Economist Matt Salois, Ph.D. joins Dr. Andy Roark to discuss the driving economic forces in the veterinary profession today. They discuss the impact of corporatization across the profession, how private equity is changing the way practices operate, and how buying practices at ridiculously high prices is supposed to pay off in profits. They also discuss rising wages in the profession (which are good!) and rising costs to pet owners (which are bad!). Will the price of veterinary services really DOUBLE in 7-10 years? What can we do to prevent that? Let’s get into this episode!
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LINKS
Good News: There’s a Labor Shortage: https://www.nytimes.com/2021/09/04/opinion/labor-shortage-biden-covid.html
The Pinched Hose Economy: https://www.theatlantic.com/newsletters/archive/2022/08/weve-never-had-an-economy-like-this/671105/
Inside Economics Podcast: https://www.moodys.com/web/en/us/about/insights/podcasts/moodys-talks-inside-economics.html
Matt Salois on LinkedIn: https://www.linkedin.com/in/msalois/
Dr. Andy Roark Exam Room Communication Tool Box Course: https://drandyroark.com/on-demand-staff-training/
What’s on my Scrubs?! Card Game: https://drandyroark.com/training-tools/
Dr. Andy Roark Swag: drandyroark.com/shop
All Links: linktr.ee/DrAndyRoark
ABOUT OUR GUEST
Matthew Salois, PhD is currently the President of the Veterinary Study Groups, Inc. (VSG), where he is responsible for enhancing the economic and cultural success of more than 1,800 veterinary member practices.
Most recently, Matt was the chief economist and head of the veterinary economics division at the AVMA between 2018 and 2022, where he applied his skills in economics, business, and communication to support the daily lives of veterinarians.
From 2014 to 2018, he served as director of global scientific affairs and policy at Elanco Animal Health, supervising a team of scientists in veterinary medicine, human medicine, animal welfare, economics and sustainability. His group devised and executed scientific engagement strategy, and built collaborative partnerships with universities, non-profit associations and scientific societies.
Matt is also an adjunct professor of applied economics at the University of Florida, where he previously taught and advised graduate and undergraduate students. He earned his Ph.D. in Applied Economics from the University of Florida and holds an M.A. in Economics and a B.S. in Health Services Administration from the University of Central Florida.
EPISODE TRANSCRIPT
This podcast transcript is made possible thanks to a generous gift from Banfield Pet Hospital, which is striving to increase accessibility and inclusivity across the veterinary profession. Click here to learn more about Equity, Inclusion & Diversity at Banfield.
Dr. Andy Roark:
This episode of The Cone of Shame Veterinary Podcast has made possible ad free by the Purina Institute. Welcome everybody to The Cone of Shame Veterinary Podcast. I am your host, Dr. Andy Roark. Guys, I got a great one here today with my friend Matt Salois. He is an economist, formerly with the AVMA and now with the Veterinary Management Groups. We get into the economic forces that are driving our profession right now. Yes, we talk about corporate consolidation. Yes, we talk about private equity money coming into the profession. Yes, we talk about, “How are these prices on vet practices justified and how do people plan to make money with this?”
Dr. Andy Roark:
We talk about rising salaries for doctors and paraprofessionals. We both think that they’re great and they’re really good. How do they make economic sense? Also, does this mean absolutely 100% that prices are going to have to go up for pet owners? We talk about the fact that the cost of care is increasing by about 10% a year for pet owners. That’s a lot. Is that how it has to be? Is that how it’s going to be? Finally, we talk about inflation and the possible recession coming up. What do we need to know? How is it going to affect us here in the trenches in vet medicine? Guys, this is a great episode. If you’re interested in any of those things, stick around. Matt is super fun and I’m really glad he talked to us. Let’s get into this episode.
Kelsey Beth Carpenter:
(singing) This is your show. We’re glad you’re here. We want to help you in your veterinary career. Welcome to The Cone of Shame with Dr. Andy Roark.
Dr. Andy Roark:
Welcome to the podcast, Matt Salois. How are you?
Matt Salois:
I’m doing great, Andy. Great to see you.
