Tuesday, March 24, 2015

Reflections: PT Industry Analysis

Early this month, I finally posted a blog regarding an Industry Analysis on Outpatient Physical Therapy. I shared what I was able to share to keep within the framework of my commitments; even still, the results were rather shocking. First, and not necessarily a surprise, our branding is way off. Secondly, we've misplaced our value proposition. Third, and finally, we're driving profit from a misdirected sense of internal value. This post brings forth some of my personal reflections on the analysis now that near a month's time has passed and I've been able to gather a broader range of feedback. I highly recommend you read the post to normalize our discussion base.

Reflections: PT Industry Analysis

1. Exercise and Aides?
There were several voices which expressed the concern that the analysis may have been skewed by the amount of billing going on where PT Aides deliver Therapeutic Exercises which are then billed for by the PTs. This case may be prevalent enough to strike a bad taste in our profession; however, I find it difficult to fully dismiss the fact that OVER HALF of our industry's profitability comes from TherEx. Mind you, when I did this analysis, the operational marginal cost was calculated from PTs and PTAs. Meaning, even if it is grotesquely prevalent that there are unscrupulous PT firms billing TherEx while utilizing aides, TherEx being over 50% of our profit pool is an UNDERSTATEMENT of its profitability.

Now I will say this: Unethical and illegal billing need to stop. It needs to stop for PT and it needs to stop for all of healthcare. Such types of billing are indeed everywhere to some degree. And, such practices are only driving healthcare costs upwards into unsustainable considerations. I did speak of this in the original post under the third insight - and - I stand by the stance that "creative billing" is ONLY hurting us and every single stakeholder around us. IT NEEDS TO STOP.

2. Should We Abandon Manual Therapy?
No! NO! No no no no no no no no... and no. I heard you. I see you. And, no, I am not advocating we just all together stop manual therapy because it isn't profitable enough. Let's look at the Profit Pool Analysis together, shall we?

Just to be clear on what this analysis indicates: It portrays that 52% of our profit from revenues comes from TherEx. It shows that operationally (without other costs considered, only direct operations), clinics can see this service return upwards of 350% in margins. Continuing, the graph also shows that Therapeutic Activities represents 12% of our profits at a declined level of profitability. Neuromuscular Re-Education represents 9% of our profits and Manual Therapy represents 13% of our profit pool, delivering about 200% in operational margins. These margins are still excellent. And perhaps more importantly, in the outpatient PT setting, manual therapy is a vital and inescapable aspect of our value proposition.

We clinically approach healthcare so very differently than ANY OTHER healthcare provider. Physicians tend to touch their patients at a minimum. Nurses tend to touch for invasive procedures or for positioning concerns. Physical Therapists are unique in that we have the option of touch as both assessment as well as our treatment modality; and, this can be delivered across a broad spectrum of treatment models.

So what about manual? Well, I think that we need to get a lot better at our manual therapy. What this graph tells me isn't that we need to only bank on exercise (while I do think we need to also be better at it). I think what this tells us about manual therapy is that we need to really ramp up our standards. We, as an industry and as a profession, need to set certain standards to what manual therapy actually means... what it means to us, to our consumers, and most importantly, what they can expect from manual therapy -- the experience, the results, the mechanisms of how and why it works, and how such an approach crosses over to their own functional independence and optimal health. THIS is where I think we're lacking and this is where I feel we really need to bolster our profession.

Exercise, then, is the corollary and therefore parallel concern and area of opportunity. It was communicated to me by many of you that the amount of exercise science, approach of progression, and breadth of knowledge is rather weak. I agree with that. It was even once mentioned to me that in the athletic community, clients go to PTs for the diagnosis and to athletic trainers for the treatment aka the exercises to get them better.

THIS IS A DANGEROUS LINE WE'RE WALKING. To this, I'll insert a quote from the original blog post to say:

Why not lobby to protect the prescription of exercise for healthcare and disease management as something truly unique, only to be given by the physical therapist? It may not be the popular thing within our profession, but boy, it seems quite popular to our consumers and stakeholders across the value chain.

