Veterinary Activity Index
Recession? What Recession?
Darren Osborne, MA OVMA Director of Veterinary Economic Research and Kim O’Brien, OVMA Economic Research Assistant
What started out looking like a weak year has turned into a first quarter that doesn’t know the meaning of recession. So far this year, veterinary revenues are outrunning inflation. Talk of a recession is everywhere, but more than two thirds of mixed and large animal practices were up for March, and almost four out of five companion animal hospitals posted positive growth over the same period.
Mixed and large animal hospitals were up 3% for January 2009 compared to the same time last year, and then down by the same amount for February. By the end of February, they were back to the starting point and then March came in with 10% growth over last year. We have to keep in mind that the Easter holiday was in March last year, meaning there were more business days this year – but that only accounts for 4% of the growth. Even calendar adjustments can’t hide the shine that March provides.
Companion animal practitioners saw a weak January; down 1% compared to January last year, but have improved 6% each month since. February rebounded 6% from the January low, and March was up another 6% to come in at 11%. Only three months into the year and already we are seeing double digit growth.
People are worried but human nature being what it is, we tend to ignore three great days and focus on one bad day to make a gloomy economic forecast. We will have to give up 4% in April to account for Easter, but the outlook is still positive.
How Does The VAI Work?
The OVMA Veterinary Activity Index (VAI) is an OVMA Economics Committee project involving a sample of hospitals across Ontario. The index is used to measure monthly changes in revenue for small and mixed animal hospitals – similar to the way Statistics Canada measures Gross Domestic Product (GDP) or inflation (CPI). The results are regularly reported in Focus.
An index was constructed from a sample of exclusively small animal and mixed animal hospitals that offered to supply monthly hospital revenue.
If you are wondering how your hospital measures up, you can compare your hospital to the graph. The absolute size of the hospital is not important since the figures represent percentage changes from month to month. A ten-person hospital can use the following formula in the same way a one-person hospital would. To compare your hospital revenue with the graph, plot your monthly revenue and compare the cycle. To index your monthly revenue for direct comparison, divide your actual monthly revenue by the average monthly revenue and multiply by 100.
For example: Suppose your annual revenue is $120,000. Your average monthly revenue would be $10,000 per month. If your January revenue was $7,500, then the index would be: $7,500 ÷ $10,000 x 100 = 75.
The monthly index is just the start. The important information is in Figures 3 and 4, which show the change in revenue over the same period last year, allowing you to compare your growth with the average.