Dr. Andy Roark:
It’s great to see you as well. Thanks for being here. For those who do not know you, you introduced yourself as husband, father, economist in that order. I think that’s wonderful. You have been an economist for the AVMA. You are currently with the Veterinary Management Groups. You are someone who is really known in our industry for having insight as an economist. I put out a social media post a couple weeks back and said, “Hey, what is the best lecture that you have seen and who gave it?” You came up on that list.
Matt Salois:
No way.
Dr. Andy Roark:
Yes, you did. You were on the list of people that I should talk to.
Matt Salois:
Oh, wow.
Dr. Andy Roark:
Take that as the high praise that it should be is that someone had heard you speak, and honestly, your name came up a couple of times. So, I was like, “Let’s get Matt on here.” I want to talk to you today about veterinary economics and the general state of finance in vet medicine. This is something I’m really, really interested in. I think a lot of us have taken in the economic position of our profession piecemeal, and I’m hoping you can paint me a more clear picture of what are the major forces and how they’re fitting together. I think I would benefit from that. I think there’s a lot of other people who would really love to have that clarity. Does that sound okay?
Matt Salois:
Yeah, that sounds great. With that praise, I hopefully live up to expectations there and-
Dr. Andy Roark:
No pressure.
Matt Salois:
… offer that clarity. I got to tell you, I feel like I’ve made it being on your podcast. It’s really an honor, so appreciate it, Andy. Thank you.
Dr. Andy Roark:
Oh, thanks for saying that. No, thanks for saying that. Okay, let me set the stage here. I think most of us in the profession are looking around these big macroeconomic drum step. Maybe we don’t totally understand or understand how they fit together. So, the big things that I’m looking at that I just want to start to crack the ice with you about is increase in corporate ownership of practices. We are seeing this as an ongoing trend. More practices are coming under the ownership of corporations. We’re hearing a lot about private equity money coming into vet medicine. I think a lot of us don’t necessarily know what private equity is compared to corporate ownership or what that’s like.
Dr. Andy Roark:
And then we see practices selling at huge values, so 20 times their earnings, and veterinarians can’t borrow enough money to buy practices. I think I just want to start at that level and say, “Can you paint me a picture of what’s happening as far as ownership of practices and how that’s going and what’s driving that?”
Matt Salois:
Yeah. Oh, wow. That’s a good question and a lot to dig into there.
Dr. Andy Roark:
It’s a big question. I know it’s big, but yeah.
Matt Salois:
It’s big. I think it’s a cascade of trends that we’ve seen evolve over time. We could say this with a lot of different things. I think one of the things that COVID escalated was this consolidation in our industry. COVID escalated a lot of things and moved us fast forward in a lot of different directions, in different areas of our lives. This was one area I think most relevant for veterinary medicine. There’s a lot of reasons why. A few, I’ll touch on here and we can dig into some of the other areas is animal health and veterinary medicine has proved itself in the past to be recession resilient.
Matt Salois:
That’s very attractive to investors across private equity and other aspects of investing, because in periods of economic downturn or sluggishness, investors and those with cash are looking to continue to propagate returns on their money. Veterinary medicine and animal health continues to demonstrate that they are resilient amongst some of those economic headwinds versus other industries. So, it’s very attractive from that perspective. Other areas I think is just the growth of animal health and veterinary medicine over time. We continue to see the population of pets expand. We’ve continued to see demand for veterinary services and pet care expand. Again, from an investor perspective, that’s really attractive.
Matt Salois:
Now, to your point, multipliers, it seems like 2018, 2019 was a lifetime ago though, but I remember having conversations with practice owners around multiples and they were talking six, seven, and that seemed absurdly high at the time. We were saying, “That won’t last. It’ll come down.” Like you said, 20 is not out of the realm of question here. We’ve seen that. We’ve experienced that. So, it just shows, I think, the cascade of these trends. They’ve amplified, particularly in this current environment that COVID created, which really shot us fast forward on this evolution of consolidation, which keep in mind this is not unique to veterinary medicine. It’s a natural tendency for a lot of markets and industries to consolidate over time.
Matt Salois:
You see this in airlines, you see this in healthcare and pharmaceuticals, you see this in automobiles. A lot of different markets and industries do this over time. So, there’s something very natural about it from an economic perspective. It’s not an aberration. It’s nothing weird or wrong. The last point I’ll make about this and I believe this the number of years ago, I still believe it today, is that there is room for veterinary practices of all size, of all types of ownership. I still think that independent practice ownership, there’s room for that now and in the future.
