Mel the catMy cat, Mel, whom I've had since 1996, has kidney disease. We're giving him a special diet and relatively inexpensive shots of fluids that are keeping his illness at bay by flushing out his kidneys, at least for now. More expensive treatments seem pointless and beyond my family's budget.

My situation, though, is hardly unique. According to the American Pet Products Association, Americans are expected to spend $12.79 billion this year on veterinarian care, up from $12.04 billion in 2009, an indication of the value that people place on their companion animals during hard economic times.

Meanwhile, many animal shelters are filled to capacity as record numbers of animals are surrendered because of high unemployment and rising foreclosures. Owners that can afford to keep their dogs, cats and other creatures are scrutinizing more closely the price that they need to pay to care for their animals.

Americans are cutting spending on everything from nonemergency procedures and diagnostic testing to parasite control products, according to a survey done last year by the National Commission on Veterinary Economic Issues. That's a change from the previous thinking that veterinarians were immune to economic pressures because people would spend what it took to care for their beloved pets.

"They did not see the downturn for a long time," says Joan Hendricks, Dean of the University of Pennsylvania's School of Veterinary Medicine, whose small animal clinic has seen a reduction of about 7% in case load and revenue. "My understanding is that they have seen the rubber hits the road when the animal gets sick."

Seeking More Cost-Effective Care

Business is hurting at Penn's well-regarded animal hospital, which does kidney transplants among other things, because pet owners are more willing to see if their animals can be treated by lower-cost vets with less training, she says. Two years ago, graduates of the school's specialization programs had their pick of jobs, while this year they had trouble getting hired at all.

Unlike human medicine, cost has always been a consideration in caring for animals. It's considered humane to euthanize a pet to spare it from unnecessary suffering. Cash-strapped owners still want to take care of their pets. They want to do so in the most cost-effective manner possible for conditions such as broken legs. They also might order a six-month supply of heartworm medicine instead of a year. Some people are also shelling out for care using payment plans such as held checks. The finances of a veterinary clinic depend on where it's located.

''What you're talking about is discretionary spending," says Gregory Hammer, immediate past president of the American Veterinary Medicine Association, in an interview. "In veterinary medicine, rarely do you run into billionaires who own lots and lots of pets.... We're seeing that people want an estimate [for the costs of care] where they might have not required one before."

Revenue and patient visits to Hammer's Dover, Del., small animal and equine practice is down 5% to 7% this year, he says.

How Pet-Related Stocks Are Faring

Investors are already sensing the plight of cash-strapped animal lovers. Shares of PetMed Express (PETS), which provides mail-order pet medicine, are down 10% this year, while the top pet retailer PetsMart (PETM) has gained about 11%, indicating that the company may be taking business away from vets. The Phoenix-based chain said in May that it exceeded its internal goals for the first quarter and raised its earnings guidance for the rest of the year.

Second-quarter results at PetsMart, which has independently run Banfield pet hospitals in more than 60% of its stores, are due Aug. 18. PetSmart holds a 20.5% interest in Medical Management International, the operator of Banfield, The Pet Hospital.

.According to the 2009/2010 National Pet Owners Survey, 62% of U.S. households own a pet, which equates to 71.4 millions homes. Pet industry expenditures are expected to hit $41.7 billion this year, up from $45.5 billion last year, according to the APPA.

Not Getting Rich

For veterinarians, the economic downturn will only add to their financial pressures. Vet school graduates, whose degrees take four years to obtain, just like at medical school for humans, have debt loads of about $130,000. Their starting salaries in private practice are about $65,000.

"You can make a good living, but if your goal is to be Bill Gates, veterinary medicine is not for you," says Karen Felsted, CEO of the National Commission on Veterinary Economic Issues. "I'm hopeful that 2010 is better that 2009 but I don't think it will be that much better."

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