Dr. Bill Wagner
Consolidation in Veterinary Medicine: Why Isn’t Patient Care Getting Better?
There are many supposed benefits of consolidation that are touted as being a reason why the corporatization of veterinary medicine might not be, at least wholly, a bad thing. Most of these benefits relate to improving the financial health of consolidated practices. At least in theory, better financial performance translates into practices being able to take better care of veterinary healthcare teams. However, what about taking better care of patients?
As mentioned on the recent Freakonomics podcast two-part episode “Should You Trust Private Equity to Take Care of Your Dog?”, improving patient care is sometimes mentioned as a hypothetical benefit of consolidation even though there does not seem to be any clear evidence that this is happening – quite possibly the opposite.
This begs the question:
Why is care not getting better in veterinary medicine despite significant consolidation?
There appears to be two significant barriers preventing these hypothetical improvements to patient care from becoming reality: Dirty data and Misalignment of incentives.
The opportunity here is exciting: Veterinary medicine has long suffered from a lack of scale in aggregated data, with “definitive” studies in veterinary healthcare typically relying on small sample sizes fraught with confounding factors. When we look at some of the larger veterinary groups who operate hundreds, and in some cases, thousands of veterinary practices, large pools of medical data that could be used to drive better patient outcomes and shape medical knowledge to the benefit of animals and humans alike are seemingly at our fingertips.
Additionally, there are many improvements to local standards of care at individual practices that can be accomplished simply via improvements in training and operational strategy. However, despite over two decades of ongoing consolidation in veterinary medicine with a rapid acceleration in recent years, the patient benefits of consolidation have yet to materialize. What gives?
While the human healthcare bureaucracy in the US is usually not something that anyone should be seeking to emulate, collecting health data is one thing that they do vastly better than veterinary medicine. The massive amount of data that is collected is a case of “the right thing for the wrong reasons”: The third-party payer insurance system in human healthcare demands a high level of accountability from providers, as they are highly focused on avoiding paying for any “unnecessary” care. This tug-of-war between providers and insurance means that large amounts of data are collected to analyze the medical benefit (and therefore, eligibility for coverage) of various medical treatments.
Collecting data is like recycling: “Single stream” is easier from a user standpoint but creates a massive logistical challenge on the receiving end of the data to sort everything after the fact. “Pre-sorted” creates a burden on the user, and assumes that they are willing, have the time, and are properly trained on the necessary data entry process.
A “single stream” of data is confoundingly difficult to accomplish in veterinary medicine. To start, there are dozens of different practice management software (PMS) platforms, and even committing to a single platform only gets you the first mile of the marathon as most PMS don’t collect this information by default any many simply keep medical records as blocks of raw text inputted by clinicians in whatever format (and containing as much or as little information as) the clinician prefers. While it may be possible with machine learning and a very robust enterprise solution to extract at least some of the desired medical data points after the fact, the more practical solution is to require that data entry to be done at the level of user input (as is largely done in human healthcare). Nearly all PMS collect at least some base information such as signalment and what care was invoiced (although even that point is heavily confounded by inconsistent charge capture at effectively every veterinary practice). However, many other important data points such as itemized presenting complaints, history points, symptoms, differential diagnoses, confirmed diagnoses, treatment plans, declined care, and relevant follow up (including whether the presenting complaint resolved with treatment) are not routinely collected at most veterinary clinics regardless of PMS as they require a significant amount of manual input – and we all know how much free time veterinary teams have for data entry, right?
In our eyes, dirty data is not an insurmountable hurdle, but is something that requires a meaningful commitment of time and resources to address. Improving patient care is, in a vacuum, a noble goal that hopefully nobody disagrees with. However, just because something is good in principle doesn’t mean that it will achieve buy-in with all the parties necessary to make it happen.
That leads to the other major hurdle:
Misalignment of incentives
Many of the improvements to standards of care that could come from consolidation don’t require building out a massive infrastructure of data collection. Simple operational improvements that can result in improved patient care include:
Standardizing training of medical staff to ensure consistent competency in patient care.
Providing structured mentorship and medical consultancy resources to clinicians.
Consistently auditing medical standards to ensure that they are being adhered to.
Most of the larger veterinary groups are admittedly doing at least some of these things, but certainly not to the degree that they are capable of with the scope of resources that they have at their disposal. If raising standards of care is an objectively good goal, why does there seem to be so little buy-in from the larger groups that have the resources to do so? The answer lies in a lack of alignment of incentives.
The business model of large, private equity backed veterinary groups is not operating veterinary hospitals. They are in the business of building a “platform” that they can sell to the highest bidder.
As I discussed in one of my recent blogs, many of the private equity-backed veterinary groups are operating under a “build and flip” model where their goal is not to actually own any of the practices that they acquire for more than a low single digit number of years. This means that they have very little incentive to invest time, energy, and resources into any long-term improvements to their practices that are not focused primarily on improving the financial performance of those businesses (and therefore improves the valuation that they can flip the “platform” for). To be fair, some of those groups invest time and resources in their teams, given how important retention and overall morale is for achieving performance goals, but most do not appear to focus on achieving significant improvements in medical outcomes. Again, I doubt that they disagree that improving medical standards of care is a noble and worthwhile goal. However, their incentives are not aligned in order to motivate them to be the change agents themselves.
Increasing amounts of local autonomy in independent-to-corporate ownership transitions is another hurdle to making sweeping changes to clinical standards within veterinary groups.
Practice owners increasingly have (rightfully) grown distrustful of larger veterinary groups with rigid operational models, instead favoring selling to or partnering with groups who are willing to promise a higher degree of autonomy for the local leaders to operate the practice largely “as is”.
This autonomy protects them against the possibility of their corporate partner coming in and being an overbearing, ham-fisted operator who might undermine the culture and performance of the practice (something that has historically happened often). However, it is a bit of a double-edged sword, as it does mean that requiring the individual buy-in of every single location for operational and medical improvements makes it very challenging for a group to raise the standards of care across a network. Given the well-earned poor reputation of many “corporates” in veterinary medicine, local teams have very little incentive to take veterinary groups at their word that any changes to patient care that are being proposed are coming from a genuine desire to do better for patients rather than simply being another angle to improve profitability.
There are some significant hurdles to achieving the purported benefits of consolidation in driving better patient outcomes. While the benefit hypothetically could exist, consolidation has been going on in veterinary medicine for a long time and there doesn’t appear to be any convincing evidence that consolidation has provided clear patient benefit to date.
As a veterinarian-founded, veterinarian-operated, and not private equity-backed group, AVP is committed to creating a “third option” in veterinary practice ownership by combining the resources of being part of a corporate network with the power of local co-ownership.
If you’re a practice owner interested in finding out more about opportunities to partner your practice with AVP, or a veterinarian interested in becoming a co-owner, please contact me at firstname.lastname@example.org.
If you’re interested in becoming a team member at one of our partner practices, please reach out to our Director of People & Success, Tedd Trabert, at email@example.com.