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Will Private Practice Survive?

By bringing innovative programs to your community, your business will continue to thrive.

By Lynn Steffes, PT, DPT

As I travel the country and have the honor of working with private practices nationwide, I hear what I refer to as “the six million dollar question:” In this ever-changing health care climate will private practices survive? I respond with a resounding “Yes!” But not without a few caveats: Private practices must:

  1. Exercise the agility that is inherent to being a small business.
  2. Be lean and study their expenses, while controlling their overhead.
  3. Build and leverage relationships they have in their communities and with their patients.
  4. Explore opportunities to collaborate with each other to create economies of scale.
  5. Celebrate the cost effectiveness of their setting in a cost-conscious personal and health care economy.
  6. Innovate new programs to bring highly valued services to our patients, our communities, and our health care system!

The first five solutions are often already on the “radar screen of private practice owners.

So how do practices begin to embrace and meet the challenges of number 6?

We must identify the emerging trends and greatest burning needs for our population and build cost-effective (see 4) services through our practices to serve the needs of our patients and our communities (see 3). Perhaps the most burning need in health care is brain fitness!

The enhancement of cognitive health through fitness and wellness may be one of our nation’s most important priorities in the next decade. Age is the greatest risk factor for cognitive impairment and as the Baby Boomer generation passes age 65, the number of people living with cognitive impairment is expected to jump dramatically. In fact, more than 10,000 Baby Boomers are turning 65 each day. After 65, the risk of being struck by the disease doubles every five years, so almost half of people suffer from this disease by 85. What this single disease may do in the next few decades boggles the mind, resulting in nearly 10 million Baby Boomers who will die with or from Alzheimer’s and Dementia (AD). “The National Institute of Health’s research funding for AD research already low in comparison to other major diseases, some have called this one of the biggest predictable humanitarian catastrophes in the history of America.”

Cognitive impairment is a very costly disease, for patients, families and the U.S. government who anticipates spending billions on care. “The projected rise in Alzheimer’s incidence will become an enormous balloon payment for the nation—a payment that will exceed $1 trillion dollars by 2050,” warns Robert Egge, vice president for public policy for the Alzheimer’s Association. “It is clear our government must make a smart commitment in order make these costs unnecessary.”

Since research has demonstrated that prescribed exercise has the single greatest opportunity to make a difference, I believe that this is an obvious calling for our profession. Both education and exercise are key components of building an effective cognitive fitness program. As physical therapists, we know that these skills are cornerstones of our skill set. Physical therapists are highly engaged with the primary target for this service: the Silver Generation. Individuals—ages 50 to 70—whose top concerns include their future cognition as it pertains to the aging process. Strong evidence exists that the current boomer generation is concerned about cognitive health and fears Alzheimer’s disease.

“Nigel Smith, director of strategy at AARP, framed the conversation by sharing that 80 percent of the 38,000 adults over 50 surveyed in the 2010 AARP Member Opinion Survey indicated “Staying Mentally Sharp” as their top ranked interest and concern—above other important concerns such as Social Security and Medicare.” In addition, these Baby Boomers also happen to have the highest disposable income for cash based programs. They are known as “….the wealthiest generation in history…”.

I strongly believe that this prevention and wellness strategy belongs in the physical therapy market space. This is where people can come for confidential assessment, exercise planning, and education based on the latest research available. A clinic-based program enables physical therapy clinics to implement a cost-effective and holistic approach.

I initiated development on a program named BrainyEX to honor both of my parents and my family members who have been on the difficult journey of Alzheimer’s disease and vascular dementia for over a decade; a journey that had little hopeful guidance and is both heart wrenching and frightening to travel.

The first BrainyEx pilot was highly successful in empowering participants to not only feel capable of impacting their cognitive health but showing significant changes in their lifestyle including exercise, dietary changes, sleep & stress management. The initial results were measured by Lumosity and in-clinic cognitive testing—all improved.

