Sharing Risks & Rewards
Owners re-assess the traditional models of hiring on salary.
By Deb Gulbrandson, PT, DPT
“No pain, no gain.” Physical therapists hear this a lot from patients who run five miles when they should have only run two, or something similarly challenging but unwise.
Recently private practice owners themselves seem to be suffering more pain and less gain, with decreased payment and rising expenses. In a service business, the highest expenses by far are employee costs, including salaries, taxes, and benefits. More and more, owners are re evaluating the traditional model of hiring a physical therapist on salary with benefits. For years, physician groups, accountants, and attorneys have been using a different model whereby individuals are paid in relation to the amount of revenue they bring in. Or, as I’ve heard it said inelegantly, “they eat what they kill.” For owners whose staff expect annual raises, while the per visit rate is flat-lining or worse, “something’s gotta give.”
Risk sharing options are currently being applied in private practices around the country, which seem to fall into two camps:
- A completely independent set of therapists coming together under one roof with their own individual practices, referred to as practice within a practice, group practice, or co-ops.
- A practice in which therapists are employees, but are not paid salaries. This may be based on an average of group collections, individual collections, profit, or some combination.
The first model invites colleagues to share in the cost of space, front office support, billing, and collections. Each practice is truly independent, with its own corporate structure and tax identification number, and pays its own taxes. Often there is an umbrella corporation owned by the therapist who started the group practice. Frequently, each therapist has a different set of skills. One may be good at marketing, another at figuring out the intricacies of the latest governmental regulations, and a third may have strengths in the financial realm. Therapists work collaboratively to elevate the entire practice, generating a “rising tide lifts all boats” effect. A number of years ago, Ruth Backway of Backways Physical Therapy in Prescott, Arizona, decided she liked the idea of working with colleagues, but did not want employees. She was also concerned about her ability to take time off without her patients suffering. She approached another therapist who was interested in working together, but not familiar with billing practices. Ruth was. The practice within a practice was created. “Over the years, people have come and gone,” says Ruth. “Therapists now want to join us as they feel they have clinical skills they are not able to use in their current settings. We incorporate a more integrative, whole body approach.” Ruth owns the umbrella company and each therapist formed a limited liability company as an independent contractor. Budgets are completed every six months. Each practice receives a hundred percent of its collections, then pays a previously agreed upon percentage back to the umbrella corporation.
Other practices may segment by specialization—women’s health, vestibular, general orthopedics, or neuro-rehab as examples. These are all clinically separate specialties requiring advanced training that can be united under one roof, but remain separate businesses.
Although decreasing financial risk is one reason for creating a practice within a practice, Cheryl Wisinski of Midwest Physical Therapy Services in Omaha, Nebraska, feels there are additional benefits. “In women’s health specialization, we have an active mentoring program. I thought why not mentor a physical therapist from a business perspective?” She wanted to bring other therapists into her practice to share space, equipment, and administrative services she was already paying for, but did not want employees or partners. She felt allowing other therapists to ease into the world of private practice with her “safety net” would benefit her practice and enable those who might otherwise not attempt it. The therapist who works with Cheryl on a part-time basis is an independent contractor who maintains employment elsewhere. Cheryl has guided her in multiple ways that are necessary to practice independently, such as credentialing for contracts and creating marketing materials. “One of the most important aspects to consider is taking your time in finding the right person,” observes Cheryl. “I sought out this therapist, and it took almost two years for her to commit, as we continued to dialogue on the benefits of moving forward. She and I are both very happy with the outcome.” Cheryl is now in conversation with another therapist whom she has known for years and who is interested in joining her practice.
Deena Goodman of Goodman Physical Therapy describes her practice in West Los Angeles as more of a boutique setting. The women’s health practice has a combination of physical therapists and fitness instructors who provide Pilates, Gyrotonics, and massage. While her physical therapists are employees and paid hourly, her fitness professionals are independent contractors. She also currently rents space to a former employee who moved north of Los Angeles, but comes back on the weekends to see her patients. Deena is considering bringing in a chiropractor as part of her clinical services who would also be an independent contractor.
In Atlanta, Georgia, Karen Davis Warren was having a conversation with her attorney about starting a private practice without a traditional employee salary structure. “If I’m paying a salary, I’m essentially working for my employees. I have to make sure to meet my payroll each pay period. I asked the attorney, how do you guys do it? We then essentially came up with a percentage of collections for the physical therapists.”
Karen was joined by Blair Green, who ultimately became a partner in One on One Physical Therapy (see “Incorporating Autonomy into Your Private Practice Business Model,” Impact, August 2013). Together they feel they provide an amazing environment that encourages both financial and professional rewards to their employees. “I want the PTs to own their documentation, as well as be intimately involved in the billing and authorization process. I tell them, it’s not over when the patient walks out the door. There’s a lot more to getting paid than just treating the patient.” One on One Physical Therapy employs their therapists, but pay is determined by individual therapists’ collections.
In talking with the owners, it becomes clear that they all are “out of the box” thinkers. Many practices include complimentary therapies, and wellness / fitness programs such as Pilates, Gyrotonics, Red Cord, yoga, or structural integration. They all stress the importance of extensive training for front desk staff. Asked how they determine when to schedule a new evaluation with a certain therapist, the owners said that often the patient makes the request, and the patient is often a family member or a friend of a previous patient. This indicates good internal and word-of-mouth marketing. If a specific physical therapist is not requested, the front desk staff is trained to ask questions to determine a patient’s needs. These include particular diagnoses for specialists needed and time of day requirements, as well as availability of the therapist. All owners mentioned the importance of understanding their state’s independent contractor rules and being very specific in the employment contracts, spelling out use of equipment, payment policies, and any marketing responsibilities. Taking time to find the right person is critical, as these payment programs may not be for everyone.
A major concern for therapists who are paid on collections would seem to be the variance in payments, such as per diem rates versus fee-for-service. However, the owners felt they balanced each other out fairly well. Many monitor this metric monthly, and if one clinician seems to be getting a higher percentage of lower paying contracts, they can adjust the therapist’s percentage accordingly.
The pros of a risk-sharing payment system definitely outweigh the cons in these owners’ minds. Comments like “owning the entire patient experience,” “therapists have a right to know where their salary comes from,” “increased sense of autonomy and financial opportunities,” and “heightened awareness of outcomes” summed up the advantages seen for the physical therapist. From the owner’s standpoint, the sweet spot is where sharing the financial risk of running a business meets providing an environment for growth with colleagues.
It’s important to note that each of these practices started with their model in place and did not transition midstream. As many staff physical therapists tend to be risk averse, switching employees to a new system would require additional processes. Change is a challenge for many people, but in the current health care environment, it may be inevitable.
Deb Gulbrandson, PT, DPT, is an Impact editorial board member and owner of Cary Physical Therapy and co-owner of Gulbrandson Orthotics in Cary, Illinois. She can be reached at firstname.lastname@example.org.
Ruth Backway can be reached at email@example.com. Cheryl Wisinski can be reached at firstname.lastname@example.org. Karen Davis Warren can be reached at Karen@onetherapy.com. Blair Green can be reached at Blair@onetherapy.com. Deena Gooman can be reached at Fit2BMom@pacbel.net.