Matt Salois:
Aspects and definitions of ownership are changing as well. There’s independent 100% ownership, but there’s aspects around equity ownership that are new in our profession or at least new in the last several years. We can’t dismiss those because those are important avenues of ownership as well.
Dr. Andy Roark:
Oh, I completely agree. I don’t think independent ownership is going away. My position as I like to say, the future of vet medicine is fragmented, which means there will be big corporate groups and there will also be tiny little mom-and-pop groups and there will be mobile vets and there will be hospice vets and there will be people who very much make their own way and own their own thing. I don’t think that’s going away. I am super pro-entrepreneur inside of vet medicine, and that doesn’t just mean for veterinarians.
Dr. Andy Roark:
Anyway, as an entrepreneur in ways, someone who has a job that didn’t exist before I made it, I don’t see that going away. I think there’s a lot of opportunities. So, I love that. I think the first question I have in this is help me understand how a company paying 20 times the amount that a practice earns makes any financial sense. So, for those of us who just came up and we made money and we paid our bills, you go, “This practice will never earn enough money to justify what it was sold for.” How does that work? So, can you just lay down that financial groundwork?
Matt Salois:
Yeah, absolutely. I mean, it all comes down to beliefs and the opportunity to grow that practice and expand the profitability and the economic performance of that practice. That’s why you see a lot of that sweet spot and purchase being in some of these medium sized practices there, where there’s still an opportunity to grow them into larger practices. That’s the lucrative part around this. It’s not just the current state of earnings and profitability of that practice. It’s the future state that these investors are most interested in. They have different time horizons. Investors will be very diverse here in that regard.
Matt Salois:
Some are looking for two to three-year return. Some are in it for the longer haul, looking at things 5, 10 years out. But the outcome is the same. The question that they’re asking themselves is the same as if I buy this now at today’s price, what can I then make a profit on when I sell this 3, 5, 10 years out? That’s a lot of the end goal of a lot of private equity there. They’ll buy a private enterprise, they’ll invest in it, they’ll grow it, and then they’re looking to sell it for a return in the not too distant future with that not too distant being very subjective depending on the investment.
Dr. Andy Roark:
Correct. Yeah. So, okay, I hear what you’re saying. Do you think that that’s feasible? Can you really buy this practice? And then I think we’re speaking in broad generalities, I know, but is it possible to buy this practice and say, “I’m going to make 10 times what this thing earns and I’m going to grow it to the point that that makes sense”? I go that type of growth, especially when it’s extremely hard to hire veterinarians and things like that, that seemed so difficult to me.
Dr. Andy Roark:
I’ve always thought that this was supposed to make economic sense in rolling these practice together and taking them eventually all the way up to where they’re a publicly traded company, something like that. I go, “Okay, I can keep pushing these things up until they have stock that people can buy and the level of return on that can actually justify this.” But just the idea of buying practices at what they’re going for now and trying to grow them to be profitable enough to justify that, boy, I really struggle with that. Am I off base here?
Matt Salois:
No, you’re not alone. I mean, I’m an economist here and sometimes I struggle with it, which is why I didn’t make a career as an investor. I made a career as an economist, particularly in the veterinary. You don’t know many billionaire economists, at least I don’t either. So, I don’t know. Take that with a grain of salt or what. It’s a really relevant and pointed question, because I think a lot of people are perplexed and I’ll say growth can come in different ways. I mean, I think the traditional ways you look at growth and you say, “Okay, I’m going to build and expand. I’m going to add doctors. I’m going to build more patients into the practice. That’s how we’re going to grow. We’re going to grow that top line growth through revenue.”
Matt Salois:
But there’s an equal opportunity in the bottom line growth around creating a more high performing enterprise that maybe you’re not necessarily growing that top line revenue, but you see opportunities in the bottom line to make a more efficient, productive business. If you can make the right investments and make it leaner and smarter, you’re still generating a growth and profit.
