In 2015, a private equity firm called BC Partners bought PetSmart, the ubiquitous pet supply chain, and began a campaign of, in its words, “improving corporate efficiency.” As detailed by Vice News, these efficiencies came from understaffing PetSmart shops, which had a gruesome effect. With too few employees to transport animals that died in stores, carcasses allegedly piled up in PetSmart freezers across the country. One employee shared a photo that she said was filled with two months’ worth of dead animals; another employee said their store had a freezer with 10 months’. A third said that, for lack of time, she would simply throw bodies away. “Sometimes I was doing it weekly because we didn’t have staff to take a vet trip to properly dispose of them, so I was instructed to dispose of them myself,” she told Vice.
It wasn’t just the dead bodies. Employees complained that PetSmart regularly denied veterinary care to sick pets because of the cost, and, according to PETA, gave bonuses to managers who kept animal care costs low. One employee told Vice, “I loved PetSmart, but ever Since BC partners took over, they don’t care about animals or employees or their safety.” (A spokesman for PetSmart denied to Vice that the store’s standard of care had declined, while a law firm representing the company wrote that “PetSmart holds the health and well-being of its associates, customers, and pets as its top priority.”)
The story of BC Partners and PetSmart is infuriating, but it is far from isolated. Private equity firms have swarmed to veterinary companies like they have to nursing homes, grocery chains, and mobile home parks. Firms are attracted to veterinary care in particular for a number of reasons. For one thing, the industry is enormous. Over 90 million American households have a pet, a figure driven in no small part by the quarantine boom in animal purchases and adoptions. For another, unlike in human health care, customers tend to pay out of pocket, rather than through insurers. This gives private equity firms cash, unmediated through third parties, with which to pay down the debts they often use to buy practices.
As such, since 2017, private equity firms have spent $45 billion on the industry. KKR bought PetVet, and JAB acquired National Veterinary Associates, while Shore Capital and Warburg Pincus invested in Mission Veterinary Partners and Bond Vet, respectively, among many others. Some of these practices’ names may be familiar to you, but most may not be: When individual offices are sold to private equity firms, they often retain their old names. It can be nearly impossible to know which vets are private-equity-owned. But don’t let the obscure names confuse you: About a quarter of general veterinary practices are now owned by large corporations (including private equity firms), while about three-quarters of specialty practices like emergency and surgery care are.
The results—for both consumers and veterinarians—have been disastrous.
For consumers, the cost of veterinary medicine has actually grown faster than the cost of human medicine. One vet who worked at a practice bought by a private-equity-owned chain told Freakonomics, “We saw three price increases in the span of a year and a half. And when I talk to some of my other colleagues who work at other [practices]—either branches of the same company or other similar corporate companies—they’re experiencing the same thing.”
For veterinarians—particularly young vets, who tend not to own their own practices—the trend has been bad too. Between 2006 and 2016, real incomes in the profession fell. In 2005, over three-quarters of veterinarians would recommend working in the industry to a family member. Today, fewer than half would, and nearly one in five regret becoming veterinarians. At large, private-equity-owned chains, “things don’t work well, everything takes longer to fix,” said Beth Davidow, founder of the blog Veterinary Idealist. “You’re staying late because processes don’t work. You can’t get your regional manager to listen to you.” Stagnating pay, fear for the future, and an endless bureaucracy: These are not the makings of a successful career—or a flourishing industry.
Harming customers and employees is a terrible way to sustain a business. But private equity firms often succeed when their companies struggle or fail. And here it is worth explaining what, exactly, “private equity” is. Briefly, private equity firms use a little of their own money, a lot of investors’ money, and even more borrowed money to purchase companies. Typically, firms aim to make operational or financial changes to the companies they buy and then sell them a few years later for a profit.
Such a business model seems straightforward, but private-equity-owned companies often have lousy outcomes for three reasons. First, most firms tend to hold the companies for only a few years, which encourages short-term profits over, say, investing in workers or sustaining a long-term customer base. Second, firms tend to load up their companies with debt, and extract various transaction and management fees from them. This tends to force companies to cut costs solely to service their new owners. Finally, firms are tremendously successful at avoiding legal consequences for their actions, a problem compounded in the veterinary industry, where clients can recover little, if anything, for the death of their pets. This encourages a certain callousness toward workers and customers, as firms know that little will happen to them if something goes wrong. Private equity firms can profit even when their companies decline, their customers suffer, and your pets die.
Bill Folger, a former board member of the American Association of Feline Practitioners, told Bloomberg, “The individual ownership of veterinary hospitals in America? It’s got one more generation.… Maybe two.” Absent intervention, veterinary medicine will likely experience the same transformation that, say, ambulances or single-family properties—industries in which private equity is active—have experienced. For anyone who’s had to pay for a trip to the hospital or tried to find an affordable first home, this is an unappealing proposition.
Fortunately, something can be done. Many states already have statutes that prohibit the corporate practice of veterinary medicine: That is, they nominally stop companies from making decisions that ought to be made by veterinarians. These laws, however, appear to be easily circumvented and poorly enforced. They should be strengthened to more clearly prohibit private equity owners from making medical choices, and should empower employees, customers, and competitors to bring suit under these laws.
With these changes, we can stop private equity from further remaking veterinary care. But we’ll have to act fast, in this industry and in others. Private equity firms are spending hundreds of billions of dollars to acquire companies in nearly every part of our economy, from nursing homes and medical staffing companies to prison phone services, retailers, water companies, and insurance, with outcomes about as bad—or worse—than in veterinary care. If we don’t act now, what private equity firms are doing to pets, they may soon do to you.