PT Plus in Elm Grove, Wisconsin, was our small pilot sight. Amy Snyder, MPT, DPT, and owner PT Plus, Milwaukee says, “Our practice has hosted a focus group and the pilot cognitive fitness program. Our client’s interest and enthusiasm to learn more about cognitive fitness has astounded me. I believe that brain health and wellness has been under served by the health care system. No one asks the questions or provides interventions until a problem occurs. As physical therapists we have a wonderful opportunity to reach out to or communities and empower them to make health choices that will keep both their body and mind well for years to come.”

We hope your clinic will explore brain fitness too. It is definitely a key part of answer to the six million dollar question!

lynn-steffes Lynn Steffes, PT, DPT, is president and consultant of Steffes & Associates, a national rehabilitation consulting group focused on marketing and program development for private practices nationwide. She is an instructor in five physical therapy programs and has actively presented, consulted, and taught in 40 states. She can be reached at steffbiz@gmail.com.

Affordable Care Act’s Second Open Enrollment


Small business options are limited.

By Jerome Connolly, PT, CAE
September 9, 2014

In a final rule1 on health insurance market standards issued May 16, the Centers for Medicare and Medicaid Services (CMS) adopted a wide range of provisions affecting insurance coverage under the Affordable Care Act (ACA), including small business plans, standards for navigators who help consumers find coverage under the ACA, drug coverage determinations, insurer quality rating information, and efforts to stabilize premiums. The rule took effect in July and will be in place when the second round of ACA open enrollment commences November 15.

According to a CMS fact sheet2, the rule standardizes notices health insurers are required to provide to consumers when they make coverage changes when policies are renewed or discontinued. In the area of drug coverage, the rule also requires health plans to make coverage determinations within 24 hours on medications that are not covered for enrollees with conditions that jeopardize their life, health, or ability to regain maximum function, or when enrollees undergo treatment with drugs not covered by the plan.

CMS said the rule aligns the start of annual employer election periods in federally facilitated Small Business Health Options Program (SHOP) Marketplaces for plan years beginning in 2015, with the start of open enrollment in the individual market exchange for the 2015 benefit year. The rule also lists the conditions under which a SHOP would be permitted to not implement “employee choice” in plans, if their state’s insurance commissioner believes it is in the best interest of consumers in that state. Employee choice provides the choice of multiple insurers in a small business marketplace.

Insurance commissioners in 18 states (Alabama, Alaska, Arizona, Delaware, Illinois, Kansas, Louisiana, Maine, Michigan, Montana, New Hampshire, New Jersey, North Carolina, Oklahoma, Pennsylvania, South Carolina, South Dakota, and West Virginia) have made that determination, claiming that the number of people in the small group market opting for coverage through the ACA is so small that allowing employees to choose from a variety of plans will lead to rate spikes because risk will be too uneven.3

The National Federation of Independent Business (NFIB), which opposed the ACA, criticized the delay of the “employee choice” option in the law. “The SHOPs should offer even more arrangements than employee choice and basic employer choice (the only option currently available), including defined contribution health plans,” says NFIB.4

Even the Small Business Majority which supports the law, expressed disappointment in that provision saying, “The finalization of a rule today that would allow states to potentially delay a critical requirement that the small business health insurance marketplaces allow employees to choose among multiple insurance carriers is incredibly disappointing for small business owners and their workers.”

NFIB also urged CMS to publish actual 2015 rates as early as possible prior to open enrollment so small business owners can plan for the upcoming year.

The final rule also specifies a list of state requirements that would conflict with federal standards for navigators and assisters who help people get enrolled under the ACA. It also requires insurers to submit data to calculate quality ratings, which marketplaces must display starting in 2016.

The regulation includes provisions beneficial to insurance plans, such as changes to the risk corridors program intended to mitigate uncertainty associated with enrollee risk profile, and adjustments to the medical loss ratio (MLR) calculation for policy issuers that provided “transitional” continuation of plans that do not comply with the ACA. Under the MLR requirement in the statute, insurers must spend at least 80 percent of premiums on claims or quality improvements, or refund the difference to consumers. The change will generally result in a reduction in rebate payments for those issuers who would have owed rebates in the absence of the adjustment. (Total consumer benefits from the first two years of the MLR provision amounted to more than $3 billion, according to a Commonwealth Fund report released May 12.5)

A spokesperson for America’s Health Insurance Plans (AHIP) applauded the rule, saying these temporary risk mitigation programs will help ensure market stability and affordability for consumers.6 In its comments on the proposed rule earlier in the year, AHIP had asked for more relief than was included in the final rule.

