As requirements for third-party reimbursement increase and payments decrease, more and more physical therapists are going the way of cash-based business models—or at least offering select cash-pay services. As a result, we’ve received quite a few questions over the years about the ins and outs of running a cash-based physical therapy practice. Luckily, cash-pay experts Ann Wendel, PT,  and Jarod Carter, DPT, have both contributed blog posts on the subject. (Check out Wendel’s article’s here and Carter’s here.)

That being said, we thought we’d do a little housekeeping and organize the most frequently asked cash-pay questions—and their answers—into one resource. Before we get into that, though, we are obliged to tell you that not everything discussed here applies to every practitioner in every state all of the time. Please consult your state practice act, professional liability insurance (PLI) policy, and a healthcare/business attorney before taking any action. Now that that’s out of the way, let’s move on to the ultimate cash-based PT FAQ:

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Building a Business

Besides having my PT license, what other licensure requirements do I need to fulfill before I can legally open a cash-based practice in my state?

You’ll most likely need a business license, but beyond that, every state has different rules and regulations when it comes to owning and operating a physical therapy practice. Before opening her practice in northern Virginia, Wendel went to city hall in Alexandria to research the rules. She recommends that any PT looking to start a new business do the same. Furthermore, she advises future practice owners to review their state practice act.

“Because I was subletting space, I didn’t need to deal with building permits,” she said. However, she did need to work with her attorney to compile her articles of incorporation, as the state of Virginia requires licensed professionals who open a business to form a PLLC (other states require the formation of an LLC). In addition to visiting city hall, Wendel recommends consulting with a local business attorney.

I run a cash-based PT business, and I have been doing quite well—but now, I’m moving to a new location where very few providers operate cash-based businesses. Do you have any suggestions for breaking into a new market—or forming collaborative partnerships?

“It can be difficult to break into a new area,” Wendel says. She contracted with Core Wellness—which she found by calling around to local businesses and doing a ton of online research—for about a year before she began seeing her own patients in a different location. Then, she slowly ramped down her work at Core and ramped up her own patient list and practice until she was able to fully transition into operating solo. Today, she sublets space from a gym/training studio so she’s not shouldering the entire financial burden of a large space. “My best advice is to research facilities near you and go meet the owners,” Wendel says. “Get a feel for what might work, and build relationships with other practitioners.”

We run a successful cash-based business, but recently, we’ve heard clients say that they want to use therapists who are in-network or accept their insurance. How should we handle this?

Wendel says she frequently hears this from clients. She usually tells them they should determine their deductible, coinsurance, and copay for in-network physical therapy: “Many patients have a $30–$50 copay per in-network visit,” she says. “And most in-network PT clinics want to see patients two to three times per week.” Wendel explains to those patients that they could pay $90 per week in copays, or they could see her once a week for highly personalized treatment for only a little bit more. “For some patients,” Wendel says. “It’s just a matter of educating them so they understand the cost. And then it’s all about value—either a patient values the care you offer or they don’t. The ones that don’t aren’t your target audience anyway.”

Getting Paid

Without a fee schedule to rely on, how do I determine my pricing? What’s a fair per-patient fee?

According to Wendel, this is a difficult question to answer without additional details, including overhead costs, caseload size, and clinic location. To figure out the pricing system that works best for you, you’ll want to take all of the these things into consideration—along with the amount of income you need to generate to live on and keep your practice running smoothly.

If I used to be credentialed through my employer, am I obligated to charge according to the third-party payer’s in-network provider rates—even if I go into private practice for myself?

As far as Wendel knows, third-party credentialing only applies to the clinic that has a contract with that insurance company. “If you go out on your own, and you do not contract with any third-party payers, then you are not bound to any of that insurance company’s rules,” she says. However, she cautions that before doing anything, you should have an attorney review the contracts that you and/or your employer signed during your tenure at that practice.

Should I check my new patients’ benefits for them to determine whether they need prior authorization? I didn’t think this type of legwork was required of a cash-based PT.

Wendel has a form she provides to patients that they can use as a prompt to ask their insurance company the right questions about their out-of-network benefits. If they do require authorization paperwork, Wendel fills out the forms for them: ”Only the providers can, so I do it as a service to my patients so that they can get reimbursed.”

If insurance companies reimburse based on how you code—for example, they pay $61.66 for an initial evaluation (97001)—and I charge more for a particular service (for example, $150 for an initial evaluation), will the insurance company reimburse the patient a percentage of what it typically pays ($61.66) or what I charge ($150)?

“As an out-of-network provider for third-party payers, you can charge whatever the market bears in your town/city,” Wendel says. Each insurance company will reimburse the patient according to its own fee schedule, and each insurance company has a “different rate of reimbursement for different codes.” Thus, what the patient receives from his or her insurance company will differ depending on his or insurance policy. Wendel notes that “as a provider, you do not have control over what the insurance reimburses, only over what you bill/receive as payment from the patient.”

I’m a home health physical therapist, and I would like to start providing cash-based home physical therapy services for patients who have chronic conditions but are no longer covered by insurance or have to take a six-week break before receiving more therapy. Are patients required to request reimbursement from their insurance company—or is that their choice?

