• Home
  • 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.

Let’s Make a Deal


Where do you fit in?

By Paul Martin, MPT, CBI, M&AMI

The rehabilitation mergers and acquisitions market has seen tremendous growth in the last 12 months. Everything that you have learned in the past about the way in which acquirers and sellers navigate practice transitions has changed. Is that not exciting?

Yes it is. Based on the first half of 2015’s closed transactions and current deals in the pipeline, we are predicting that there will be over 40 transactions in the rehabilitation market this year. This is up from 26 transactions in 2014, and 2014 and 2015 in combination had more activity than the combined past 15 years. In addition, the speed, pricing, and structures of these deals are like nothing we have ever seen before. So what does this mean to you?

It is time to decide. If you are in a market that has not been through significant consolidation, it probably will not be long before it hits. And different from the acquirers from the past, these consolidators in many cases are forming partnerships with multi-clinic companies. Then they invest resources into growing these businesses, while maintaining the goodwill and relationships of the former owner/new partner.

So our view is that you need to decide now what your position will be. Do you want to consider growing by joining a regional or national company? Or do you want to develop strategies to grow and remain independent? Notice I did not mention “just wait and see what happens” as a viable option. That option could be suicide for your business.

Essential Anatomy 5


A valuable 3-D anatomical model at your fingertips.

By Emily Monson, PT

The Essential Anatomy app is the perfect tool to replace your 2-D model. It is interactive and easy to use, and is the perfect app to have at your fingertips when at the clinic.

The app is easy to navigate. With simple on and off buttons for each body system, you can pinpoint the exact part you want to see. You can turn on as many as seven layers of systems at a time, which is useful for seeing how parts and systems interact and work together. You can fade layers as needed, making the 3-D model realistic by allowing you to see in even more detail. Also, through the zoom in and out and drag and drop features, you can set up a model to view from a specific desired angle.

I find that this app is helpful especially when learning more about a patient’s surgery or condition, as it shows specific details. You can also bookmark certain models you create and personalize to make it easier to return to certain patients or conditions.

The app is under one dollar, which is very reasonable for the amount of information available and numerous ways it allows you to explore the human anatomy. You can also purchase add-ons. These add-ons include Muscle System Plus, which allows you to explore muscle origins, insertion points, and blood flow, as well as Skeletal System Plus. Both of these add-ons have animated models, which make for even more ways to view the systems.

What Is Your Game Plan?


Be careful not to treat your practice as a commodity.

By James Glinn, PT, DPT, OCS

In the late 1960s and early 1970s kids actually “traded” baseball cards. I can recall all sorts of amazing trades taking place, oftentimes with large lots being swapped in multiple item deals. There were small reptiles, marbles, skateboards, bikes, and, of course, all sorts of sports cards. Oftentimes you would see new unopened packs traded with fervor with the acquirer paying handsomely for the chance at what might be inside. Every once in a while some kid would screw everything up by flooding the market. Maybe a grandmother would buy someone a whole box of sport cards or an older brother would hand down boxes of curated cards. Trades would go sideways and the stakes would change. Sometimes the cards in one’s collection would plummet in “value” when a big brother handed down four or five Steve Garvey cards. The emotions of the trades and the ever-changing market were exciting and one never knew what might come next. Everyone had at least one card that was “special,” had more inherent value for some reason. You could never get that card. It might have been a card seemingly worthy of only sticking through the spokes of a bike, but to that cardholder, for their own reasons, it was special.

The cards started to lose their luster for me when the blowhards entered the scene. Sports card shops and shows gained in popularity, and the blowhards spouted about dollars rather than double plays. It seemed the inherent magic slowly dwindled, and, over time, so did the sports card market magic. All along the path of diminished interest were blowhards barking about how much money a card could be worth, seemingly oblivious to the magic. Baseball cards became another commodity…

Copyright © 2018, Private Practice Section of the American Physical Therapy Association. All Rights Reserved.