In addition to the final rule, the CMS also posted answers to Frequently Asked Questions7 May 16 regarding a range of other ACA requirements, including “essential health benefits” that insurers must cover, the actuarial value of plans, mental health parity, guaranteed availability, minimum essential coverage, and transitional policy extensions of plans that do not comply with the ACA for employers with 51–100 employees and for individuals.

This FAQ document emphasizes that health plans must provide coverage of the essential health benefit package, and it is a violation of the law if the plan’s benefit design—or the implementation of its benefit design—discriminates based on an individual’s age, expected length of life, present or predicted disability, degree of medical dependency, quality of life, or other health condition.

Moreover, insurers may not impose benefit-specific waiting periods, except in covering pediatric orthodontia, in which case any waiting periods must be reasonable. This clarification refers to a waiting period that is applied uniformly to a specific benefit within the plan design and not reasonable medical management.8

The FAQ also states that insurers may file plans that they only market through the Exchange to qualified individuals or the SHOP Marketplace, provided the marketing does not violate applicable discrimination standards, and otherwise complies with applicable federal and state laws and regulations. However, such plans would be considered to be offered in the individual or group market, respectively, in the state. If, despite the fact that the policy issuer has not advertised the plan other than through the Marketplace, an individual or employer (as applicable) seeks to enroll in the plan directly with the insurer, the health plan may instruct the individual or employer to complete enrollment through the Marketplace. But if the individual or employer wishes to enroll directly with the plan, the insurer must accept every individual or employer in the state that applies for such coverage.

While small businesses with fewer than 50 employees are not mandated to buy health insurance in 2015, the SHOP exchange is designed and available for employers with up to 50 employees to offer group health coverage. However, some features of the federal and state SHOPs were delayed late last year as officials shifted focus to the bungled individual marketplace rollout.9

Small employers with generally up to 50 full-time equivalent employees (FTEs) have access to the SHOP Marketplace, which is open for enrollment year-round. It is estimated that small businesses pay on average 18 percent more than larger businesses for health insurance. SHOP is intended to offer small employers increased purchasing power to obtain a better choice of high-quality coverage at a lower cost by pooling their risk. To purchase coverage in SHOP, eligible employers must have at least one common law employee, offer SHOP coverage to all of their full-time employees (FTEs), and meet minimum participation rates.10

A tax credit is available to help small employers afford the cost of providing health care coverage for their employees but it is specifically targeted for those employers with low- and moderate-income workers. Employers with fewer than 25 FTEs, paying average annual wages below $50,000, and that contribute 50 percent or more toward employees’ self-only premiums may qualify for a small-business tax credit of up to 50 percent to help offset the costs of insurance. In 2014, this tax credit became available to qualified small employers that participate in the SHOP Marketplace. The 50 percent tax credit will continue through 2015, after which the program is scheduled to end. On a per-employee basis, the amount must be under $50,000. In fact, if it is under $25,000, the full credit is awarded—but then it phases out until the average reaches $50,000. If the credit exceeds the tax liability for the year, it can be carried back one year or forward for 20 years.11

Beginning this year, the ACA increased the incentives that can be offered to employees, from 20 percent to 30 percent of the total cost of coverage for participation in “health-contingent” wellness programs that require participation in a physical activity, for example, or meeting certain health standards, such as a desired cholesterol or blood sugar level or body mass. To incentivize smoking cessation, smokers can be charged premiums up to 50 percent higher than those for nonsmokers, and federal grants are available to help small businesses start a wellness program.12

A variety of factors, including those described above, has depressed small business enrollment in the first year, and it is likely to remain suppressed for the near term. The Obama administration has allowed small business employers to renew their existing plans through 2016 even if they do not meet ACA coverage standards, and many will do so because of uncertainty with the exchanges. Moreover, as mentioned earlier, the tax credit for businesses with fewer than 25 employees has a limited reach and has been difficult to navigate.