“Patients are not required to submit for reimbursement,” Wendel says. However, “most patients cannot afford to [pay cash and not receive anything back] so they will seek some sort of reimbursement from their insurance.” It’s also important to note that “all of the rules and regulations for treating Medicare patients apply; you cannot take a cash payment from a Medicare patient for physical therapy.”

I’m starting a cash-based PT practice in a fitness studio, but we will be separate entities. I will provide the PT billing invoice, but the payment will go through the fitness studio (and, therefore, the patient will get a payment receipt from the studio). Will this be a problem when the patient then submits this to insurance for out-of-network reimbursement?

Wendel suggests ensuring that your “invoice has all of the necessary information on it—including the amount the patient paid for each unit billed—so that the patient has no trouble getting reimbursed.” Or, you could take the host organization out of the equation completely: “If you wanted to, you could make it simpler by using something like Square to collect payments directly from your patients, so there is no need for them to pay through the fitness studio,” she says.

I’m opening a cash-based health and wellness practice, and I’d like to get patients reimbursed through their insurance companies. Do you have documentation you provide your patients to help them obtain reimbursement?

According to Wendel, “most third party payers will not reimburse patients for non-covered services.” She further explains that because “wellness is not a covered service, [it] would be an out-of-pocket expense for the client.” To determine whether a client is eligible to receive reimbursement for wellness services, you’d need to check with the insurance company—or ask the patient to do so. Wendel says that “some clients may be able to use their health savings account (HSA).” In fact, she’s used Square to process payment from a client’s HSA card.

Can I accept payment from Medicare patients?

You may not accept payment from Medicare patients unless you are a non-participating provider, Wendel says. Legally, physical therapists cannot opt-out of Medicare, which leaves PTs with three choices when it comes to their relationship with Medicare:

  • No relationship: PTs who have no relationship with Medicare may not provide covered services (e.g., physical therapy) to Medicare patients. However, they are able to provide non-covered services, including wellness services.
  • Non-participating provider: PTs who are non-participating providers are allowed to accept self-payment at the time they provide service as long as they send the claim to Medicare so that Medicare may reimburse the patient directly.
  • Participating provider: PTs who are participating providers accept and bill Medicare for patient visits.

If a Medicare patient wants to pay cash for therapy and does not want to be reimbursed, is that not allowed?

Unfortunately, that is not allowed; physical therapists may not opt out of Medicare.

I’m a rehab therapist with a private practice, and I’m considering going cash-based. Where can I learn more about the specifics of billing Medicare for services rendered?

We recommend reading Jarod Carter’s three-part series (here, here, and here) on Medicare for cash-based practices.

Documenting

What have you found to be the most efficient method for providing patients with necessary documentation for their insurance in conjunction with receipts?

Wendel created all of her own forms, which you can find here.

Do cash-based providers need an EMR?

Yes! Wendel uses WebPT’s EMR and Front Office Package: “I like having everything handled through WebPT,” she says. “It's pretty seamless. I use everything: scheduling tools, automatic appointment reminders—which are invaluable—and online evaluation and treatment note faxing. I like that I can fax my notes directly to other providers and have them review the POC.”

Do you document wellness services in WebPT for Medicare clients? If so, how do you handle the ICD-10 and CPT coding section?

Wendel says that she “documents the visit in shortened form (not a SOAP note), and records the exercises and movements” she does during each session. I use the "Unknown" code for the ICD-10 section—it's just a place-holder—and four units of therapy exercise for the CPT code.

I’m a fairly new physical therapist who works for a not-for-profit organization as a full-time PT. I’d like to open my own part-time cash-based clinic for after-work hours. Do you recommend I use WebPT if I only have a small number of patients?

“WebPT is a great investment for your practice,” says Wendel. “I like the professionalism of having my logo on the typed notes and POCs that go out to referring physicians. It also saves you from storing paper charts in your house for seven years after patients are discharged!”

Providing Wellness Services

Are PTs allowed to provide wellness services, or do we need to hire someone to provide these services?

PTs can provide wellness services, but, as Wendel advises here, you should contact your state board and review your professional liability insurance (PLI) policy before doing so to make sure you're protected.

Does an MD need to order wellness visits?

In most states, wellness and preventive services are not covered by insurance, and therefore are not considered physical therapy. Thus, you would not need a physician referral. However, Wendel suggests always checking “your state practice act for specifics about physical therapists providing wellness services.”

Is manual therapy or dry needling appropriate to provide during a wellness visit?

The short answer is no. Wellness services are not covered by insurance; manual therapy typically is. As a result, Wendel does not provide any hands-on manual therapy during wellness sessions. As far as dry needling, she has this to say: “In Virginia, where I practice, I am required to have a physician's order or a signed POC to perform dry needling.” If a patient requires manual therapy or dry needling, “it's pretty clear that they are coming for treatment for a specific condition, in which case they would be a PT patient,” she says.


Still have questions about running a cash-based practice? Wendel offers cash-based consulting services and other products—like a webinar and starter kit—on her website. Also, check out Heidi Jannenga's Founder Letter on why patients can't always pay cash—and why PTs should care! as well as this PT billing FAQ.

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