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Possible or Impossible?

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Can private practices meet obligations under compliance and reporting requirements and still turn a profit?

By Jeff Hathaway, PT, DPT

The answer is “it depends.” Making a profit while meeting compliance and reporting requirements depends on many things: the size of your practice, your average payment outside of Medicare, the number of insurers requiring Medicare standards, your electronic medical record’s (EMR’s) current capabilities, your allowance for documentation time, and your interpretation of the various rules and regulations. It also depends on how much of a profit margin you believe is worth the risk. All of these dependent variables add to the complexity and cost of complying with the rules and regulations associated with running a private practice today.

Medicare is by far the most complex and costly compliance program and seems to be spreading to other payers as the “gold standard.” To see the potential impact of Medicare regulations, we need to examine how a private practice would look financially if all patients treated were to require Medicare compliance.

The table below calculates the financial impact if 100 percent of the patient visits required Medicare compliance. In an 8-hour day, assuming limited use of modalities (being more evidence based) and not allowing for documentation time, that would cap the maximum number of units billed at between 32 to 40 Current Procedural Terminology (CPT) codes or units of physical therapy per day at an average payment of $25 per unit. For our purposes we will use the high end of 40 units. As an example, we will look at the computations of a typical single practitioner private practice using conservative industry standards of expenses as a percentage of revenue/collections, which are taught through Evidence in Motion’s (EIM) executive private practice management certificate course:

To be considered reasonable, the rules and regulations should be tenable for single practitioners first and foremost. By the above example you can see that is clearly not the case, unless you believe the top salary level for a physical therapist should be approximately $60,000.00. Even at $60,000.00 the business profit is only 10 percent, which by medical standards is extremely low and probably not worth the risk.

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For clinics that see a higher percentage of non-Medicare patients, where payment levels are above Medicare, profits can be easier to reach provided that those same payers do not follow Medicare regulations, your EMR is robust in the area of documentation compliance, you do not set aside and pay your clinicians for documentation time, and your Medicare population is below 25 percent of your practice payer mix. Clinics meeting these conditions can likely be profitable and pay their physical therapists more than the $60,000 per year in the example shown above.

If we only focus on the policies, rules, and regulations without fully taking into account their economic impact, then we end up with very frustrated and discontented members of our profession as well as professionals who cannot be paid at the level their education and value would otherwise dictate.

When rules and regulations become a greater focal point of a business than the actual purpose or primary service of that business, then the cost to that business is greater than the actual dollars spent on compliance. It becomes a drain on all of a business’s resources, including and most important—human resources.

When staying on top of compliance becomes a financial burden and the consequences of failure to comply are disproportionate to the actual impact of that failure, then the fear around the compliance drives all behavior. What is at risk is the loss of focus on providing the appropriate care to achieve the goals of that treatment plan. In short, the fear of documenting improperly supersedes the fear of not providing the appropriate treatments.

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In the past few weeks I had the privilege of lecturing to a group of last year physical therapy students on “Business and the Value of a Physical Therapist (PT).” I specifically asked them what they feared more—documenting improperly or providing the wrong treatment plan for the patient. The response was a resounding affirmation that the fear of improper documentation was greater than the fear of doing the wrong treatment.

The bottom line should not only be the financial impact on the business of these compliance requirements, but also the impact on our profession in terms of freeing us to focus on what should be most important (patient care) and to ensure that physical therapists are paid commensurate with their education and value.

Jeff Hathaway, PT, DPT, is a PPS member, president of the PTBA, and partner in Confluent Health with the position of chief executive officer for the BreakThrough PT clinics in North Carolina. He is also the owner of ProActive PT clinics in New York and a partner in Therapy Partners, Inc. He can be reached at Jeffh@RedefiningPT.com.