Matt Salois:
And then the dual win-win comes when you can do both at the same time. That’s why you see a lot of mergers and acquisitions. Yes, they see that opportunity to grow the market through demand, but they’re also looking at hey, if we can combine companies and create synergies, we can create a more efficient enterprise and grow through the demand side as well. That’s where a lot of that economic opportunity comes from.
Dr. Andy Roark:
When we start looking at other economic forces that we’re seeing in the profession, we’re seeing a rapid increase in salaries of paraprofessionals, which I think is super great. I like to see those things going up. Veterinarians especially, we have good data on new graduates coming out of school and taking their first job. Boy, those salaries are going up. I mean, they’re in the six figures right out of the gates and that hasn’t been the case in the past. So, I’m looking at those things. Do you see those trends being related to or tied to the type of consolidation or things that we’re talking about, or is that an independent wave that’s going through just based on completely different things?
Matt Salois:
It’s related. First I got to say, I saw a tail so immediately like a squirrel, I’m distracted. I love it. I hope the dog pops up. I love it. I hope one of my cats come in here.
Dr. Andy Roark:
It wasn’t my tail. Yeah, it wasn’t my tail. It’s my wingman.
Matt Salois:
Oh, my goodness. I was worried for a minute there.
Dr. Andy Roark:
You may hear a [inaudible 00:13:04] in a minute.
Matt Salois:
I hope I do. It’s related. I think what’s driving a lot of that wage growth right now is what you mentioned before around the labor shortage and the very tight labor market we’re in. Again, this is one of those things that I would say COVID pushed fast forward. We were in a tight labor market even before the pandemic. Again, I’ll bring up anecdotes around asking practice owners before COVID what your biggest challenge is. They would say hiring and recruiting. A lot of times it was more around finding the right fit rather than just finding somebody.
Matt Salois:
Now, it’s just trying to get a warm body into the practice, whether it’s a credential technician or a DVM. This is one of those areas that I often will remind everyone to look at both sides of the situation we’re in with the labor market because we talk a lot about it from the employer side and the woes of hiring. That is concerning, because there are some growth barriers that are in place when you can’t hire people to fill your business and grow that business, but it’s a different story when you are on the labor market and one that we can’t dismiss. So, there’s a great article. I read it out last year. Good news, there’s a labor shortage. It’s still really relevant even though it seems like the world is ever changing in last September.
Matt Salois:
It feels like a lifetime ago, but it’s written by an economist from MIT, really accessible, very digestible. Just a reminder, remember, when you’re looking at the labor market, there’s two sides of it. There’s a demand for labor, which are your employers, and then there’s a supply of labor, which you and me and everybody are participants in that. We need to be mindful of that side, because exactly what you said, what we’ve seen here through scarcity of labor now more than ever has been an elevation of wages and earnings that quite frankly fell behind in many ways depending on the industry.
Matt Salois:
Veterinary medicine was one of them. If you look at earnings of veterinarians in real terms accounting for inflation, post-2008 recession, whether you believe it or not, the market responded as if there was a glut of veterinarians. So, wages and earnings of veterinarians was actually falling for a number of years after the recession. It wasn’t until around 2015 or 2016 that they started to climb up again. The visuals are always the most impactful when you see this. When you look at the trend line of the trajectory earnings for average veterinarian was on pre-2008 recession, it wasn’t until around 2020, 2021 that it was actually finally starting to reach that trend line again. So, yes, they’ve been rising.
Matt Salois:
What I remind everyone is this. We’ve been on a 10-year market correction journey for quite a while when you go back to that trend line. Secondly, remember, we’re in an environment of inflation. So, we have to ask ourselves too, are those increases in earnings making up for the increase in expenses there? Because that takes a toll out of your real spending power. Yes, if your earnings are rising 6% per year, that’s wonderful, but if the average cost of everything is rising at 10%, your real income is actually declining.
Dr. Andy Roark:
That does make sense. If you a dream of doing team training with your team, getting your people together, getting them on the same page, talking about how you guys work together in your practice, I’d love to help you. You can check out drandyroark.com and check out the store. I have two different team training courses. These are courses for teams to do together to get on the same page and to talk about how you do things. I have my angry clients course, and I have my exam room toolkit course. They are both available and there. Check them out. All right, guys. Let’s get back into this episode.
