I hear veterinarians level the claim of “unfair” competition again and again- and again.  I’m starting to feel like Inigo Montoya in The Princess Bride.  “You keep using that word.  I do not think it means what you think it means.”

"Hello.  My name is Inigo Montoya.  You killed your credibility.  Now prepare for your industry as you know it to die."

“Hello. My name is Inigo Montoya. You killed your credibility. Now prepare for your industry as you know it to die.”

The Reading Eagle Business Weekly section recently featured an article (9-24-13, “Veterinarians have their hands full”) about how competition is bringing “change to pet docs”.  I read it with interest for two reasons.  First, as a CEO of an organization providing veterinary services, I know a little bit about the market.  Second, I wanted to see how long it would take a veterinarian to level the claim of “unfair” competition against non-profit veterinary providers.  I got a two-fer when I saw that it wasn’t just non-profits generally which were vilified, the Humane Society of Berks County was specifically named as offering “unfair” competition.  Better yet, we didn’t even get a chance to respond to the false claim in the article.  I guess if a vet says it, it must be true.

Are non-profit veterinary practices competition?  You bet!  As in every industry, veterinary medicine is competitive.  What makes it a little unique is the effectiveness with which private practice veterinarians have functioned as a cartel and blocked competition by any other model than their own, decades old and faltering, model of the independent practice model.  They say the mere fact we are a non-profit corporation instead of an llc. or plc. corporation is inherently unfair and act as if it’s unseemly and unheard of.  One need only look around to see how wrong they are.

People like to refer to their pets as kids, so let’s look at child care.  There are for-profit and non-profit providers for daycare fighting it out in the market place.  Veterinary medicine is medical service for animals, so let’s look at human health care.  There are for-profit and non-profit hospitals, insurance companies, and doctor’s offices and practices.

Across all sectors of our economy there are a variety of corporate and business entities providing service from sole proprietorships to limited liability corporations to professional corporations to publicly traded companies to government entities.  Does Exeter McDonalds complain about the municipally owned Reading Country Club horning in on its burger business right across the street?  Is it competition?  Yes.  Is it “unfair” competition?  No.

Even within the vet industry, there have been complaints about for profit competition.  Banfield, owned by the Mars candy company, operates out of PetSmart.  VCA is a publicly traded company.  Vets complain about them, too.  VCA can use its billion dollar plus annual billing to obtain better pricing on its drugs and supplies than the local one owner vet practice can.  They can use their Antech diagnostics division to give themselves preferential pricing and use the resources of that company to fund the purchase of additional practices.  They have a wall of lawyers who help them get around the laws in states where private practice vets have managed to block corporations like VCA from buying practices directly- instead they run complex professional management services for their own practices.  They have a single marketing department.  Is this completion?  Hell, yes!  Is it “unfair” competition?  I don’t think so but I’m sure our little HSBC vet practice offer far less competition of any sort to our competitors.  After all, there are three VCA’s in spitting distance of our practice.

On an aside, I wonder why VCA didn’t get mentioned specifically by that vet in the article?  Perhaps because he sold his own prior local practice to Los Angeles based VCA years ago?

What exactly is our non-profit advantage, by the way?  We pay payroll tax, like the vets.  We have all the same facilities and operations and staff and carrying capacity costs as the vets.  We don’t pay tax on our stuff, but neither do the vets since they are tax exempt for all business related purchases, just like us.  Most vets draw a salary so they pay income tax, not corporate tax, and so do we.  Non-profits don’t pay property tax, but if we lease a building we still have that cost passed along, just like a vet, and let’s be honest, trash and sharps collection cost a practice as much as most property tax bills.  In short, our base costs are essentially identical to a for-profit vet practice.

So, what would be “unfair” competition? What would be unfair would be if we were able to find a way to use whatever paltry tax benefit we get and use it to unfairly undercut other vets in pricing.  That would be unfair.  But we don’t.  We peg our rate to the middle of the market, meaning that at least half the private practice vets in town charge less that we do and less than the other half of the vets in town, which charge more than we do.  Are they “unfair” because the charge less than we do?

Perhaps the vets think we have some unfair heart tugging capacity that brings in clients.  I sure hope so.  Because we need every single one to help us recoup the costs for the hundreds of thousands of dollars in free and reduced cost services we provide to stray and homeless pets in our care and to the thousands of low income clients we assist each year because they have no place else to turn.  Certainly not to the private practice vet who often asks for a credit card in advance of service.  Is that fair to us?  Yes, it is, because we chose to help those people.  It’s our mission, which is why it’s not only fair, it’s legal.  Just ask the University of Pennsylvania Ryan Veterinary Hospital, which is a non-profit hospital that somehow avoid mention by the vets.  Veterinary services help animals stay healthy and stay in homes.  And stay out of shelters.  Period.

The reality is any private practice owner could become a non-profit corporation any time then choose to take advantage of the same so called “breaks” we get.  But most don’t because they know it’s not some silver bullet which will help them save their practices from the economic march of time.  The same march that crushed the family doctor under foot.  Or the Sony Walkman.  Or the haberdasher.  Fair?  Yes.

