Show Me the Green: Top 5 Reasons to Switch to a Cash Pay Model

close up of united states seal

Twelve private practice owners discuss direct pay model on revenue, profitability, and job satisfaction

By Liz Plowman, PT, DPT

With the cost of running a practice on the rise and third-party reimbursements declining, practice owners are challenged to run a profitable business and provide quality patient care.

Reimbursement rates for physical therapy services are steadily declining with fewer services covered. The Centers for Medicare and Medicaid Services (CMS) have reduced physical therapy reimbursement by a few percentage points each year along with multiple-procedure reductions, sequestration reductions, and the physical therapy assistant differential, wherein any service provided 10% or more by a physical therapy assistant is only paid at 85%.1 While private insurance companies statistically reimburse “physician services” higher than Medicare reimbursement rates at an average of 143% (range 118%-179%), there are several cases of private insurance contracts reimbursing at meager rates (e.g., $37 per visit), only approving minimal services and/or encounters, and requiring a lengthy pre-authorization process resulting in denials and delays in care.2

Patients pay more in monthly premiums and annual deductibles with less coverage. According to Forbes, the average monthly premium for an individual health insurance plan ranges from $928 for a “Bronze” plan to $1,336 for a “Gold” plan (before tax credits or subsidies, if the individual is eligible). Copayment and co-insurance responsibilities are also on the rise, effectively giving patients less coverage at a greater cost to them.3

According to the APTA website regarding direct pay practice models, “cash-based models can allow physical therapists to avoid restrictions placed on their services by third-party payers that interfere with their ability to help patients reach their goals. Another benefit of this approach is avoiding the cost of collecting payment from third-party payers and the difficulties in negotiating rates with insurance companies that may undermine the financial viability of a physical therapy practice.”4 For these reasons, more private practice owners are turning to a direct pay model.

I surveyed a group of 12 private practice owners from several states across the US as well as from the UK and Ireland about why they chose a direct or cash-pay model compared to a “traditional” third-party reimbursement model. While the practice settings were diverse (orthopedic, neurological, pelvic health, pediatric, etc.), and the practice locations each had issues specific to locality, five principal themes emerged.


A practice can specialize in quality (one-on-one, high-end care), convenience (mobile visits, concierge model), or affordability (low cost, pro bono). It is feasible to specialize in one with possibly a secondary, but one cannot specialize in all three. A practice cannot offer the highest quality in one-on-one care with all of the “bells and whistles” at the lowest cost. It would only be in business for a short time if it did. That’s the equivalent of staying at the Ritz Carlton Hotel but paying for a room at Motel 6. It does not work in the hospitality industry. Why should it be expected in the healthcare industry? By operating under a direct pay model, a practice can generate revenue sufficient to support high-quality one-on-one care or offer the convenience of a concierge-style practice. However, with declining reimbursement rates from federal, state, and private third-party payers, a practice that primarily takes insurance (provided they are billing ethically, which is a conversation for another piece) must make up the difference in revenue in volume. There is absolutely room in the market and a need to provide cost-effective care in order to serve patients who cannot afford the higher prices of direct-pay clinics. However, one cannot get a first-class seat on an airplane on a basic economy fare. For a clinic to play the high-quality or convenience game, it cannot also play the low-cost game.


Suppose physical therapists and physical therapy assistants are in a practice that has sufficient revenue to pay a better salary. In that case, the practice owner can better recruit and retain a highly qualified clinician. By not seeing 3-4 patients at a time, clinicians can better provide higher quality care, spend real time with their patients, and have less documentation and administrative burden in the day. Burnout is a real phenomenon, and clinicians are quitting or “quiet quitting.” If a private practice can generate revenue sufficient to support a lower-case volume, clinicians will be able to practice at the top of their skillset — the way they were trained to in school, giving each patient their full time and attention, researching evidence-based intervention appropriate to each case, and not being completely wiped out at the end of the day. Happier employees are more likely to stay. And in the age of “quiet quitting,” retaining good employees is more valuable than ever.


When billing insurance, the practice owner hopes to be reimbursed for services in two to four weeks (hopefully), but this process can often take longer, resulting in aging accounts receivable. The third-party payers control when they will pay, how much they will pay, and whether or not they will cover the services you have already provided (regardless of “pre-authorization” status). As a business owner, you have no way of reasonably predicting your revenue, which makes it difficult to budget with any accuracy. In a direct or “cash” pay model, the patient pays at the time of service, and there is no aging A/R. The business can set its rates based on its financial goals and the local market and have a predictable revenue stream without the guesswork.


When someone pays for a service, particularly if it is a sizable investment, they are much more likely to put in the effort to get the most out of that service than if it is free or low-cost. People will pay high session fees to a personal trainer because they know they are more likely to be more committed to their fitness plan if they are financially invested and if they have someone holding them accountable. The same holds in physical therapy. If a patient understands the value of the service and is willing to invest financially in their health, they are far more likely to comply with the plan of care, attend and actively participate during appointments, and perhaps even perform the home exercise program. Under the insurance model, the patient is responsible for the copayment (if the clinic collects at the time of service), which may be only $25-$30 (though copays are generally rising). Without the same level of financial commitment, it is easier for the patient to “blow off” physical therapy. Or patients who are “just here because the doctor sent them” are less likely to buy into the services your practice offers and, therefore, less likely to be compliant and committed. However, under a direct pay model, the patients understand the value of the services they are purchasing, are more likely to show up and participate, and complete a plan of care rather than dropping off early and claiming that “physical therapy doesn’t work.” Overall, the direct pay model may fill the schedule with more committed patients that recognize the value of physical therapy services and genuinely want to be in your clinic.


So many times, physical therapists evaluate a patient and determine an appropriate, evidence-based plan of care only to be told that the patient’s insurance provider does not cover certain services (e.g., dry needling), will only cover an inadequate number of visits, or will not allow specific codes to be billed together during the same encounter. In many cases, a provider will ask a patient to pay out of pocket for these services. But if a patient won’t do that, or if the insurance company’s contract states that the patient cannot receive those services, then the provider is forced to provide the care the insurance company dictates, not the care that is in the patient’s best interest. With a direct pay model, the provider has no contractual obligation to the insurance company and, therefore, is only bound by state laws and the practice act and not by the insurance company. This allows the physical therapist to provide the best possible care based on what the patient actually needs, not what their insurance company says they can have.

Many private practices operate successfully under a direct pay model. The practice owners surveyed for this piece reported general satisfaction with direct pay, namely because of the ability to provide high-quality care to committed patients with timely and fair payment for services. 


1American Physical Therapy Association. “Position Paper: PTA Differential.” Published March 2, 2022.

2Lopez E, Neuman T, Jacobson G, Levitt L. “How Much More Than Medicare Do Private Insurers Pay? A Review of the Literature.” KFF. Published April 15, 2020..

3Masterson L, Menga M. “How Much Does Health Insurance Cost In 2022?” Forbes Advisor. Updated August 24, 2022.

4American Physical Therapy Association. “Cash-Based Practice.” Accessed December 18, 2022.

action item
Liz Plowman, PT, DPT

Liz Plowman, PT, DPT, is the owner of Pain Boss Physical Therapy in Spring, Texas. She can be reached at

*The practice owners interviewed for this piece have shared their opinions under the condition of anonymity. The views expressed in this piece are those of the individuals surveyed, not necessarily the author.

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

Are you a PPS Member?
Please sign in to access site.
Enter Site!