Dr. Andy Roark:
When we see these sorts of increases in salary that are matching up with inflationary pressures as well, I see paraprofessionals’ salaries going up and I personally felt that they’ve been way underpaid. I love how you say look on both sides and from both directions, because I’m an employer and then also I’m an employee. I’m an associate vet. I look at technicians and other doctors and say, “This has to work for everybody.” So I’m a big fan of balance, and I hear the fears of especially independent practice owners who are going, “We need to be competitive and we need to find this money to pay these people.”
Dr. Andy Roark:
If you want to see me quickly reject a theory, tell me that greedy vet practice owners have been sitting on piles of money that they have not been paying their staff. I will be done with the conversation because that’s just not true. It’s not all what I’ve seen. I’ve always seen veterinarians doing their best to keep the business going and to take care of their people while keeping prices low and care affordable for pet owners. That’s really the balance and the challenging thing. So, here we are and we have the price of practices going up and we have salaries going up. I got to tell you, Matt, I have concerns. I talk about this with a lot of different guests in a lot of different ways about, “Does this mean that a significant increase in the cost of care is inevitable for pet owners?”
Matt Salois:
Oh, wow. Yeah. Well, I love what you just said and there were so much great things that you just touched on. I’m going to try and see if my 40-plus-year-old brain can keep up with what you just laid out there. First, I want to touch on the support professionals and our credential technicians and practice managers and all of it, because you’re right, we’ve seen wages and earnings for them particularly escalate in the last 12 months rise in a way that they’ve needed to. I have to ask myself as an economist, never in the last 12 to 18 months have we probably saw as much in the trade literature and had conversations around fairly paid technicians and others.
Matt Salois:
I have to wonder, “Would we have had those conversations if it wasn’t for COVID and for the labor market situation that we’re in?” This is one of those things where good news, there’s a labor shortage, because finally, you start to realize the opportunity that these types of professionals provide and the need to economically reward them in a way that makes sense. Yet, to your point as well, it’s challenging around the markets. They all compete with one another. So, a technician doesn’t have to stay in veterinary medicine if there’s an economic opportunity that’s better and they can work elsewhere. Do you travel much on the road? Do you take many road trips, Andy, with you or your family?
Dr. Andy Roark:
Since the pandemic, I have intentionally geared down, but boy, 2016 I think was the most I traveled, I was on the road about 125 days out of the year.
Matt Salois:
Oh, wow. That’s intense. Well, my wife and my family live in Florida. We live in Illinois. So, we like to take road trips down there to see them. We’re still old school. We drive. My wife took a picture, there’s this, I call it a gas station. It’s so much more called Buckys, and there’s Bucky the Beaver. You go on these billboards and you see him. There’s just like these massive havens, these gorgeous restrooms, which you wouldn’t think of for a rest stop. Hundreds of different kinds of beef jerky. Bucky the Beaver’s around like a Disney character greeting people. It’s just an amazing experience. She sent me a sign inside one of the Buckys. She finally decided to stop and see what all this was about because we’ve driven by it for years and never gone in.
Matt Salois:
And then there was a sign. It was an employment opportunity recruiting staff line workers $30 an hour. I saw that and I thought, “Wow.” So here we are not to trivialize Buckys or gas stations and restaurants, but how wonderful. It demonstrates the scarcity of labor in a really critical way. For me, they’re recruiting everywhere inside and outside veterinary medicine. We have to be not just competitive for ourselves in veterinary medicine, but we got to be competitive across other opportunities that technicians, managers, and all the support professionals have available outside veterinary medicine. So, it’s so critically important. And then the third piece in your comment around the affordability, we absolutely have to keep that front and center.
Matt Salois:
Typically, what we saw historically, the average cost of veterinary care was rising about 3%-ish a year, pretty much in tune with national inflation. The average practice might look like that. Other practices might be different depending on what they were doing with their pricing strategies. But now we’re looking at 9, 10% increase in average veterinary services. This is data coming I’ve seen from VetSuccess that they’ve shared before industry conferences. The rule is 72, which is an old rule, but if you ever heard it, at a 7.2% interest rate in 10 years, the price of something doubles. So, here we are above that and we’re looking at the price of veterinary services in an average way more than doubling in 10 years. That’s concerning.