To the private practice vets who feel the strain of the economy:  I feel your pain and I have sympathy for you, but your pain and my sympathy can’t change what’s coming.  It isn’t HSBC or UPenn Vet or Atlanta Humane or San Francisco SPCA causing you this pain or is bringing an end to your storied monopoly of services.  To end on another quote, this time by Joe Strummer, “It’s just the beat of time, the beat that must on.  You who have been crying for years- we’ve already heard your song.”

We’re here.  We’re non-profit.  Get used to it.

Share

The Cartel, Revisited

September 12th, 2013 | Posted by Karel Minor in Uncategorized - (2 Comments)

Cartel (noun): An association of independent businesses organized to control prices and production, eliminate competition, and reduce the cost of doing business (1). Also called a trust (2).

(1) Dictionary of Military and Associated Terms. US Department of Defense 2005. (2) Collins English Dictionary, 2003.

There’s been a long lull in blogging this summer, mostly because I’ve been busy doing a lot of things which will annoy the private practice veterinary community.  We’ve expanded HSBC’s own veterinary services and have just received final approval for our new community veterinary hospital, to break ground this fall.  I’ve presented workshops at the nation’s largest animal welfare conference highlighting and promoting the new wave of non-profit based veterinary hospitals springing up across Pennsylvania and the United States.  We’ve helped other shelters add or expand their own veterinary resources to better fulfill their humane missions.

However, during that time I’ve also had a bit of an about face in my rhetoric due to meeting several veterinarians from around the country.  If you follow this blog, you know I’ve stated many times that non-profit vet services are presented as the boogey man for every problem facing small, private practice vets.  This is especially the case for private practice vets who are struggling in the face of very real, but completely unrelated, negative market forces.

I’ve pointed out the private vet practice has been in decline for decades in the face of these other economic drivers and, in my opinion, is going the way of the human health care industry.  There will be more consolidation, non-profit practice, corporate practice, with only the most capable private practices surviving.  I’ve pointed out that the vets themselves facilitated a glut of new graduates who need jobs and these new graduates like animal shelters, are charitable, and don’t want to buy in to the old, debt ridden, practice purchase model.  Many of them want only to work as a shelter vet or desire a non-profit practice, as long as the practice of medicine is high quality.

I’ve talked about the way non-profit practices like ours can provide better than industry standard care at market rates for those who can afford it, at reduced rates for those who can afford less, and for free for those who can afford nothing.  This approach is deeply rooted in mission, since there is now a growing body of evidence that having a strong veterinary relationship decreases relinquishment of pets to shelters.

Whether the old timer vets like it not, the world is changing and their model of practice is coming to an end.  Given the new models of service rising, I think this is for the best for animals, for people, and for veterinarians.

I’ve also been pretty vocal in my feelings that the private practice veterinary community across the nation, and sometimes with the active support of their state vet boards and veterinary medical associations, attack non-profit veterinary practices and seek to keep them from opening or close them down.  If this was any other industry, and the economic bullies weren’t able to hide behind a white lab coat and stethoscope, we’d call it a cartel.  I have called the thugs of the veterinary industry- and it is a multibillion dollar industry, make no mistake about it- a cartel.

But this year I had a bit of an eye opening.  I realized that it wasn’t just non-profit practices who were falling victim to these attacks.  It was also other veterinarians and other practices feeling the heat.  I’ve been meeting vets from around the country who want to turn the model I promote- non-profit missions driven by veterinary services- on its head.  They are trying to have veterinary practices which embrace major non-profit, mission driven goals to better serve animals and people.  And their own consciences.

Vets who have opened full adoptions programs in their hospitals and have even applied for 501c3 status for that work.  Vets offering charity clinics and sliding scale fees for poor clients.  They are starting to look like us!  And now they face opposition from their own community, sometimes even from their own partners.

Am I mad they are stealing our “market share”?  Do I pretend to fear the quality of their charity isn’t as good as ours?  Am I suspicious of their stated motives and suspect its really just some plot for more profit?  No!  Hell, I know they aren’t getting rich giving away services, that they aren’t stealing clients from other vets or from us, that they aren’t undermining the quality of care industry wide- and so does every other vet, just like they know we aren’t doing that either.  They are simply professionals who care about animals and people and are doing what they think is best for them, for their own practices and for themselves.

800px-There's_no_cabalJust like me and the vets who work for and support the mission of The Humane Society.

I called the vet industry a cartel and I was wrong.  A cartel implies a broad coalition, a monolith in support of a monopoly.  But I see cracks in the monolith now and I see the very bricks which constructed it- the very vets these assailants of non-profit practices claim to represent- pulling themselves from the mortar to build a new foundation for the future of veterinary medicine.  So, I don’t think it’s a cartel any more.

I think it’s become a cabal.

Cabal (noun): A small group of people who work together secretly united in a plot.

Merriam-Webster Dictionary, 2013

Share