Employee benefits brokers in the 18 states declining to implement the employee choice option will have just one plan to present to employees of small business clients through the ACA’s small business Exchanges, thus leaving in place a distorted, non-uniform system. This will likely extend the time for determining whether the commercial exchanges are making rates more affordable for small businesses.

Once the delays are ended, the renewals run out, and every state is offering employee choice in an online exchange, it is likely enrollment will steadily improve. But without the employee choice feature, there’s little reason at present for a small business to go through the Exchange instead of the brokers whom they have traditionally used.13


Jerome Connolly, PT, CAE, is a registered federal lobbyist whose firm Connolly Strategies & Initiatives has been retained by PPS. A physical therapist by training, he is a former private practitioner who throughout his career has served in leadership roles of PPS and APTA. Connolly also served as APTA’s Senior Vice President for Health Policy from 1995 – 2001.




1. ACA Exchange and Insurance Market Standards for 2015 and Beyond, Final Rule, Centers for Medicare and Medicaid Services, Department of HHS, http://op.bna.com/hl.nsf/id/bbrk-9k6sfm/$File/finalexchMay2014.pdf. Accessed July 2014.

2. Exchange and Insurance Market Standards for 2015 and Beyond, Center for Consumer Information & Insurance Oversight, www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/marketstandards-5-16-2014.html. Accessed July 1, 2014.

3.4. Kardish C, Small Business Participation in Health Exchanges Likely to Remain Weak, Governing. Posted July 1, 2014. Website www.governing.com/topics/health-human-services/gov-small-business-health-exchanges-enrollment.html. Accessed July 2014.

5. The Federal Medical Loss Ratio Rule: Implications for Consumers in Year 2, The Commonwealth Fund, May 12, 2014.

6. Hansard S, CMS Releases Final 2015 Health Insurance Exchange Rule, BNA’s Health Insurance Report, May 21, 2014.

7. Frequently Asked Questions on Health Insurance Market Reforms and Marketplace Standards, Center for Consumer Information & Insurance Oversight, www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/downloads/Final-Master-FAQs-5-16-14.pdf, posted May 16, 2014. Accessed July 2014.

8. Hansard S, CMS Releases Final 2015 Health Insurance Exchange Rule, BNA’s Health Insurance Report, May 21, 2014.

9. Klein K, Answers to More Small Businesses Questions About Obamacare, Bloomberg Businessweek, June 30, 2014.

10. Key Provisions Under the Affordable Care Act for Employers with Fewer Than 25 Employees, Small Business Administration. Website: www.sba.gov/content/employers-with-fewer-25-employees. Accessed July 18, 2014.

11. Taulli T, Small Business Tax Credits For Obamacare?, Forbes, March 8, 2014.

12. Bluestein A, Your Obamacare To Do List: Launch a Wellness Program, Inc. Magazine. Website: www.inc.com/magazine/201312/adam-bluestein/obamacare-to-do-list-create-a-wellness-plan.html. Accessed July 18, 2014.

13. Bronson C, Obamacare Exchanges to Offer Just One Plan for Many Small Employers, Insurance Business America, June 12, 2014.

Leadership and Culture as Keys to Successful Acquisition

By Michael Durand, MBA, ATC

Growth through acquisition can prove to be a successful strategy. However, it is not without its challenges. In the growth of our organization, which has 13 locations, nearly half of our clinics were acquisitions and the rest were de novo. The success of our acquisitions is tied closely to the transition of leadership and culture. Highlighted below are acquisition scenarios that we experienced in our company’s growth. In each scenario, we had different leadership strategies in place to transfer our organization’s culture to the new acquisition.

“Acquisition A” was early in our history. The acquired clinic was a single owner and practitioner who had plans post-acquisition to focus on a related business outside of traditional physical therapy. The geography, patient demographics, physician referral base, and other considered factors all fit with our existing practice. A newly hired physical therapy manager replaced the former owner without overlap or transition. We failed to consider the leadership transition, which we could have implemented with the exiting owner. Also, the newly hired physical therapy manager was not fully ingrained in the culture of our organization. Because of these two factors, the acquisition was destined to fail, and we were forced us to close our doors within a few years.


