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Max Your Margin: How to Stay Profitable Amid Falling Reimbursements

Therapy practices that will be successful in the current healthcare environment are the ones that grow their revenue potential beyond 3rd-party payments

Erica McDermott
5 min read
February 13, 2019
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Last year, at WebPT’s fifth annual Ascend business summit for rehab therapists, the WebPT team hosted a focus group to learn more about the needs of private practice PTs, OTs, and SLPs. One of the themes that came up repeatedly during that conversation was the ever-present struggle with decreasing reimbursements, which makes sense considering how challenging it can be to earn enough revenue to provide exceptional care to patients in the current healthcare climate. As more studies—like the UnitedHealthcare one that WebPT President Heidi Jannenga discussed here—explore the efficacy of conservative alternative pain management interventions like rehab therapy, there’s hope that this trend will change, and that physical therapy reimbursement issues will no longer be a hurdle. In the meantime, though, the therapy practices that will be successful and profitable are the ones that expand their revenue potential beyond third-party payments. Here’s how:

1. Go fully or partially out-of-network.

Not all insurance contracts are created equal, which means it may not be worthwhile to continue contracting with some of your payers, especially if they aren’t paying you enough to cover the cost of providing your services. As I wrote, “The decision to drop a payer can be a challenging one to make—and it’s not something you should do without a plan, because it could cause your revenue to decrease (at least in the short term).” That said, “accepting patients from a payer that isn’t paying you enough to cover the clinical costs associated with seeing those patients is a losing battle—one that could end up hurting your practice in the long run.”

During this webinar, Jannenga explained that some “providers try to make up the cost difference by either increasing the volume of patients they see or reducing total patient treatment time or care episodes, but none of those decisions are based on what’s best for patients; instead those providers are making concessions to their treatment plans that essentially reduce the quality of the care they’re providing for all of their patients.” If that’s the case, it may be time to go out-of-network with a payer. Just be sure to follow WebPT CEO Nancy Ham’s advice to consider the big picture—taking into account how dropping a contract may impact your patients and referral sources—before you “draw a line in the sand” with a particular payer.

If you’re done with third-party payers altogether, consider launching a fully cash-based operation. This is becoming an increasingly popular option, and a number of rehab therapy practices have created thriving cash-pay practices. Check out this cash-pay FAQ to learn more here.

2. Add cash-pay fitness or wellness services.

Regardless of what you decide to do with your current insurance contracts, you can increase your revenue stream with cash-pay fitness or wellness services. It’s a great way to serve a wider segment of your community—and keep past patients engaged with your practice. After all, the global wellness market is worth $4.2 trillion—and growing. To determine which services to offer, explore your passions and your current patients’ needs. Just don’t worry that you have to offer them all by yourself. There are plenty of good reasons to partner with providers in different specialities in order to better serve your patients.

As WebPT’s Kylie McKee wrote here, “Any programs you offer should be geared toward meeting the long-term needs of your client base. For instance, practices that see a high number of student athletes may find it beneficial to offer running evaluations, sports screenings, or performance improvement clinics, whereas clinics with a large Medicare population may want to implement wellness programs that focus on geriatric care and improving quality of life.”

If you’re looking for some cash-based service inspiration, here are a few ideas from McKee:

  • Guided weight loss and/or fitness programs
  • A medically oriented gym with group classes like yoga, Pilates, or cycling
  • Nutrition consulting

As with any new business endeavor, it’s best to contact your state board, review your liability insurance, and chat with an attorney prior to establishing a new wellness program.

3. Re-examine fixed costs.

Because profit equals revenue minus costs—and revenue seems to be declining—it’s a very good time to start re-examining your fixed costs (e.g., rent, equipment, and software expenses). In this post, WebPT’s Melissa Hughes quotes Robert Snow, DPT, OCS, ATC, CSCS, as saying that if a “piece of equipment does not generate revenue, then don’t buy it.” Instead, “ask every equipment rep this question: how does this reimburse?” In other words, everything you spend money on should have a return on investment (ROI) that you’re comfortable with—including your practice management technology.

4. Add technology to streamline operations.

Speaking of technology, if your software solution isn’t helping you be better in business, produce clean claims, and build quality relationships with your patients and referrers, then you’ve got to make a switch to a platform that does. After all, technology systems—at least the good ones—are designed to help you streamline operations, so you can reserve your and your staff’s resources for patient care. With that in mind, be sure your practice management solution offers:

5. Leverage online marketing to reach direct access patients.

As it stands, 90% of patients who could benefit from seeing a physical therapist never do, and while that number is shockingly large, it’s not all that surprising considering that most of the general public still doesn’t understand the value of physical therapy. While it’s still crucial to maintain relationships with other providers and use data to demonstrate to payers why they should be improving payment rates, there’s an entirely untapped market of patients who need your services now—especially given the current opioid epidemic. So, it’s time to go to them—directly. And that requires leveraging online marketing—and direct access laws.

Today’s patients are taking a much more active role in their healthcare decisions, and many of them are beginning to search for potential providers and treatment options online, before ever setting foot in a physician’s office. That’s why it’s imperative to have an optimized online presence that includes a professional website, active social media channels, and positive reviews from past patients—all communicating the value of your services and rehab therapy in general. That way, prospective customers can come to understand the benefits of receiving first-line PT, OT, and SLP services.

While there’s no quick fix to the current state of declining reimbursements in health care, there are things you can do to remain profitable. What other revenue-increasing strategies have you implemented? Tell us in the comment section below.


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