February 6, 2023

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Veterinarians are taking out large sums of money to set up luxury pet clinics

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To kick off 2020, Morgan McDaniel fulfilled a lifelong dream: she bought her own veterinary clinic, a financial jump and secured a $4.5 million loan.

Then the pandemic hit, and so did the pet adoption boom in America. Cat and dog parents kept asking Montgomery McDaniel Animal Hospital in Bienville, LA, for more services. Can it provide long-term care for a dog’s torn anterior cruciate ligament? Did you offer a night stay?

McDaniel decided she could, with a $750,000 loan to expand her practice with more than two dozen bedrooms, an exam room for specialized procedures, and an artificial turf playing field. She purchased an underwater treadmill for rehab care, and had a slushie machine installed as therapy for her 35 employees.

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

Similar stories can be found across the country as the animal health care sector is experiencing impressive growth. Vets are now breaking down walls or breaking open the floor to make room for new clients demanding boarding, daycare and grooming.

Their budgets are also getting more complex. In the first nine months of 2022, small business loans to veterinary offices rose 23 percent at BNC Bank, a spokesperson said. At Huntington National Bank, veterinary credit applications have quadrupled in the past four years.

Experts say this is being fueled by a wave of pet adoptions. More than 23 million American households—nearly 1 in 5—have welcomed a pet during Corona Virus pandemic, according to the American Society for the Prevention of Cruelty to Animals. The share of households with at least one dog jumped from 38 percent in 2016 to 45 percent in 2020, before leveling off last year. Cat ownership increased from 25 percent in 2016 to 29 percent in 2022.

For Brian Greenfield and his partners at Animal Clinic Northview, the pet pandemic has spurred them to accelerate their expansion timeline. The clinic outside Cleveland has added 12,000 square feet of state-of-the-art space, including 10 examination rooms, two operating suites, a reconfigured intensive care unit, rehabilitation pool and underwater treadmill. The project cost $4 million, 75 percent of which was a loan from the Palestinian National Council.

Becka Byrd in San Antonio purchased land to start a second veterinary clinic in 2018 and opened it in 2021, complete with a “pet sanctuary and spa.” Boarding suites have flat-screen televisions showing blazing fireplaces or playing cartoons.

McDaniel’s premium dog boarding service allows owners to interact 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.

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

“The door has been kept open for vets for the entire pandemic,” said Brandi Keck, head of veterinary lending at Live Oak Bank. “It quickly became incredibly clear that the veterinary industry was going to be one of the winners.”

The veterinarian from the point of view of a pet

Pet expenses, including healthcare costs, are largely discretionary. Researchers often track consumer expenditures on pet food, toys, training and even surgeries to gauge consumer confidence.

But in the years leading up to the pandemic, underwriters began to feel the rating was becoming increasingly unreliable. People no longer view their pets as possessions, said Ed Nunes, a senior director at TD Bank that oversees veterinary lending. They see them as family.

There’s also new research indicating that pets have been a panacea for many of the stressors associated with isolation, loneliness, and poor hygiene during the pandemic.

Researchers from the University of Montreal found Dog ownership has had major positive health impacts during the pandemic. The researchers found that owning at least one dog encouraged immunocompromised people to exercise more and sleep better, while non-dog owners spent more time sitting and lost sleep.

Similar dynamics also helped isolate the veterinary industry during the Great Recession; Nunes said revenue from the vets sector has mostly flattened rather than decreased.

The pandemic has accelerated two other dynamics: Not only have people adopted more pets, they’ve been stuck at home together. Veterinarians say that when humans are more attentive to their animal companions, they spend more money on them.

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

That means more visits — emergency rooms sometimes report long waits to see patients, and some vets’ offices have said they’ve stopped taking new clients for preventive care appointments — and more spending on non-medical services.

In other words, we’ve been spoiled by our pets, said Bird in San Antonio. Since pets are not paid for their care, veterinarians cater to their business to attract human clients. So boarding facilities start to look like resort hotels, and day care centers start to look like kindergartens instead of kennels.

“Embodiment is everything,” Bird said. “I think that’s true even for me.”

Vets are quick to point out the medical condition of some of these facilities. The pool of knowledge and scientific advances in animal medicine has been rapid, Greenfield said in Ohio, and veterinary clinics need to invest constantly to retool their facilities.

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More and more practices are also taking a new approach to not only medical treatment but other pet services as well, known as “Fear Free.” Includes basic vaccine administration protocols (Use food to build confidence and positive reinforcement) and trim nails (food again, But also sometimes a mild soother for anxious pets), though each step involves a consultation between doctors and pet owners.

There are standards for pet boarding and day care, too. Individual dog enclosures, for example, may have some privacy, such as a curtain or blankets where the dog can hide, according to Fear Free Protocols. Cats are well served by placing diffusers with calming pheromones around the facility or playing certain music. Dogs and cats turned out to be completely different tunes.

“We’re looking now, what do our facilities look like from a pet’s point of view?” said Carmen Rostenbeck, CEO of the International Boarding and Pet Services Association. “What do they look like? What do they sound like? What do they smell like? How do they feel on their paws?”

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

“Part of being a professional lender is being a trusted advisor to the doctor,” he said. “I know a lot about training management.”

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

That’s great for pets — “a longer, healthier, happier, pain-free life,” Greenfield said — but it adds economic pressure in a vet industry that’s already facing a shortage of doctors and technicians. It starts an arms race among practitioners for the best facilities, the most advanced equipment, or the best amenities. And that extends beyond Medicare to day care centers and boarding indoors.

It’s not cheap for vets to make all these investments. Their business is capital intensive – a new piece of equipment is expensive, and labor costs are also high. Bank officials say some practice owners are borrowing to obtain a business line of capital to pay employees.

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

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However, the Bureau of Labor Statistics projects strong demand for practitioners, with veterinary jobs rising 19 percent over the next decade, compared to 3 percent for physicians and 5 percent for the rest of the U.S. workforce.

However, these costs are still generally worth it, given how resilient the industry is. “We know that even in difficult times, [a pet owner] “He’ll take care of his dog,” said David Burch, Huntington’s director of professional banking. “And if something bad happens, he might choose not to take a trip to Disney World so he can pet his dog.”

Defaults on veterinary loans are uncommon, Burch said, and Huntington doesn’t measure them. Many veterinarians are interested in becoming practice owners, as doctors are often willing to acquire struggling practices and take on their financial obligations. One constant industry refrain is that the quickest way to beat student debt is to buy into a practice.

They just have to keep up with consumers’ expectations, say veterinary clinic owners.

And as Beard’s practice expanded, she built a separate pet acupuncture room—good for arthritis, even nausea and gastritis, she said—and euthanasia counseling, and an entire pet boarding pavilion.

Larger animal hospitals can feel like an assembly line for surgeries, said Tommy Monaco, who started his private practice in northern New Jersey in November. It was believed that a smaller surgical practice would be a successful alternative and designed to increase the comfort of the animal patient and pet parent.

In his clinic, Greenfield and his co-owners wanted the ability to treat more animals and did not want to send clients to other facilities for rehabilitation or prescription care. 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 section is a rehabilitation pool where vets can jump into the 97-degree water and splash with recovering puppies – or dogs who just need some low-impact exercise. Up the back stairs, 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 clinic is hiring almost constantly, he said — he shows them the clinic and watches their eyes light up as they walk through the operating control room, ICU oversized and drive-through, just in case the hospital should return to spaced care. socially again.

“Quite honestly, at the time we built it, we thought it was too big,” he said.