Following the difficult lesson in acquisition A, we implemented a new strategy for acquisition B. A strong internal leader who was ingrained in the culture of our organization took over for the exiting owner who was bound to continue at the clinic for six months post-transition. Though we felt we were more prepared in this venture, we did not anticipate the impact and value of the exiting owner through the transition. The exiting owner did not fully support our organization’s culture with the remaining staff. The result was an “old guard versus new guard” clash, and, subsequently, many of the acquired clinic staff opted to move on. In the short term this was a challenge. Thankfully with strong leadership, a firm sense of the organization culture, and “new blood,” acquisition B has survived and thrived.

We ventured into a third acquisition—acquisition C—with experience. Throughout discussions with the current owner, we spoke frequently about the culture of our organization and our goals of incorporating our culture into their clinic during the transition. We were able to impart our organizational values and show the value of creating a unified leadership for the existing staff. For this acquisition, we not only had new leadership ingrained in our culture, but we also had a previous owner that “bought in” to the direction we were taking the clinic. Throughout the transition, both leaders were consistent in the message they delivered to staff. This consistency led to a successful transition, desired staff retention, and positioned the clinic for immediate growth.

Although there are several factors to consider when incorporating a growth strategy through acquisition, few are as critical to the success of these ventures as the leadership and culture transition.

Three valuable lessons we have learned through our acquisitions have been:

  1. A leader from within your organization must transfer your organization’s culture to the acquired location.
  2. Cooperative leadership between the acquiring organization and exiting ownership will lead to a smoother transition.
  3. Understanding and capitalizing on the value of the exiting owner, in combination with the energy and drive of the new leadership, will jumpstart the growth of the practice and create a successful acquisition.

Michael Durand, MBA, ATC, is director of business development at Physical Therapy & Sports Medicine Centers and managing partner of Strategic Therapy Partners. He can be reached at mike.durand@ptsmc.com.

Navigating the Course


Mergers, acquisitions, and other exit strategies.

By Iris Kimberg, PT, MS, OTR

Orchestrating the sale of your practice is not unlike the process of starting or growing your practice. It requires intense focus on your end goal, coordination among many professionals working on your behalf, and a firm belief in your ability to navigate the course as it unfolds. Since the sale will impact your professional and private life after the sale, you must structure it to meet your end goal.

Fifteen years after I sold my own therapy practice and 15 days after I helped a physical therapist sell his practice to an employee so he could move back to Australia, I am still in awe of how a therapy entity can be sold. After all, we cannot guarantee that a patient will walk through our doors, we cannot guarantee that a physician will make another referral, or that a therapist will stay at work. Yet, if a practice is built to last and if value is integrated into every aspect of a practice, it is an asset that commands whatever price the marketplace will bear. Anything that increases the volume or the security of future revenue will increase the value of your practice. What makes your practice valuable to you should also make it valuable to a buyer.

In the past, practice owners approaching the age of 60-plus and thinking of retiring were the most likely private practice sellers. Today there is a new face for practice sellers. These include therapists of any age who have grown their practices as far as they can and want “out;” therapists who are selling from a position of strength (for example, their practice is booming, and they want to capitalize on that); therapists who are selling from a position of weakness or desperation; and therapists who need to sell for myriad reasons, death in family, breakup, or dissolution of partnership.


Make sure you understand why you are selling so that you are clear to potential buyers. Be sure about your goal in selling and be flexible about how you might reach that goal. If the goal in selling is to secure enough money to retire: Don’t count on it, although many therapists look to recoup their initial investment and be compensated for many years of hard work and endured risk. Others want to end the burden of ownership, but continue working as a highly compensated employee. Typically, the ways to reach your overall goal of selling include an outright sale (stock or asset purchase), a structured buy in/buyout plan, or a merger with a local competitor.

To achieve your goal, you will need to assemble a team to navigate the course, yet I cannot emphasize enough how vital a role and voice you should have in the process. While everyone’s focus tends to be on the asking price, and, later on, the gap that is often between the asking price and the offered price, many other facets to any practice deal exist. Life after your practice sale needs to begin well before the ink is dry and the deal is done. How you structure the deal will impact how your life will be after the deal.

