Vets borrow heavily to create palatial pet clinics


To start 2020, Morgan McDaniel fulfilled a lifelong dream: She bought her own veterinary practice, a financial leap that took out a $4.5 million loan.

Then the pandemic hit, and so did America’s pet adoption boom. Cat and dog parents kept asking McDaniels Montgomery Animal Hospital in Pineville, La., for more services. Can it provide long-term care for a dog’s torn cruciate ligament? Did it offer overnight boarding?

McDaniel decided she could, and took out a $750,000 loan to expand her practice with more than two dozen dog bedrooms, an exam room for special procedures and an artificial turf field. She bought an underwater treadmill for rehabilitation and had a slurhy drink machine installed as a treat for her 35 employees.

“I dream big, I will say that. It seems extreme in some cases,” McDaniel said.

Similar stories can be found across the country as the animal health sector experiences fantastic growth. Now vets are tearing down walls or breaking ground to make room for new customers who are clamoring for boarding, daycare and care.

Their balance sheets are also becoming more complicated. In the first nine months of 2022, small business loans to veterinary offices increased 23 percent at PNC Bank, a spokesman said. At Huntington National Bank, veterinary credit inquiries have quadrupled over the past four years.

It’s being driven by a wave of pet adoptions, experts say. More than 23 million American households — nearly 1 in 5 — took in a pet during the coronavirus pandemic, according to the American Society for the Prevention of Cruelty to Animals. The proportion of households with at least one dog jumped from 38 per cent in 2016 to 45 per cent in 2020, before leveling off last year. Cat ownership went from 25 per cent in 2016 to 29 per cent in 2022.

For Brian Greenfield and his partners at Animal Clinic Northview, the pandemic pet boom spurred them to speed up their expansion timeline. The clinic outside Cleveland added 12,000 square feet of groundbreaking space, including 10 exam rooms, two operating suites, a remodeled intensive care unit, a rehabilitation pool and an underwater treadmill. The project cost $4 million, 75 percent of that in the form of a loan from PNC.

Becka Byrd of San Antonio bought a lot to start a new veterinary practice in 2018 and will open it in 2021, complete with an “animal retreat and spa.” The boarding suites have flat-screen TVs showing burning fireplaces or playing cartoons.

McDaniel’s luxury dog ​​boarding facility allows owners to communicate with their pets through daily video calls. The clinic’s staff of veterinary technicians and assistants put the puppies to bed each night and give them nightly treats.

Tommy Monaco in northern New Jersey started his own specialty surgery practice. His wife, Francesca, left her job as a management consultant at ed-tech firm Blackboard to manage the company’s finances. Jonathan Trail, of southern New Jersey, added 2,500 square feet of space to his “mom and pop” general veterinary practice with a $700,000 loan from TD Bank.

“The door stayed open for vets throughout the pandemic,” said Brandy Keck, head of veterinary lending at Live Oak Bank. “It became incredibly clear very quickly that the veterinary industry was going to be one of the winners.”

The vet from an “animal point of view”

Pet expenses, including for health care, are largely considered discretionary. Researchers often track consumer spending on pet food, toys, exercise and even surgeries to gauge consumer confidence.

But in the years leading up to the pandemic, loan underwriters began to notice that the classification was becoming increasingly unreliable. People no longer view their pets as property, said Ed Nunes, a TD Bank senior executive who oversees veterinary lending. They see them as family.

There is also new research suggesting that pets were a panacea for many of the stressors associated with isolation, loneliness and poor health habits during the pandemic.

Researchers from the University of Montreal found that dog ownership had significant positive health effects during the pandemic. Owning at least one dog encouraged immunocompromised people to exercise more and sleep better, the researchers found, while non-dog owners spent more time sedentary and lost sleep.

Similar dynamics also helped isolate the veterinary industry during the Great Recession; For the most part, revenue from the veterinary sector just flattened rather than decreased, Nunes said.

The pandemic accelerated two other dynamics: Not only were people adopting more pets, they were stuck at home together. When people pay more attention to their animal companions, they spend more money on them, say veterinarians.

Who spends the most time (and money) on pets?

That meant more visits — emergency rooms reported sometimes hours-long waits to see patients, and some veterinary offices said they stopped taking new clients for preventive care appointments — and more spending on nonmedical services.

In other words, Byrd said in San Antonio, we’ve spoiled our pets. And since pets don’t pay for their own care, veterinarians make sure to attract human clients. So boarding schools are starting to look like holiday hotels, and kindergartens are starting to look like kindergartens instead of kennels.

