may or may not be necessary, due to meeting quotas. There’s a sort of homogenizing of the medicine — like you can’t really customize for each individual. So it’s like factory style medicine.
“It’s like in this hospital, we promote this medication, because that’s our financial goal right now in this hospital, so there’s an ulterior motive with the money, and it becomes a little bit cookie-cutter. Because this hospital, this corporation, carries this product only, or promotes this product only, or is associated with this food brand. So they will, of course, promote that food brand. There are influences on the medicine that are beyond just what’s right for the patient.”
Cash pay and ‘barking mad’
Acquisitions of vet practices can be high-dollar transactions, according to people who know the market.
“You know who some of my wealthiest clients are? They’re not developers, institutions, or syndicators. They’re veterinarians. PE has set their target on vets some practices are going for 10-15x EBITDA. A client recently sold his 12,000 SF clinic for $30M. It’s barking mad!”
The Tweet from a health care real estate investor/advisor was startling. But why? “Veterinary bc of the insane demand. Also a lot do cash pay. Most of the groups I talk to say that their only revenue bottleneck is that they can’t hire vets fast enough.” A reply” “The signing bonuses I’ve seen some of these companies offer are wild and hard to turn down though.”
Some healthcare sectors see a lot of private equity activity in the Management Services Organization, or M.S.O. model, where the private equity company supplies “management services” like hiring, tax compliance and so on, often with certain performance metrics built in. Harrison said that’s not that common in veterinary care.
“The big one is acquisitions. For associates who are already in that practice, they then join the corporate practice, or if you’re the owner of the practice, they kind of own you, and you are required to work for a certain number of years for them in order to earn the payment for your practice before you can leave.”
Like dentists and others who sell to private equity, it’s an attractive proposition — so the vet can stop worrying about the business aspects, and get back to veterinary medicine, which they love. But the downsides of selling to private equity can become apparent really quickly.
Vet shortage
The rising number of pets adopted during the pandemic has resulted in strains on the industry, including shortage of vets across the United States. Mars Veterinary Health, the giant owner, posted a study on the topic in August 2023.
Findings include these:
“Pet healthcare services spending is expected to increase 3-4% per year beyond inflation over the next 8-10 years.
“Up to 55,000 additional veterinarians will be needed to meet the needs of companion animal healthcare in the U.S. by 2030.
“Even with the new veterinary graduates expected over the next 10 years, a shortage of up to 24,000 companion-animal veterinarians will likely still exist by 2030.”
Today, the United States has around 116,000 practicing veterinarians with nearly 2,000 retiring each year, the study said.
What you can do
What are the things you can do, as a pet owner, as a practice owner?
If you’re a practice owner trying to sell, she said: “Try your best to sell to an independent veterinarian, rather than to a corporation. Because odds are, you may get stuck in a situation that’s nothing like you expected, and the beautiful thing that you built that as your practice, you’ll watch it become a cog in a machine, or you’ll be forced to practice medicine in ways that you don’t believe in.”
It’s hard, she said, “because the corporates pay so much more,” often “multiple factors higher than what an individual can possibly pay.”
“People are so desperate to get out of their practices, because they’re burnt out, that they see this as the best thing that’s ever happened to them. So that’s really, really tricky.
“I would say for pet owners, try to see who owns the practices and make sure that it’s owned by an individual, independent veterinary entity, rather than one of the large conglomerates like Mars or N.V.A. Or find out if it’s a chain or not — basically, if it’s a chain, odds are the care and the well-being of their pet may be compromised.”
It can be complicated, she said, because it’s not always clear who owns a practice — as we noted above, often they leave up the same shingle after acquisition. So it’s worth the time to do your homework.
“One final thing that I want to say just to be fair, is that even though I’m hardcore anti-corporate, is that, for what it’s worth, I find the corporate mindset or the P.E. mindset is the problem, not the industry,” she said. “It’s the mindset that money is the only thing that matters, the bottom line comes first. And to have no checks and balances on it. That’s the problem.”
