Veterinary Activity Index
January 2008 Report - Roller Coaster Revenue
Darren Osborne, MA OVMA Director of Veterinary Economic Research
Changes in revenue this year have been anything but consistent for veterinary hospitals in Ontario. Annually, revenue growth is running at twice the rate of inflation but the feast and famine changes from month to month are stressful to staff and clients. Companion animal practices have experienced an annual revenue growth of 6% while mixed and large animal practices have enjoyed an revenue growth of of 5%. Compare these figures to Ontario’s inflation rate which is currently running at 2.3% which is less than half of either of the aforementioned growth levels.
The variation in monthly revenue growth for October and November are indicative of the volatility in revenues for the year. Companion animal hospitals saw October revenues jump to 15% over the same month last year and saw November revenues hover at a mere 3% increase. Likewise, mixed and large animal hospitals saw a healthy 9% increase in October revenue followed by a smaller 5% growth in November. One explanation for the roller coaster revenue could be one month cannibalizing another. With the exception of a weak spring for mixed and large animal hospitals, every strong revenue month has been right after a weak revenue month. If this is the case then the hardship is short lived. If a crazy month can guarantee a slow month, then you have a chance to catch your breath before the next surge. The secret is to recognize it as a break and not the beginning of the end.
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.
The figures shown represent changes in monthly revenue. The average is represented by a value of 100. Comparing the two graphs, it is clear that there is a larger change in monthly revenue from exclusively small animal hospitals because the influence of heartworm season is greater. Other than the sheer magnitude of the upswing during heartworm season, the two hospital types exhibit similar revenue cycles.
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.