As we face a new normal as physical therapy owners seeking the best outcomes for our patients and our business, is it time to rethink your current physical therapy business model?
As we coach thousands of PT owners and their staff in successful practice management solutions, MEG has found some valid reasons to consider changing your business model in response to the present-day market and the future of physical therapy private practice in your area, and we want to share them with you.
Look at it this way: Blockbuster balked at the shifts happening in their industry and assumed they could survive on overdue fees forever. Don’t let an aversion to change and failure to adapt to changing environments slow cook your business as well. This is not an opportunity to survive, but thrive!
Let’s look at the different physical therapy business models to consider today and be sure to review more actionable, essential tips in our PT Owner’s Resource to Optimizing Your Practice in 2021 to make the critical operational changes necessary to keep your clinic from falling behind before it’s too late.
Physical Therapy Business Model Explained with Pros and Cons
The “In-Network Insurance Model” for Physical Therapy Practices
This is the typical in-network model that is most popular and most common to physical therapists across the nation. Thanks to discounts negotiated with your insurance plan’s network of providers, it provides services at a lower cost to your insurance company.
- Most covered under insurance prefer to use their insurance benefits in order to get what they are paying for.
- Billing can be a burden on the individual so they prefer that the provider do it.
- More Patient Referrals since many referral sources are hesitant to refer their patients “out of network.”
- Less marketing training at the front desk to “Sell” the patient on the idea of going out of network.
- Reimbursement rates continue to decline, and for many, are approaching non-viability.
- Difficulty getting signed up and in network with carriers due to closed panels.
- Greater patient care restrictions with POC and documentation being required for proper authorization.
- Greater burdens being placed on clinical credentialing and recredentialing along with arduous denial and appeal processes.
The “Out-of-Network Insurance Model” for Physical Therapy Practices
This model is typically seen with practices where the reimbursement “in-network” is so low that it’s not financially viable for a practice to participate or the insurance carrier panels are closed preventing any new private practices from becoming an “in-network” provider. In this model, the provider is not bound by insurance company’s rules and regulations.
- Increasing out of pocket costs for “in-network” is approaching “out-of-network” pricing.
- More and more MD’s are going out of network and it is now being perceived as a higher quality care option.
- Higher profit margins are often seen resulting in more money being reinvested into the practice.
- Increased training and marketing expenses to educate the public on this option.
- Increased time and effort to convince Doctors to refer out-of-network.
- Not every new hire PT can perform at this level of expectation without additional training.
The “All Cash Model” for Physical Therapy Practices
This model is where all services are rendered on a cash basis. Each patient is financially responsible for the cost of their own PT visits. This is not the same thing as an “out-of-network” provider who is still submitting to the insurance carrier for “out-of-network” payments.
- Allows expert clinicians to be paid as such.
- Allows for a “paid in full prior to service” arrangement.
- Avoids third party payors from dictating POC and Auth.
- It may be challenging to charge the same amount for junior clinicians.
- It may require additional training in marketing to be able to sell the idea of paying out of pocket.
- It may be difficult to collect income when not in the office treating patients.
- Practice growth can be somewhat limited to return business.
The “Hybrid Model” for Physical Therapy Practices
Under this model, you have the ability to see all the “in-network” patients you like while at the same time capturing all of the “out-of-network” and cash pay patients you want. It requires a unique dual tax ID business arrangement with an office environment consisting of two separate suites, preferably adjoining, so that you can capture the economy of scale from centralized corporate functions.
- Greater market share than your competitors working under a single model system.
- Better profit margins than the in-network model while surpassing the volume of out-of-network and cash based models.
- Serve more people in the community by offering them more choices to pick from.
- You have to have two Tax ID’s.
- Need to operate within two adjoining suites, possibly limiting space options.
- Two marketing programs to run under one business strategic plan.
- Specialized training for front desk staff to professionally handle the incoming new patients.
To learn more about the strategies that will grow your practice in 2021, check out this free resource for private practice owners (or book a free practice assessment call today!)