Blog Post

Fee for All: How to Set a Rate Schedule for Your Rehab Therapy Practice

Recommendations and examples of implementing the ideal fee schedule for your practice.

Kylie McKee
5 min read
May 3, 2017
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I’m going to be frank here: setting the right fee schedule for your clinic is important—like, really, really important. Why is it such a big deal? The answer might seem obvious, but it’s actually a bit more nuanced. When new patients step into your office, you’re not just improving their day-to-day function—you’re showing them the value of their health and well-being. By seeking out movement-based therapy, patients are making an investment in their physical welfare. So, as a rehab therapy provider, are you investing in yourself by charging what you’re worth? Setting a fair and reasonable rate schedule tells your patients not only that your services are worth the price of admission, but also that rehab therapy as a whole is worth every penny.

Contending with a Cash-Based Model

Your clients come to you because you’re amazing at what you do, and the byproduct of your expertise is their ability to live healthy, active lives. But, it doesn’t matter how skilled you are—if you aren’t generating enough revenue to pay the bills, you won’t be in business for very long.

It seems like a no-brainer: the amount a clinic charges for services is a big part of what makes that business a success. And if you have a cash-based practice, it’s especially crucial that you charge enough to keep the doors open.

Avoid the “volume-over-value” trap.

“Can’t I charge less and just see more patients?” you might argue. Your willingness to accept lower rates and jam-pack your schedule is coming from the right place—you got into this business to help people, after all—but consider this: the burnout that often follows is just as damaging to your business as an inadequate patient load. Provider burnout can be the kiss of death for even the most earnest of rehab therapists, because it threatens the quality of care. And ultimately, patients pay the price.

Crunch the numbers.

The bottom line: It’s all about balance. Just because you can see 15 patients in a day doesn’t necessarily mean you should. According to private practice owner Ann Wendel, PT, the key is determining how many patients you need to see in order to:

  1. meet your financial goals, and
  2. continue bringing your A-game to each session.

As you define your financial goals, be sure to consider how much revenue you need to cover your overhead costs, taxes, and other expenses. Add this amount to your take-home goal to determine the gross income necessary to keep your practice (and yourself) financially healthy.

Now, here’s the fun part. Once you’ve calculated your gross income goal, divide that by the number of weeks you plan to work in a year, factoring in vacation and personal leave. The number you get is your weekly gross income. Then, divide that amount by the number of patients you can realistically see in a week. The resulting amount is the average per-visit out-of-pocket cost for your cash-pay patients. By calculating this number—and projecting the types of services you expect to provide on a weekly basis—you can get a good idea of where your service rates should be.

Know your market.

It’s also vital to know the lay of the land. These days, it’s not difficult to find out what your competition is charging, on average, for an office visit. Resources such as Glassdoor and City Data can provide information on the general cost of rehab therapy services in your locale.

It’s a beautiful day in the neighborhood! And knowing basic demographic information about that neighborhood can tell you a lot about how you should price your services. For example, the cost of therapy services is likely a little steeper in high-income areas, so you may benefit from keeping your rates on the high end—as long as you can offer the kind of high-value services that justify those rates.

If your practice is in a low-income area, you might want to consider a strategy that incorporates working with insurance panels. Remember: You don’t need to hang on to insurance panels that don’t meet your clients’ needs—or measure up to your reimbursement rates. What matters is that you position yourself according to the demands of the area.

Skip the sliding scale.

Of course, if your practice is cash-based, then it’s especially pertinent that you find a happy medium for your fee schedule as opposed to working off a sliding scale. According to this article from the APTA, “it is recommended that you bill based upon a single fee schedule for all of the services that you provide.” That said, if you wish to make your services accessible to low-income individuals, then you might consider developing a need-based discount structure to better serve that client base.


Initiating an Insurance-Based Model

Stick to one fee schedule.

Things can get pretty dicey when you’re dealing with insurance companies. Some practices opt to set up fee schedules for individual payers in order to maximize their reimbursements. However, creating a separate fee schedule for each payer can be a time-intensive task that yields minimal reward. In fact, according to this article, the APTA doesn’t recommend using multiple fee schedules at all. “It is much harder to justify your fees to a payer if you have multiple fee schedules. A better approach would be a single fee schedule, and then apply fee discounts based on your arrangements with payers.”

This single fee schedule philosophy also applies to self-pay patients who opt to pay for services on their own—without involving an insurance carrier. It might be tempting to create a separate “self-pay” fee schedule, but trust me—this can quickly turn into a billing nightmare. In some cases, it could even be considered unethical. A better option—and one that many providers choose to implement—would be setting up discount structures for patients who wish to pay out-of-pocket.

Set your sights high.

So, then, what should your fee schedule look like? Some clinics base their fee schedule on their regional Medicare fee schedule. But, applying Medicare’s rates across the board certainly won’t help you maximize your reimbursements, and you’ll likely be leaving money on the table. As this post from the Medical Group Management Association states, “to make sure fee schedules are maximizing reimbursement from payers, make sure that they are set above the allowable amounts for each payer, for each charge.”

As with most matters concerning payment for medical services, determining your pricing structure can be tricky business. But, you certainly don’t have to go it alone. If you’re still not sure how to determine your fees, there are plenty of business and consulting services that can help. In the end, it’s all about knowing your worth. And, as your patients start to see their health improving, they’ll know you’re worth it, too.

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