Your accountant will play a vital role in your practice sale. The strength and quality of your financial statements is a direct reflection of your practice and should include profit/loss statements/balance sheets from the past three to five years with information backed by filed tax returns. Your accountant should help you break down your clinical costs so that gross profit percentages can be determined. Prospective buyers will want an accurate aging report (AR), and projections for the current year.

Your accountant may or may not be equipped to help you with your practice valuation; if he is not, seek out a professional who is. Your accountant should discuss with you and your attorney the consequences from a tax perspective on structuring your deal as an asset or a stock sale. This is crucial and will directly impact your tax liability. Unfortunately, what is advantageous for a seller from a tax perspective may not be advantageous from the buyer’s perspective; fair negotiations are important.

There must be an open and ongoing dialogue between your attorney and accountant for structuring the purchase agreement. Your attorney should make sure you have a good nondisclosure agreement in place before you release any details to potential buyers. Your attorney should help you evaluate any letter of intent from a potential buyer, and review, revise, and sometimes create the purchase agreement. Your attorney should help craft an employment agreement (if that is part of your deal) and evaluate any non-compete clause you will undoubtedly have to sign. Sometimes lucrative employment contracts offset a less than optimal purchase price. Other times a poorly negotiated employment agreement may not compensate you adequately, especially when you may be working less or differently during the non-compete transition period.

Be realistic, be flexible, be clear about what you want for yourself, and what you want your role to be post sale. Most therapists think their practice is worth more than it actually is, so be prepared for some initial disappointment. If you plan on staying on only for a “reasonable transition period,” then who you sell to is less important. If you want to stay on post-sale as an employee, then you need a high degree of compatibility between you and the new owners. The negotiation of your employment agreement (terms, salary, etc.) becomes almost as important as the negotiation of the purchase agreement. Your non-compete clause must be reasonable in order for it to be enforceable. Carve out any nuances that you believe are important. You must always be allowed to earn a living, but there are a finite number of nonclinical, academic, or management positions in our field. Do not wait to begin exploring what is next until the day you walk out the door.

The emotional component to a practice sale is rarely addressed or discussed. Regardless of the purchase price and the joy you may envision after a sale, most owners post-sale have some degree of identity crisis. You are probably more attached to your work identity than you realize. Answering “yes” to the question: “Can this practice exist without you?” is easy. Answering “How will you exist without your practice?” may be harder. Even though you may be selling of your own accord and on your own terms, you are likely to feel a sense of loss. Who we were versus who we are today comes into play. One therapist described it best: “It is like I lost my wallet. Suddenly, I don’t have a job title, a desk, or a name plate!” Re-inventing yourself post-sale, much like growing and selling your practice, is a process. Capitalizing and leveraging the skills you have amassed over the years will assist your successful transition.

Iris Kimberg, PT, MS, OTR, is a PPS member, private practice consultant, and owner of NYtherapyguide.com. She is also on faculty at Columbia University and can be reached at infonytherapy@aol.com.

Surviving the New Payment Model


The right technology helps physical therapists report and document patient care accurately and efficiently.

By David McMullan, PT

Earlier this year, legislators passed HR 4302, “Protecting Access to Medicare Act of 2014,” which once again temporarily addressed the flawed Sustainable Growth Rate (SGR) formula for Medicare Physician Fee Schedule. This latest legislation brings the physical therapy industry closer to a new payment model that will offer significantly more value to patients while mitigating Medicare and insurance fraud and abuse.

Historically, the physical therapy industry has operated on a fee-for-service billing model. Because the process is subjective, there has been room for interpretation. Ongoing treatment and procedure codes are based on time, and do not consider patient improvement or how time is spent with the patient. As a result, overbilling and inaccurate coding—either intentional or accidental—are common in the physical therapy industry.

To remedy the flawed program in 2007, Medicare introduced the Physician Quality Reporting System (PQRS) to gather quantitative data on the quality of the care being provided to patients. PQRS uses a combination of incentive payments and payment adjustments to promote reporting of quality information by eligible professionals. While well intended, this voluntary program has low participation, particularly in the area of outpatient rehabilitation. Despite the bonus potential and/or penalties tied to reporting, the majority of physical therapists opt out of this program because of its onerous reporting requirements.


