Planet Money: The Planet Money indicator: NPR

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SYLVIE DOUGLIS, BY LINE: NPR.

(EXTRACT FROM THE DROP ELECTRIC SONG, “WAKE UP TO THE FIRE”)

SALLY HERSHIPS, HTE:

Gizmo (ph) is a flying squirrel. He lives in Marshalltown, Iowa. And recently, Gizmo had to visit his vet.

STACEY VANEK SMITH, HOST:

Grant Jacobson is Gizmo’s veterinarian.

HERSHIPS: What was wrong with Gizmo?

GRANT JACOBSON: Well, he was a little less thrilled. He was here for neutral surgery – so nothing wrong with him.

HERSHIPS: (Laughs).

JACOBSON: But he might have had a grudge if he had known what was going on.

HERSHIPS: What was it in the background?

JACOBSON: There – oh, a dog, I’m sure, howling …

HERSHIPS: (Laughs) OK.

JACOBSON: … Because it’s – we had – yeah.

VANEK SMITH: Just a six-minute drive from Grant is another vet, so Gizmo has a choice. But there is a story here because Grant worked for this other vet for 19 years. He said he intended to buy the practice. It was sort of understood that this would happen. But then he started hearing these things from the owner that made him suspicious.

JACOBSON: Hey. There are going to be these people. They belong to one of the companies. They do an evaluation of the practice. You know, I don’t really mean to sell them, but I want to know what the place is worth.

HERSHIPS: The costumes have arrived. You can see where it’s going. Grant was beaten. He says these corporate visitors offered a million dollars more for the practice than he could afford, and he didn’t feel happy about it.

JACOBSON: Well, I mean disappointing would be an understatement for sure.

HERSHIPS: The company that beat Grant’s bid is Mars, the international chocolate giant that makes M & M’s and Twix bars and has branches around the world. And this trend is over. Money from companies and even private equity from everywhere, from Goldman Sachs to Mars to JAB Holdings (ph), which is the parent company of Krispy Kreme, has poured into the veterinary industry.

I am Sally Herships.

VANEK SMITH: And I’m Stacey Vanek Smith. This is THE PLANET MONEY INDICATOR. Today on the show – when and why giant corporations started investing in healthcare for our gerbils, dogs and cats and how all that corporate money can impact independent vets like Grant .

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VANEK SMITH: Not everyone likes animals.

HARNESS: What?

VANEK SMITH: (Laughs) I know. I know. But for the 63.4 million Americans who own dogs, the 42.7 million Americans who own cats and, of course, we cannot neglect the owners of fish, birds, reptiles, horses, flying squirrels. – for all of these pet owners, their love translates directly into dollar signs.

MEDELLIER: You know, I have clients who call their dogs the brothers and sisters of their children and their parents the grandparents of their dogs or cats.

HERSHIPS: Dr Medellier (ph) is a vet, and she sees these kinds of expenses firsthand all the time. Last year in the United States, spending in the veterinary care market totaled $ 31 billion. Today, we spend more than double what we did ten years ago on our pets.

MEDELLIER: And so, buy toys, oh, thousands of dollars in clothes – you know, people are going to remake their homes.

VANEK SMITH: What?

MEDELLIER: Yes, they are going to build catteries outside. I’m going to do that (laughs) so …

VANEK SMITH: I don’t even know what a cattery is.

HERSHIPS: Stacey, you told me you were a cat lover. I doubt at the moment (laughs).

MEDELLIER: People who will remortgage houses for – some of those vet bills are $ 20 – $ 30,000 if you’re going to have a hip replacement, if you’ve had major operations.

HERSHIPS: Wait a second. You have had clients who remortgage their homes.

MEDELLIER: Yes. Yes. How are you – $ 30,000 – where are you going to get this money?

VANEK SMITH: But it wasn’t. And I know it may come as a shock to some pet owners, but when Medellier was a kid a lot of pets were kept outside the house. Maybe you take them to the vet several times a year. So when did we start spending $ 30,000 on surgery for our pets? Mike Dicks was chief economist for the American Medical Veterinary Association (ph), and now he is a consultant for veterinarians.

MIKE DICKS: I teach vets to ask clients a series of questions because it’s so important. Where does your pet sleep? Four options – he sleeps outside. He sleeps in the garage. He sleeps in the house. He sleeps in my room.