I mean how POWERFUL would that be? PTs are the ONLY professional (licensed or not) legally allowed to prescribe exercise as medicine. But, why am I harping so very much on the exercise aspect? It has to do with where healthcare is going. We're seeing that the healthcare environment is heavily favoring a preventive model of care. The less intervention to be done, the more value you bring because you are keeping people and populations of people healthy. THIS is the new standard of value in the industry to which outpatient PT is a part. Manual Therapy is largely interventive; certainly, there are many cases which manual therapy is done for a wellness or maintenance concern. Nevertheless, manual therapy alone will not keep people healthy. However, the amount of evidence supporting exercise as a mode of maintaining and elevating health is undeniable. As such, why not go ahead and secure this low hanging fruit?

If we are truly experts of physical health, we need to stake our claim now while climate in healthcare has yet to settle into its new patterns. THIS is the time. THIS is the opportunity. So very many of our other goals can and will be met through this foothold. 

3. What About Our Brand?
Branding in healthcare is both a micro and macro concern. The profession at large needs to have a brand for the micro aspects to have any sure groundwork. This, of course, has been an ongoing problem for PT. I still suggest that we leverage exercise (one of the key value propositions our consumers look for and pay for) as both our differentiator and our answer to the changes in healthcare.

I know there's all sorts of talk which has reverberated for years about movement, manual therapy, health, wellness, function, the human experience... etc.  But, let's face it. We can't brand what we want until we reach out to our consumers regarding the brand image they already have of us.

And, I'll go out on a limb and say, while most of our retained consumers know what we do, most of our first time consumers will be expecting exercise. What's my "proof" on this? When's the last time someone came up to you, knowing that you're a PT, and said something like, "Hey... I got a thing about my back. Are there any stretches I can do to help?"

I find that's far more common than, "Hey... I got this thing about my back. You mind popping it for me?" when it comes to the vast majority of PTs. I know it's not a popular thing to say. But hey, if we're ignoring the data - AND - if we're ignoring our consumers, then what are we even doing?

Some Closing Thoughts
I don't really have much of a "here's the answer" conclusion regarding the PT profession and its brand, not to mention its segmented branding efforts. What I do have to say is that it all has to do with unity through leadership. When will that dynamic and equilibrium be met for truly meaningful and sweeping initiatives? My guess, in the next 5 - 10 years. It will happen in a time when so very many DPTs will have graduated and saturated the job market that a culture of being "fed up" with the status quo will go beyond lunch time grumblings and social media rants. It must and will reach a moment of critical mass where economically speaking, inaction will hurt more than the efforts of action. THIS is when things will change.

For the moment, however, we do have control over the micro brands that we own. The best advice I can give is that you seek to build your brand as part of a solution set to meet the needs of consumers. Give out the gains they want; eliminate the pains they have when it comes to meeting said needs. Such brands tend to have the highest brand equity and financial sustainability.

Well, that's it for now! For those of you coming across this industry analysis for the first time, thank you for sharing in my thoughts! For those of you revisiting it, I thank you for delving into it once again. And, for those of you who raised concerns, thank you for giving me the opportunity to clarify some areas in which perhaps I was not the most articulate in expression. In all cases, I hope you enjoyed this reflection.

Until Next Time, I Remain Yours In Service,


  1. Thank you for taking the time to shed some business light on the PT industry. I appreciate the information and have often thought the profession needs more financial analysis. I have an MBA and am currently working on my DPT also, so we have something in common. I have a comment/question on PT profit pool graph. From what I can gather you are taking the revenues per CPT code and subtracting costs to come up with a profit margin. I estimate that reimbursement differences between CPT codes(as per physician fee schedule ) would typically fall between 5-10 % of each other, and most of them are closer to 5%. So if the revenue per CPT code are similar, what accounts for the differences in your profit margins and operational margins? Is in just because of denials? Or are there more costs associated with providing the other services? Maybe our problem is poor note writing. Thanks again Ryan

    1. Hi Ryan, GREAT questions. You're instincts serve you well; the answer is in denials. OP PT bills for neuro re-ed ALL the time; but, the denial occurs in great frequencies. It *may* be in (or probably not in) our notes that faults us such denials. But, I'd suggest more that insurance companies and CMS knows good and well we overbill as an industry (not just PT but healthcare at large). Therefore, since everyone is doing it, EVERYONE get's a pay cut.