A few months ago, I was facilitating a practice owner discussion when the conversation turned to associate veterinarian compensation. That in itself was not unusual. If you get enough practice owners in a room, eventually the topics of recruiting, retention, profitability and compensation are likely to show up.
One owner shared that she had recently increased associate pay for the third time in just a few years. Another was trying to decide whether to offer a signing bonus large enough to compete with a corporate group down the road. A third owner, who had always prided himself on paying well, admitted he was starting to wonder where the money was supposed to come from.
Then one of them asked the question many owners are thinking but not always saying out loud.
“Have we reached peak compensation?”
Before we go any further, let me make something very clear. This is not an article about whether veterinarians deserve to be paid well. They do. It is not an article suggesting owners should look for ways to pay associates less. They shouldn’t. And it is certainly not an article blaming associates for responding to the market in front of them. Rather, this is an article about sustainability.
As practice owners, consultants, educators and leaders in this profession, we have to be willing to hold two truths at the same time. Veterinarians should be well compensated for the value they bring, and the compensation models we build have to be supported by the economics of the hospitals in which they work.
That’s where the conversation gets interesting.
How We Got Here
Veterinary compensation did not increase in a vacuum. Over the last several years, the profession experienced a perfect storm of increased demand, limited doctor supply, corporate competition, rising student debt awareness, and changing expectations around work-life balance. Many hospitals were booked out for days or weeks, owners were desperate for help, and associates suddenly had more options than they had ever had before.
When demand exceeds supply, compensation increases. That is not unique to Veterinary medicine. That is economics.
In many ways, the increase in associate compensation has been a positive development. For years, our profession has wrestled with the disconnect between the cost of education and the earning potential of veterinarians. Higher compensation has helped many doctors build more stable financial lives, improved the attractiveness of the profession, and forced hospitals to think more intentionally about how they recruit and retain talent.
Those are good things.
The challenge is that many of the forces that pushed compensation upward did not occur in isolation. At the same time doctor compensation rose, so did technician wages, CSR wages, payroll taxes, benefits, drugs, supplies, equipment, rent, utilities and nearly everything else it takes to run a hospital. Meanwhile, many hospitals are now seeing slower growth, softer transaction counts, and more client price sensitivity than they experienced during the height of the COVID boom.
That does not mean compensation needs to go backward. It does mean owners need to understand the math.
Compensation Has to Be Funded
One of my favorite questions to ask practice owners is, “Where does compensation come from?”
It sounds overly simple, but it is a useful exercise. Compensation does not come from hope. It does not come from what a competitor is offering. It does not come from what we wish the hospital could afford. It comes from revenue, productivity, efficiency and profitability.
Let’s put some rough numbers to it. If an associate veterinarian is paid $150,000 per year in base salary, that is not the full cost to the hospital. Once payroll taxes, benefits, CE, licenses, dues, PTO and other expenses are included, the true cost may be significantly higher. That doctor’s compensation then has to be supported by the revenue they help generate and the profitability of the business as a whole.
This is not to suggest every doctor should be measured only by production. Far from it. Doctors contribute to culture, mentorship, client trust, medical quality and team development in ways that are not always reflected cleanly on a production report. That said, we cannot ignore productivity either.
A hospital paying high compensation to doctors who are highly productive, well leveraged and supported by a strong team may be perfectly sustainable. A hospital paying similar compensation to doctors who are underutilized, poorly leveraged, or working in an inefficient system may find itself in trouble quickly.
The compensation number alone does not tell the whole story. The economics behind it do.
The Danger of the Arms Race
One of the risks I see in the current market is what I would call the compensation arms race.
A hospital loses an associate, and the first assumption is that pay was the issue. A corporate group offers a large signing bonus, and the independent owner down the road feels compelled to match it. A new graduate hears what a classmate received in another state, and suddenly that number becomes the expectation everywhere.
I understand why owners feel pressure to compete. When you are short a doctor, the strain is real. The remaining team gets tired. Clients get frustrated. Revenue may suffer. Owners start doing the math on empty appointment slots and conclude that almost any compensation package is better than no doctor at all. Sometimes that may be true – But not always.
