NEW YORK (CNN/Money) - In the best of times and in the worst of times, Americans will spend thousands of dollars to keep their pets alive.

"I've seen ducks getting cataract surgery and cats getting kidney transplants," said Ryan Daniels, pet health care analyst for William Blair & Company, LLC.

The $12 billion veterinary industry has been growing 7 percent annually in the United States, analysts say. The pet health care industry appears to be recession-proof, having managed to avoid downturns for at least 70 years, said Daniels, and the sector doesn't suffer the malpractice suits that plague the human health care industry.

"When we saw a down tick in the economy, pet businesses continued to do OK," said Arthur Henderson, analyst for Jefferies & Co. "People were very elastic when it came to spending for their pets."

So where is all that money going?

The industry is dominated by two major players: VCA Antech (down $0.69 to $24.46, Research), a Los Angeles company known by its ticker symbol WOOF, and the privately-held Banfield, The Pet Hospital, which is partly owned by Phoenix-based PETsMART (up $0.20 to $22.45, Research).

VCA Antech buys up independent animal hospitals and currently has 365 under its wing. The company reported a 22 percent jump in animal hospital revenue in the second quarter. VCA Antech reports third-quarter earnings on Oct. 25, and analysts are projecting a 19 percent jump in sales.

Banfield has more than 500 animal hospitals, located inside PETsMART stores. PETsMART, which deals in all aspects of pet care including dog sweaters, salt water aquariums and reptile habitat stones, is a much larger company than VCA Antech. PETsMART reported $899 million in second quarter sales, compared to $207 million for VCA Antech. PETsMART reports third quarter earnings on Nov. 16, and consensus is projecting 10 percent sales growth.

Analysts say the two businesses cater to different pet-owner demographics, so they don't cannibalize each others' sales. VCA Antech takes a more expensive, boutique-style approach to health care, analysts say, while Banfield caters to the big box crowd.

"VCA runs freestanding, larger facilities that are probably running a higher level of health care," said Daniels, the William Blair analyst.

Henderson, the analyst for Jefferies & Co., said VCA has a "higher-end mentality" with a "certain cache" in having an independent location, while Banfield offers a "lower cost alternative."

"If I had to go and get a rabies shot and pick up some food, I'd go to a Banfield facility, but I don't know if I'd go to a Banfield facility if my dog had a cut," said Henderson.

However, Banfield vice president Karen Johnson said that her company offers high quality, full-service pet health care to 350,000 to 400,000 clients per month, with a "full complement" of laboratories. Banfield offers ultrasound and is working to introduce digital radiology services into its clinics, said Johnson, and the company also offers a preventative program, the "Optimum Wellness Plan."

"Just like in human medicine, veterinary care is going more towards preventative care," said Johnson.

Johnson also said that Banfield's healthcare database is used by the Centers for Disease Control and Prevention to try and detect diseases within the pet population that can be transferred to humans.

The pet health care industry is driven by free-spending empty nesters who spend money on pets instead of children, according to analysts. Some of them are baby boomers whose kids have left the house, while others are young professionals without children. Many of these pet owners treat their animals as humans. The pet health care industry, which closely trails human care in levels of technological advancement, is becoming more and more capable of accommodating pet owners seeking treatment for life-threatening maladies.

"I think 10 years ago you couldn't even get this kind of care," said Daniels, the William Blair analyst. "If you had a dog with a tumor, they used to just let the tumor grow and put the dog to sleep. But the human-animal bond is growing."

VCA Antech is also growing, primarily because of its diagnostic laboratory unit. This is a particularly important part of animal health care, because the patients can't tell the veterinarians what's ailing them. VCA Antech reported 12 percent growth in lab sales during the second quarter, 2005, with a profit margin growth of 47 percent.

"It's a business with unbelievable margins," said Henderson, the analyst for Jefferies & Co. "The only question with VCA Antech is: Can the company grow at the same click as its growth over the past few years?"

Morningstar analyst Debbie Wang said VCA Antech will probably maintain mid-teen growth in its diagnostics area because of increasing demand.

"I think there's always going to be a group of people who are willing to do that, especially as you get more empty nesters," said Wang. "In those households, the pet takes on incredible importance as a member of the family and people are willing to shell out incredible amounts of money to keep them healthy."

The analysts interviewed for this story do not own stock in the companies mentioned here.

To find out what happens when Fido hits the road, click here.