Matt Salois:
To me, when you look at the matter of the labor shortage, this is really important, because when we think about strategically what we need to do as a profession to address these issues, I know we need more, we need more DVMs, we need more technicians, and we needed them more before COVID. But if we respond to the shortage by opening the floodgate and rapidly expanding the supply of professionals, we all know the biggest cost center in any veterinary practice is it’s labor for good reason. I mean most businesses are like that, but all health professions are like that because these are highly trained, educated professionals that deliver complicated services.
Matt Salois:
But that’s going to go directly into providing or raising a barrier to the affordability of care, which has to be on our minds. I think it is, but it’s one that we’ve got to be really careful about in terms of what we do in our profession, how we respond to this tight labor market we’re in, and balancing that with the affordability of care. So, that pet care and more specifically veterinary care doesn’t become for the elite only. That access to all remains, because it’s so important.
Dr. Andy Roark:
Yeah, that’s really important to me is that I do want to make pat ownership classes. I don’t want to make it so that only people with significant resources can have that. That bothers me at a moral fundamental level. Help me understand this from an economic standpoint, how unique is veterinary medicine this way? Okay. I understand basic economics and supply and demand. Trust me, I get that stuff. Are there other industries out there really that are deeply focused on keeping their product accessible to as many people as possible?
Dr. Andy Roark:
So, for example, magic wand, we as a profession are no longer doing pet healthcare. We are selling high end cars where you go, “Okay, we have more work than we can do. The demands for our services is through the roof and growing. We can’t get enough laborers.” The obvious answer is you just raise the price. You raise the price of your service until the demand is pressed down enough that you have enough supply to meet that demand. So, when supply is down, the demand goes up.
Dr. Andy Roark:
When the demand goes up, we can increase prices and try to bring that down. But because we don’t sell high end cars, we sell pets, I am unwilling to just turn that knob and increase the price of my services until the demand falls down to a place that we can meet it. Is that as big an anomaly as I imagine it being or is that more common in other industries that I’m thinking of?
Matt Salois:
Yeah, I think you’re a hidden economist, Andy. You get it. Yeah, that’s good. I wish I was a hidden veterinarian, but I am not at all. I just work in veterinarian medicine, which I love. Yes. The market we’re in is in many ways similar to a lot of other markets, particularly other healthcare markets, but I think there are some differences here that are worth drawing out. Another funny anecdote, one of them is this and I was drawing parallels to the dental industry and the dental profession with a good friend and colleague, Dr. Peter Weinstein. We were trading thoughts and ideas and we were differing on something. I can’t remember what it was, but he said, “Matt-“
Dr. Andy Roark:
Peter likes to argue. He’s been on the show many time.
Matt Salois:
He does.
Dr. Andy Roark:
Take your position and be contrary to it.
Matt Salois:
He is good at it, which is why I like to argue with him in a friendly way. He said, Matt, “here’s the difference. Nothing dies in a dental practice.” I’m like, “You’re right. You’re right. Nothing does, hopefully not, right?” But we are dealing with lives here and lives are saved in a veterinary practice, not to be overly dramatic. The connection that people have with their pets is visceral and it’s real and it’s tangible. We saw that now more than ever throughout the course of the pandemic. Like you said, we’re not a market selling McLarens here. I don’t know I’ve seen a McLaren on the road, but I know they exist.
Matt Salois:
There are few things as ubiquitous as pet ownership in the United States. It is ubiquitous and that has to matter. So, it doesn’t mean that within veterinary medicine that you can’t cater or define a niche, whether it’s affordable veterinary care or some posh elite service that’s catering to the wealthy and the elite. There’s nothing wrong with that. The challenge becomes when the market is dedicated to servicing a sole ladder on the economic ladder of society, that’s problematic because of the ubiquity of pet ownership.
Dr. Andy Roark:
Yeah, that makes sense to me. Looking into your crystal ball and saying, “Okay, these are the market forces that we’re looking at,” how will pet owners continue to afford services? I think that there’s two pieces of this, right? How do we keep services affordable? But I think they’re destined to go up because everything is going up. Is the only answer to move into an insurance model or are there other economic models that in other industries have provided some relief and kept goods and services affordable?
