I recently read a white paper published by Bank of America detailing rising costs of Veterinary care. As Veterinary professionals, we’re all aware of this and much of the recent published information has targeted pet parents as the audience. For those of us who spend any time on the clinic floor, we recognize that it’s not only pet owners who sometimes experience heartburn around pricing, it happens in our own clinics to our own team members.
Walk through any Veterinary hospital long enough and you’ll hear it.
“That exam costs how much?”
“Why is bloodwork so expensive?”
“I can’t believe what Veterinary care costs these days.”
Most Veterinary team members have heard these comments from clients, and our teams can only hear this so many times before the feeling can start to creep into their own thinking. Hospital owners and managers often have more “behind the scenes” insight into understanding why prices are what they are (granted, some hospitals do overcharge and I’m not defending pricing on every service in every hospital), but the average technician or CSR may not have that same level of insight. This article is not about equipping our teams to argue with a client over pricing, but instead is designed to help them understand more about what it takes to operate a hospital and why pricing (assuming it’s appropriate, intentional, and ethical) is what it is.
When team members lack that understanding, it becomes difficult to confidently communicate value to clients. It can also create internal tension when staff members begin to wonder whether prices are truly justified.
The Price of Veterinary Care Is Rising
Veterinary service inflation has significantly outpaced overall inflation for several years. Veterinary service prices increased approximately 6%–7% year-over-year in 2025, while general consumer inflation remained closer to 2%–3%. Veterinary inflation has exceeded overall inflation for multiple consecutive years.
As owners, we know that the above doesn’t mean Veterinary hospitals are becoming dramatically more profitable. In many cases, it simply means the costs of providing care have increased substantially.
Veterinary hospitals operate in one of the most labor-intensive healthcare industries in existence. Unlike many businesses, there are very few opportunities to automate the core service. In most cases, every patient still requires a veterinarian, technicians, assistants, customer service representatives, and support staff. As a result, when labor costs rise, hospitals have limited options other than increasing fees.
Where Does the Money Actually Go?
Many team members assume that a $100 exam fee (which I realize is high by industry standards and I’m using it just as an example) means the hospital earns $100. In reality, only a fraction of that fee becomes profit.
Consider a typical Veterinary hospital generating $1,000,000 in annual revenue.
Industry benchmarks often look something like this:
- Staff wages and benefits: 40–50%
- Cost of drugs and medical supplies: 18–25%
- Facility expenses (rent, mortgage, utilities, maintenance): 5–10%
- Equipment, technology, and software: 3–7%
- Insurance, professional fees, licenses, and compliance: 2–5%
- Marketing and administrative expenses: 2–5%
By the time all expenses are paid, a well-run Veterinary hospital may achieve a profit margin of only 8–15%. That means on every $100 spent by a client, perhaps $10 ultimately remains as operating profit. The other $90 is used to provide the care.
Labor Is the Largest Expense
If there is one number every team member should understand, it’s this: Labor is typically the largest expense category in Veterinary medicine. Most hospitals spend nearly half of every dollar earned on payroll and benefits. And that isn’t just veterinarians or a “greedy” owner looking to overpay themselves. It includes:
- Veterinary technicians
- Veterinary assistants
- Receptionists
- Practice managers
- Kennel staff
- Payroll taxes
- Health insurance
- Retirement contributions
- Continuing education
- Uniform allowances
When hospitals raise wages—which many teams rightfully advocate for—that cost must ultimately be funded somewhere. The most common source is increased service fees.
This is one reason many hospital owners become frustrated when they hear from team members, “We need higher wages (or more benefits),” but then the team balks at increasing prices. Don’t get me wrong, most hospitals can operate more efficiently and be better stewards of revenue once it’s earned, but cutting and managing expenses only gets you so far and, in most cases, pricing eventually has to enter the mix.
Modern Medicine Is Expensive
Today’s Veterinary medicine bears little resemblance to the profession of 20 years ago. Many clients now expect:
- Digital radiography
- In-house laboratory diagnostics
- Ultrasound
- Advanced anesthesia monitoring
- Electronic medical records
- Laser therapy
- Advanced dentistry
- Referral-level surgery
All of these services require significant capital investment and ongoing maintenance, calibration, quality control, and consumables. Technology improves patient care, but it also increases the cost of delivering that care.
The Hidden Costs Clients Never See
One of the challenges in Veterinary medicine is that many costs are invisible. Clients see a 30-minute appointment. They don’t see:
- Team meetings
- Inventory management
- Equipment maintenance
- Continuing education
- OSHA compliance
- Controlled substance management
- Cleaning and disinfection
- Medical record documentation
- Training new employees
All of those activities consume time and resources, though they don’t directly generate revenue. Yet all are essential for safe patient care and when a hospital charges for an examination, part of that fee helps support these behind-the-scenes functions.
(Most) Veterinary Hospitals Are Not Printing Money
Another misconception among both clients and team members is that hospital owners become wealthy from every fee increase, yet the data tells a different story.
Recent industry reports show that while Veterinary practices have experienced modest revenue growth, visit counts continue to decline in many hospitals. Revenue gains have largely been driven by price increases rather than increased patient volume. In other words, hospitals are often charging more simply to maintain financial stability while seeing fewer patients.
The reality is that most Veterinary hospitals are not becoming dramatically more profitable. They are working to keep pace with rising operating expenses.
Why Understanding This Matters
When Veterinary team members understand practice economics, several positive things happen. First, they become more confident discussing recommendations with clients. Second, they better appreciate the relationship between hospital profitability and team compensation. Third, they understand that financial health allows hospitals to invest in people, equipment, training, and facility improvements.
Most importantly, they begin viewing fees not as a necessary evil, but as the mechanism that allows high-quality medicine to exist.
A Better Conversation
Hospital leaders should regularly share basic business metrics with their teams. Not every detail is necessary (for example, I’m not suggesting we start sharing compensation for every employee by name), but helping employees understand concepts such as labor percentage, inventory costs, profit margins, and inflation can transform how they view pricing discussions.
I don’t expect my team to be CPAs or P&L whizzes, but I’ve found that what some call “open book management” (which can take many different forms) can be a great strategy to inform and educate our team on why we charge what we charge, thereby giving them more ownership of our pricing model and a sense of confidence that comes from understanding.