In 2013, Functional Limitation Reporting (FLR) was introduced, shifting the emphasis from providers to patients and patient outcomes. Similar to PQRS, FLR is a quality-reporting initiative that gathers data on patient status and outcome. While PQRS is focused on risk, the emphasis of FLR is on function (i.e., how a patient’s functional limitations have changed as a result of the therapy that they received). Unlike PQRS, FLR is mandatory; therefore, if a physical therapist does not report, he or she will not be paid.

While elements of PQRS will remain, it is apparent that the claims-based reporting option is going away and will not be an option in 2015. However, FLR appears to be the stepping-stone to the industry’s new payment model, which will focus on patient outcomes and not the amount of time physical therapists spend with each patient.

In 2016, a new payment model is expected to be introduced, which will have new evaluation codes and a more simplified coding system. Coding will follow a patient’s current medical status, how severe or involved the patient is, and the amount and intensity of treatment that is required to move a patient from their current level of function to their optimal level of function. It is anticipated that the evaluation component of this new model will mirror the physician model that utilizes evaluation management (EM) coding. Using this model, physicians bill different value codes for an evaluation based on the complexity of the patient condition and evaluation procedures required. For example, if the physical therapist performs a battery of tests and the treatment is very involved, coding is billed at a much higher-level evaluation code. However if the patient’s condition and assessment were straightforward, requiring only limited assessment tests that are problem focused, physical therapists would bill at a lower evaluation code.

The EM coding model has been around and worked in the physician world for some time. While most people realize that the current physical therapy payment model must change, providers fear that they may be paid less. While providers certainly will not be paid more under this new model for giving good care, being efficient, and obtaining good outcomes for their patients, they should not be negatively impacted by the change. In contrast, however, for those blatantly abusing the system, the new payment model will make fraud related to overbilling difficult. Providers will need to show how involved they were with the treatment, patient status from start to discharge, and demonstrate the value of care that they are providing patients—otherwise they will not be paid.

The Role of Documentation Technology

Providers may have trepidation about the new payment model, particularly if they are taking liberties when billing. For these providers the impact of these billing standards will be significant, and lead to a 15 to 20 percent decrease in revenues. Having the right tools in place will help physical therapists accurately report.

Gathering data is essential to the success of this new payment model. For the outpatient rehabilitation market, providers need a standardized outcome tool to benchmark against. Such a tool most likely will be a combination of something the patient completes, an overall sense of improvement/satisfaction with the care they were provided, and something more quantifiable on the provider’s side, such as where the patient started, how they improved, how many visits the improvement required, and the cost involved.

From a technology perspective, capturing the appropriate documentation and data elements will be essential to a provider’s success. Documentation technology will play a pivotal role in a provider’s ability to record and report the functional status of a patient at the outset of care, throughout the care model, and at the end of care.


When considering documentation technology, look for a solution that offers alerts. Providers are required to report at specific intervals—at the onset of care and then every 10 visits—or they will not be paid. In addition to alerting the physical therapist to report on FLR, the documentation system should also alert the scheduler at the front desk to the impending deadline so that they can put an additional reminder on the physical therapist’s schedule. Visual alerts and dashboard make reporting on a timely basis easier for physical therapists.

The ideal system should also assist providers with documentation. Similar to a clinical decision-support system, it should guide clinicians to the appropriate coding and billing selections. For example, built-in logic can guide providers along the way, ensuring test measures have been completed and offer code recommendations based on the type of visit and other pre-determined justifications. The system should provide clinicians with the power and guidance to bill appropriately given the amount of time spent treating patients and the intensity of the service provided in combination with current medical condition and functional status of the patient already documented within the system. The use of algorithms and logic will make documentation easier for clinicians, thus enabling them to spend more time on treating patients and less on reporting.

As the industry continues to move toward a new payment model, clinicians will likely see an expansion of the current FLR requirements. The ability to report accurately ensures claims are processed and paid efficiently. Documentation technology with built-in logic will keep you on top of these changes.

David McMullan, PT, is vice president of Product Management for SourceMedical. David has more than 20 years of outpatient rehabilitation health care experience. He can be reached at David.McMullan@sourcemed.net.

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