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  • 2015-09-September

Change – the eternal love/hate relationship

By Stacy M. Menz, PT, DPT, PCS

As a business owner, you know that change is often necessary as your business evolves and grows. You are the one implementing the change on your business. You feel in control, you are doing it for the good of the company, your employees, and/or your patients. When change comes on our terms, it is exciting and generally welcomed. Change also can be imposed on us and not something that is in our control—or even something that is welcome. You are on the receiving end of it. You feel like you have less control. You do not know how it is going to affect your company, your employees, and your patients. Do you see the reason for the love/hate?

As October 1 rapidly approaches all of us will be required to change to ICD-10. Hopefully you have begun to implement strategies for navigating the transition. While this change is an example of one that was externally imposed on our practices, what you are able to do is reframe it. Look at how you can create some control for you and your staff. How does your staff navigate change best? Do they need to sit with it for a while, take baby steps, or just make the leap? By knowing your staff, you can best support them during a period of change. Also, sometimes it is changes that force us to make needed process changes or provide the opportunity to reassess different aspects of our operation that can be improved. Is there a positive that can be taken, are there creative solutions to some of the changes that make whatever the change is more palatable?

Private Practice Mergers & Acquisitions

Boom times for selling or raising capital.

By Ryan Buckley

Outpatient physical therapy is in the midst of a decade-long mergers and acquisitions frenzy with no signs of abating. My firm has had the benefit of a front row seat to industry consolidation, advising on a dozen sale and refinancing transactions with private practices, corporates (known as strategic buyers), and private equity investors. There neither has been a more compelling nor lucrative time in the last ten years for private practices to: (i) take chips off the table while also recapitalizing for growth with a private equity partner; (ii) pursue a full sale to a strategic buyer; or, (iii) fund an expansion through debt financing. In a sector as dynamic as physical therapy, the old adage that you are “either growing or dying” has never held truer. To their credit, private practices have responded with a ravenous appetite for outside investment.

The hunting ground is plentiful for buyers and investors. The industry has been consolidating for 10+ years, yet private practice remains immensely fragmented. The ten largest companies—two public operators and eight private equity-backed strategics—comprise just 21 percent of clinic market share (or 3,300 clinics), with no company owning more than 7 percent of clinics. Beyond the large strategic consolidators, the number of companies with more than 12 clinics approximates only 100 companies, who collectively own approximately 2,300 clinics. This market landscape results in 10,000+ clinics spread across literally thousands of private practices nationwide.

For practices interested in mergers and acquisitions, the landscape is ideal. A decade ago, sellers could look to just a handful of acquirers. Today, the amount of financing alternatives and number of potential capital partners has grown significantly. The influx of private equity into physical therapy has led to the development of over 15 new strategic buyers that are actively looking for practices to buy, both regionally and nationally. The prevalence of these PE-backed strategic consolidators—supported by favorable industry tailwinds, a stable reimbursement environment, strong operating performance, and robust debt markets—has created a uniquely attractive environment for private practice sellers. This dynamic continues to drive higher valuations, seller optionality, better deal terms and high certainty to close. Valuation, most often measured as a multiple of adjusted pre-tax earnings, has jumped upward by 25 percent to 50 percent in recent years.

For practice owners, pursuing strategic alternatives related to one’s life’s work can be daunting. In this environment, the reasons to pursue a transaction abound; yet, preparation and proper positioning are paramount to ensure an optimal and successful outcome. Hiring an experienced mergers and acquisitions advisor for guidance through the four- to six-month transaction process is often a critical step. An advisor with physical therapy experience and intimate market knowledge will ensure that a compelling investment thesis is properly crafted and communicated to credible counterparties. A good advisor will calibrate deal expectations, enhance certainty to close, and provide counsel on transaction nuances such as retained ownership versus an outright sale, employment and partnership terms, restrictive covenants in a purchase agreement, and on-going business considerations like personnel modifications, billing consolidation, and payor/reimbursement changes.

Every business eventually reaches an inflection point where a mergers and acquisitions or capital markets solution should be evaluated vis-à-vis continued expansion, long-term business building expertise, and wealth monetization. While personal seller dynamics such as age, succession planning, the need for expansion capital, and business life-cycle considerations should be contemplated, private practices should not ignore this ideal environment for outpatient physical therapy and the multitude of compelling strategic alternatives that exist currently.

Start with Kudos


Morale is important to your physical therapy practice.

By Tannus Quatre, PT, MBA

Whether you have two employees or 200, morale is an often overlooked key to many things that link to your bottom line. Productivity, turnover, idea generation, and more, can all benefit from small upticks in the morale of your team.

The good news is that while the costs associated with poor morale can be devastating, investments in morale do not have to cost much at all. Once such investment can—and should—become a part of your regular meeting routine: starting each meeting with kudos.

While regular meeting schedules vary (weekly, monthly, and quarterly), the ability to carve out a few minutes to publicly acknowledge one another can fit into any meeting format you may use. By doing so, this small investment of time (usually no more than 5 minutes) achieves two very important things.

First, it makes people feel good. Being recognized is an important contributor to happiness in the workplace, and doing so in a public format heightens the benefit. Making people feel good by starting your meeting with kudos is cheap, easy, and works.

Top-of-Mind Awareness

By Tannus Quatre, PT, MBA

The 2016 presidential campaign season has begun, and there is one thing on every candidate’s mind: name identification. Although we are several months away from the first caucuses and well over a year out from the general election, any chance of of winning the favor of the general public starts with name identification—and for good reason.

Campaigns are—by definition—a popularity contest. He or she with the most votes wins, and rallying together a population, which aligns in favor of a single decision (read: vote), is no easy task. While substance and policy play an important role as voters cast their ballots months from now, the early phases of any campaign are dominated by emphasis on name recognition—for without awareness, policy falls on deaf ears.

Believe it or not, it is the same for us in the world of physical therapy marketing.

Despite the fact that you provide “the best” physical therapy in your market, others do, too—at least that is what they all tell your customers. Speaking on behalf of your bottom line, being the best only matters if you are well known. It is a popularity contest not just for our presidential candidates. It is for us as well.

Judy Cirullo, PT, Cert MDT, CMP, CFE, FABS

From top, clockwise: strength training scapular stabilizers; positioning during one of the tests in functional movement screen (FMS); assessing pain in the acromioclavicular (AC) joint.

From top, clockwise: strength training scapular stabilizers; positioning during one of the tests in functional movement screen (FMS); assessing pain in the acromioclavicular (AC) joint.

Judy Cirullo is the owner of Oregon Spine Physical Therapy in Eugene, Oregon. She can be reached at jcirullo@oregonspinept.com.

Practice, Location: Oregon Spine Physical Therapy, Oregon. Practice specifics (1 location, 9 employees, 38 years in practice).

What is the most influential book/person/event that enhanced your professional career? During physical therapy school in the late 1970s, there was minimal emphasis on diagnosing by physical therapists. Much of the emphasis in training was treatment and evaluation based on what was dictated by the referral source. After three years of practice, I was introduced to Robin McKenzie and mechanical diagnosis and therapy. The diagnostic component to this approach not only fit the direction I wanted to grow in, it changed my whole approach to patient evaluation and assessment. This became the foundation, but not the only tool, for my practice style throughout the rest of my career. I continued connecting and working with experienced colleagues, and training in diagnostic techniques that were research based and outcome driven.

How would you describe the flow of your average day? I have reduced patient care time to focus more on staff mentoring, coaching, and development, as well as strategic planning for the business.

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