“Anthropomorphism is everything,” Byrd said. “I think that’s true even for myself.”

Vets are quick to point out the medical case for some of these facilities. The amount of knowledge and scientific advances in animal medicine have been rapid, Greenfield said in Ohio, and veterinary clinics must constantly invest to re-equip their facilities.

More and more practices are also taking a new approach, not only to medical care, but other pet services, known as “Fear Free.” It includes basic protocols for vaccine administration (using food to build trust and for positive reinforcement) and nail clipping (again food, but sometimes also a mild tranquilizer for anxious pets), although each step involves consultation between doctors and pet owners.

There are also standards for boarding schools and kindergartens. For example, individual dog enclosures may have some privacy, such as a curtain or carpeting where a dog can burrow, according to Fear Free protocols. Cats are well served by placing diffusers with calming pheromones around a plant or playing certain music. It turns out that dogs and cats like very different tunes.

“We’re now looking at what our facilities look like from a pet’s point of view?” said Carmen Rustenbeck, executive director of the International Boarding and Pet Services Association. “What does it look like? What does it sound like? What does it smell like? How does it feel on your paws?”

The Fear Free approach has become popular enough that TD Bank’s Nunes is studying it so he can better evaluate the business plans of loan applicants.

“Part of being a specialty lender is being a trusted advisor to the physician,” he said. “I know an incredible amount about practice management.”

And on the medical side, pet parents are increasingly willing to invest more money in treatments to extend their animals’ lives, Greenfield said.

That’s a great thing for pets — “More longevity, healthier, happier, pain-free quality of life,” Greenfield said — but it adds financial pressure to a veterinary industry already facing a shortage of doctors and technicians. It sets off an arms race among athletes to have the finest facility, or the most advanced equipment, or the best facilities. And that extends beyond medical treatment and into kindergartens and boarding schools.

It is not cheap for veterinarians to make all these investments. Their business is capital intensive – a new piece of equipment is expensive, and labor costs are also high. Some practice owners take out loans to have a line of work with capital to pay employees, bank officials say.

In many cases, large student loans increase the burden. Four years of vet school costs more than $200,000 on average, according to personal finance website Bankrate, forcing many students to take on debt. And when they graduate, they can expect a median salary of $100,370 per year, according to 2021 federal data.

Still, the Bureau of Labor Statistics predicts strong demand for practitioners, with veterinary jobs rising 19 percent over the next decade, compared with 3 percent for human doctors and 5 percent for the rest of the U.S. workforce.

These costs are still generally worth it, given how robust the industry is. “We know that even when times get tough, [a pet owner] is going to take care of his dog,” said David Burch, director of specialty banking in Huntington. “And if something bad happens, he might choose not to take a trip to Disney World so he can take care of his dog.”

Defaults on vet loans are so uncommon that Huntington doesn’t measure them, Burch said. And so many veterinarians are interested in becoming practice owners that doctors are often willing to acquire difficult practices and take on their financial obligations. A constant refrain in the industry is that the fastest way to get ahead of student debt is to buy into a practice.

Veterinary clinics, say owners, just have to keep up with consumer expectations.

During Byrd’s practice expansion, she built a separate room for pet acupuncture — good for arthritis treatment, and even nausea and gastrointestinal inflammation, she said — and euthanasia consultations, and an entire wing for animal boarding.

Larger corporate animal hospitals can feel like an assembly line for surgeries, said Tommy Monaco, who started his own practice in northern New Jersey in November. He believed a smaller surgical practice would be a successful option and developed one to maximize animal patient and pet parent comfort.

At his clinic, Greenfield and his ownership partners wanted the capacity to treat more animals and didn’t want to have to send clients to other facilities for rehab or prescriptions. They more than doubled the size of the hospital pharmacy and added a brightly lit exercise room for animals recovering from surgery or with chronic joint and muscle problems.

Across a small partition is a rehabilitation pool where vets can jump into the 97-degree water and splash around with recovering puppies – or dogs that just need some low-impact exercise. Up a back staircase, the hospital has two apartments for doctors who need a nap between shifts and a large conference area for training sessions.

When Greenfield recruits new vets — the practice is hiring almost constantly, he said — he shows them around the clinic and watches their eyes light up as they pass an operating observation room, an oversized intensive care unit and a drive-through window, in case the hospital has to return to socially distanced care again.

“Honestly,” he said, “at the time we built it, we thought it was a little too big.”

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