Matt Salois:
Yeah, I’m so glad you asked that question. I think two sides of it. What can the pet owner do and then what can we do as organized veterinary medicine to support more affordable veterinary care? You named it from the pet owner side, exploring options like pet insurance, wellness care plans, budgeting for veterinary care like you would groceries or mortgage. The behavior aspects of this, as an economist to me say people will always be challenged to do that, right? Savings for example, American households have never saved as they’ve needed to in order to have the great retirement that we all dream of.
Matt Salois:
So, there are some significant behavioral challenges there and putting it on the pet owner, but there are definitely things that pet owner can do to manage the cost of veterinary care. From the perspective of the profession, there are things that we can do. I think we could take another hour for that question alone, but if anyone’s heard me talk knows that I’m a big proponent and advocate for efficiency and productivity and it is the saving grace.
Matt Salois:
I’ve learned to be careful in touching on that concept, because rightfully so, a veterinarian may remind me of, “Don’t tell me to be more productive. I’ve never worked harder in my life.” It’s so true and it’s so true. Here’s the tragic irony around inefficiency is that it’s hidden and you don’t often see it. You can work harder but not get more done if you’re facing barriers to productivity that remain hidden and out of sight. I think COVID was a good reminder of that, that we saw barriers to productivity come up, curbside care, deep cleaning exam rooms between patient visits, only allowing a certain number of patients and clients in an office in a hospital, so many things. Some of these things have come and gone and some things have lingered.
Matt Salois:
That took a hit effectively to the average number of patients that a hospital or a typical full-time DVM could see in a given hour or a given week. The way that you compensate for low productivity is you work longer hours and you burn your people out. I think that’s what we’re seeing here is that that burnout be pushed out even further, because we’re having to work harder to accommodate these barriers to efficiency. So, the average veterinary professional was used to running a mile in a treadmill and could do that and wake up early in the morning and run that mile in a treadmill and be fine, barely break a sweat because they were proficient, they were good at it.
Matt Salois:
And then COVID came and took them off that treadmill and put them on the beach, where it’s a lot harder to run that mile and they’re being asked to run a little bit further because of the demand increases that we saw for veterinary care. By the way, there’s COVID and a pandemic and everything else. So, it’s like you’re running that extra mile and there’s a hurricane throwing heavy wind and rain on you. It’s a miserable situation. So, what improving efficiency and productivity is take you off that caustic stormy beach and back onto the treadmill that you know and you love and you’re proficient at. That’s why it’s so important to focus on that.
Dr. Andy Roark:
Yeah, I like that. I think that’s a great answer. The idea that we can be more efficient and there are systems for productivity that we can put in place. I’m a huge believer in that. I’m an optimistic person, but I also believe in innovation and ingenuity. I think that there are things that we can do to do this better and make it work. Not just, “Sorry, prices are going to keep going up and we’re going to keep doing exactly what we’re doing and pet owners are going to have to figure it out whether it’s insurance or savings or whatever.” I very much think that you are right on it as far as in the history of humankind, we have continually figured out how to do it better, how to make things more accessible, how to make things work.
Dr. Andy Roark:
So, that’s what I needed to hear. That leaves me with a smile on my face. As you look in into your crystal ball here and I want to wrap up on this, we have increased inflation. We have the Fed is raising interest rates and making the cost of borrowing money higher and things to try to slow things down. If it’s a recession that we’re in, it’s a weird recession. Where do you see this going in vet medicine? If you had to go on record and say 12 to 18 months out from here, this is some of the changes that I expect that we’ll be feeling, what would those be?
Matt Salois:
Yeah, I’d say don’t worry so much about it.
Dr. Andy Roark:
I like that.
Matt Salois:
There are a couple reasons. Part of it is what will come, what will come. I’m a big believer in worrying about those things that are in your circle of influence and those things that are not do not, but it doesn’t mean don’t be prepared, right? Headlines always have a way of heightening emotions and that’s the purpose of headlines I think is to grab your attention and get you to read it and get an emotional response. Are we in a recession or not? It’s not the right question that we’re asking ourselves for a couple of reasons.