VANEK SMITH: Mike says the places our pets sleep exemplify this huge change that has happened – an invention that has completely changed the way we interact and spend on our pets.

DICKS: That human-animal bond really, really took off in the late ’80s with the advent of parasiticides, and we were able to keep these dogs at home.

HERSHIPS: Parasiticides.

DICKS: Oh, sorry – things that kill fleas and ticks.

HERSHIPS: I mean, you know, love has its limits (laughs) right? Like I love you. But do I love you enough to catch fleas? It’s a whole new level of love.

DICKS: And the more people are inside with these animals, the more they notice things. They notice the dog’s itch, or he rubs his eyes, or he drags his butt on the ground or whatever.

HERSHIPS: And when they do, Mike says, they call the vet. According to the American Pet Products Association, last year we spent over a hundred billion dollars on our pets on food, treats, and vets. Thus, since the 1980s and 1990s, these expenses have attracted more and more business attention. And veterinary practices can be considered a reliable investment. There is little overhead. It’s not like you have to build a factory or set up a production line. I wrote to Mars. I wanted to know why the company had invested in vets. They declined an interview. But Mars also makes pet foods like Pedigree and Whiskers (ph), so it makes sense to invest in vets as well.

VANEK SMITH: Mike says there are about 6,000 small and medium-sized veterinary practices and hospitals in the United States, like those that have at least two or three full-time vets on staff. But of these, 5,000 of them are now owned by large companies. You might not know this because many of them like to maintain the look and feel of a small business. But many consolidate them or even buy them and return them, and it’s impacting independent vets like Grant in Iowa.

HERSHIPS: Vets are often in debt. They had to go to school, which is expensive. The average tuition fee is over $ 200,000. Some vets will never be able to repay their loans. They pay the interest. And finally, the government simply forgives the balance.

DICKS: One way to manage servicing this debt is to own a practice. But you bring them out, don’t you? I mean, they – it was hard for them to get in so much debt in the first place. But now, with business competition, it’s almost impossible.

VANEK SMITH: Of course, it’s always good to have a second opinion. Gary Ackerman was a veterinarian for 20 years. Today, he runs an advisory service for vets who want to sell their practices. And if that’s you, you have options.

GARY ACKERMAN: They’ve had visitors. They have people calling them. They get emails. They get letters. You literally have to have your head in the sand to not be aware of what is going on there.

HERSHIPS: If you’re a vet with your own mid-sized practice, like three or more doctors, it’s a sellers market. Gary says another reason so many companies are interested is that over the past decade and a half there have been all of these huge technological advancements with medicine, just like with humans. It was exotic. But now you can do a total hip replacement on your Chihuahua. And yet these upgrades come with increased costs. But at the same time, he says, big investors can operate more efficiently.

ACKERMAN: Yeah, I mean, if you have five practices that can access a 100,000 dollar CT scanner, it’s probably going to have better economies of scale than having to buy it for your individual practice. Quite often, frankly, an individual firm cannot afford it.

VANEK SMITH: Plus, pretty much everyone we’ve spoken to agrees that no vet has gone to school to get into the financial side of the business, is isn’t it? They did it because they love animals. And there are still ways for vets to buy their own practices. Like, Mike, the veterinary economist, says you can buy the kind of small doctor’s office with one or two doctors who wouldn’t be interested in a big business buyer. Or also, he developed a plan in which an established veterinarian sells his practice. over a period of eight to ten years to a younger employee.

HERSHIPS: And back in Marshalltown, Iowa, Grant says that starting his own practice was not what he planned. But he says business has actually been great. He hired and expanded. And now he has a staff of almost 20 people. And, Stacey, I know you’re wondering about Gizmo the Flying Squirrel.

VANEK SMITH: I’m wondering about Gizmo. How is he?

HERSHIPS: By the way, how is Gizmo feeling?

JACOBSON: Oh, apparently OK, I guess. I got a photo of a surgery site today. Is this normal? Yes it’s normal. It’s a scab where the operation took place, so yes. Yes.

VANEK SMITH: This episode of THE INDICATOR was produced by Brittany Cronin with assistance from Gilly Moon. It was verified by Michael He. THE INDICATOR is edited by Kate Concannon and is an NPR production.

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