The problem with an arms race is that someone eventually runs out of ammunition. For Veterinary hospitals, that ammunition is margin. If compensation decisions are made without regard to profitability, the consequences show up somewhere. Maybe equipment purchases get delayed. Maybe facility improvements are postponed. Maybe technician development slows. Maybe the owner works more hours to fill the gap. Maybe there is less money available for bonuses, benefits or reinvestment.
None of those outcomes help the profession long term and a hospital that is financially unhealthy cannot be a great employer forever.
What Associates Actually Want
Compensation matters. I don’t want to minimize that for a second. If we pretend pay is not important, we lose credibility with the very people we are trying to lead.
However, I also think owners sometimes overestimate compensation as the only reason associates stay or leave. Over the years, I have watched doctors leave jobs where they were paid well because they lacked mentorship, felt unsupported, disliked the culture, wanted more flexibility, or no longer trusted leadership. I have also watched doctors stay in hospitals where they likely could have earned more elsewhere because they felt valued, had autonomy, enjoyed their team, believed in the mission, and saw a future for themselves.
This is where ownership becomes more than writing checks. If the only reason an associate stays at your hospital is because you are the highest bidder, you may not have a retention strategy. You may have an auction. That does not mean you can underpay people and make up for it with pizza lunches and “culture.” Fair compensation is foundational. But once compensation is fair and competitive, the practices that retain great people often win through leadership, communication, flexibility, mentorship, trust and opportunity.
Those things are harder to put in a job ad, but they matter.
Building Sustainable Models
So, have we reached peak compensation? Maybe. Maybe not.
I don’t know exactly where the market goes from here, and I’m wary of anyone who claims they do. What I do know is that compensation models need to be built intentionally.
For some hospitals, a straight salary model may make sense. For others, production-based compensation or a hybrid model may better align doctor opportunity with practice economics. In many cases, the best model depends on the hospital’s size, culture, schedule, leverage, caseload, mentorship needs and financial performance.
There is no one-size-fits-all answer.
What matters is that the model is understandable, sustainable and aligned with the behaviors we want to encourage. If we want doctors to practice thorough medicine, communicate clearly, support the team, mentor younger colleagues and contribute to the health of the business, our compensation systems should not accidentally discourage those behaviors.
Owners also need to be transparent about expectations. What level of production is needed to support a particular salary? How is production calculated? What expenses are included or excluded? How are PTO, discounts, returns, inventory issues and negative accrual handled? What does success look like?
Associates deserve clarity, and owners need it too.
The Shared Responsibility
One of the challenges in conversations about compensation is that they can quickly become “owners versus associates.” I don’t think that framing is helpful. The healthiest hospitals view compensation as a shared responsibility.
Owners are responsible for building an environment where doctors can succeed. That means appropriate staffing, good scheduling, functional equipment, clear protocols, team training, strong culture and leadership that removes barriers rather than creates them.
Associates are responsible for understanding that compensation is connected to the economic health of the practice. That means showing up as professionals, communicating value to clients, leveraging the team appropriately, practicing good medicine, supporting the culture and recognizing that profitability is not a dirty word.
Both sides benefit when the hospital is healthy. Both sides suffer when it is not.
If you are a practice owner reading this and feeling pressure around compensation, I would encourage you not to start with information.
Know your numbers. Understand your payroll as a percentage of revenue. Review doctor productivity. Evaluate schedule utilization. Look at technician leverage. Study profitability. Then ask whether your compensation model supports the kind of hospital you are trying to build.
If you are an associate reading this, I would encourage you to ask questions. Not just about salary, but about mentorship, schedule, support staff, culture, leadership, caseload, growth opportunities and how success is measured. The highest offer is not always the best opportunity, just as the lowest offer is not automatically unfair.
Veterinary medicine needs talented doctors to be compensated well. It also needs hospitals that are financially strong enough to support those doctors, invest in teams, serve clients, care for patients and remain sustainable for years to come.
So, have we reached peak compensation? Maybe the better question is whether we have reached the point where compensation conversations need to become more honest, more transparent and more connected to the realities of running a healthy hospital.
If that is where we are, I think that is a good thing. Difficult conversations, handled well, tend to make businesses stronger. And in this case, stronger businesses are exactly what our teams, our clients, our patients and our profession need.