Matt Salois:
While we’ve seen two straight quarters of negative growth and that’s the formal definition of a recession, negative growth in our gross domestic product, GDP, those numbers are always preliminary and they won’t even be formal numbers for at least another six to nine months. So, we won’t even know whether it’s true for that amount of time, but we’re in a really different situation than a lot of other previous recessions in some way that leaves most economists scratching their head is we’ve got this slowing economic growth that we’re seeing, but we’ve got this red hot labor market that’s at play here. We’ve never experienced that.
Matt Salois:
So, typically, when you think about an economic downturn like a recession or something worse, that’s always matched with an inability to find a job and declining wages and earnings. We’re not really seeing that. Yes, we’ve got inflation and that’s an issue. We need to be really focused on that and the Fed is doing that, which is great, the Federal Reserve. But I would say whether or not we’re in a recession is not the most relevant question because of that reason. Are you gainfully employed? Are you worried about losing your job? Are you worried about your earnings falling, your household income falling? I think those are the relevant questions there.
Matt Salois:
The other thing to remind everybody is that we’re in a weird situation in our economy. Never have we been in something like this. What others have called slowing growth or negative growth, I call it slowing, stabilizing. Normalizing is probably the word I most prefer. We saw these epic rises and demand veterinary services and just economic growth generally last year resulting from the pandemic. What we have to remind ourselves is those epic highs were never intended or meant to last. They were artificial for a number of reasons. Pent-up demand drove increased demand in 2021 because people couldn’t spend in 2020. So, they were in 2021. Economic stimulus, three major payments went out in 2021 giving households a lot of extra cash.
Matt Salois:
So, that was driving and then people were spending more time at home. This was a big factor with veterinary care, but people are returning to work more normally. So, pairing back on some of that spending because it’s less front of mine there. So, we’re in what others have called the everything is weird economy. I’ve heard it called the pinched hose economy too.
Matt Salois:
So, if you think about as a kid and you pinched a hose tight and then the water built up and you let it go and the hose would flap about, that’s what our economy’s been doing. It got pinched because of COVID then let go. We’re working through all of this pent-up economic activity here that’s creating volatility. A lot of it’s cyclical, which is hard to see when you’re experiencing it now, but we’re going to be able to reflect back in 18 to 24 months and say, “I remember that. That was crazy, but things are more normal now.”
Dr. Andy Roark:
Man, all of that makes so much sense. I really love the pinched hose metaphor. That really works for me, man. That’s perfect. That really makes me feel good. I think there’s a lot of wisdom there. I’m going to have to sit and process that a little bit. I am going to track down good news. There’s a labor shortage. I’ll put a link in the show notes for those who want to see it. Other resources that you recommend just in general for understanding economics or economics in veterinary medicine?
Matt Salois:
Yeah, absolutely. So, I won’t take credit for that pinched hose economy. Someone else wrote that. You can Google it and there’s a great article talking about that as well. Very accessible and digestible. I like Inside Economics. It’s a great podcast if you’re willing to invest the time. A funny bunch of economists come together and have a deep dive on different economic issues, lots of other resources out there, but I would just say find what you like that’s accessible and enjoy listening and reading to it. If you don’t, move on to the next one.
Dr. Andy Roark:
That’s awesome. Matt, where can people find you online if they want to see some of the stuff that you’re writing and things that you’re doing?
Matt Salois:
Yeah. Oh, thanks. If you want to see pictures of cats and kids and food, I have an Instagram account that’s probably of no interest, but I try to be active on LinkedIn as well, posting thoughts about veterinary medicine, economics more generally, an occasional bad dad joke here and there too.
Dr. Andy Roark:
I’m going to tune in for that. Matt, thanks so much for being here. Guys, take care of yourselves and we’ll talk to you again soon.
Matt Salois:
Thank you so much. Great being here.
Dr. Andy Roark:
That is our show, guys. I hope you enjoyed it. I hope you got something out of it. As always, if you’re thinking about doing some team training and you’d like to run some training that your team is going to enjoy and jump in together and get on the same page about how to do things with, I’d love to help you. Check out my courses. I have an angry client course and I have an exam room communication toolkit course. Both of them are meant to be done by groups together. Head over to drandyroark.com. I’ll put links in the show notes, but man, I’d love to love for you to see what we do and how we do it. I’d love to help you have a better practice. Anyway, gang, take care of yourselves. I’ll talk to you soon.
