1

The Future of Payment: Perspectives from the Field

dollar bills turning to dust

Forecasting payment in physical therapy

By Craig Phifer, PT, and Kristen Wilson, PT, DPT

Reimbursement is a hot topic in physical therapy and has been for the past many years. Below are the thoughts of three
leaders in our industry on how payment decline will affect our profession. Many thanks to our contributors for their
perspectives:

Grant Koster, PT; Former Senior Vice President of Clinical Operations, Athletico Physical Therapy

Jarod Carter, PT, DPT; Owner of cash-based practice Carter Physiotherapy

Ken Guzzardo, PT, DPT; Owner of 3-Dimensional Physical Therapy

Emily Hoertz, SPT

What do you think is going to happen in the next five years regarding payment for our profession?

Grant Koster: Payment will continue to be front and center for our profession. The ability of the profession, as well as
individual organizations, to continue to clearly articulate their value will be paramount. Traditionally, we haven’t
done a great job demonstrating this through data to the owners of the healthcare dollar. There are groups like the
Alliance for Physical Therapy Quality and Innovation (APTQI) that are shaping the narrative for decision-makers to
influence the awareness and data on value in physical therapy with government payers. We must continue to provide our
value to stakeholders, including consumers, payers, and employers. Value is driven when people get to the most
appropriate landing spot for their condition and achieve the best outcome when they are there.

There are also plenty of people trying to disrupt traditional channels of healthcare, and rightfully so. We shouldn’t be
fighting against one another, but rather partnering to tell our differentiated story about physical therapy. Then, when
achieved, outcomes will be rewarded with increased new patient flow and increased payment. This raises the floor and the
ceiling of the profession in my opinion.

Jarod Carter: I think the exact same thing that has been happening for three decades is going to continue happening.
Third-party-payer payment for physical therapy services will continue to decline as our costs of doing business
increase. According to Albert Einstein, to expect a change in this relentless trend is the definition of insanity.

Ken Guzzardo: Payment will probably not increase anytime soon! Insurance companies are facing the same stressors to turn
a profit and combat rising costs as we are. As much as we think that insurance companies are the bad guys, they have the
same challenges that we have as far as running a business (although they have more control than we do on the revenue
side!). I believe larger companies will have the leverage to negotiate higher rates from insurance companies, while
smaller businesses will be squeezed out. Just like we’re seeing with the physical therapy assistant reduction, I believe
insurance companies will look for ways to reduce payment and go after companies they believe are fraudulent with billing
or providing services.

How is the future of payment going to affect our profession as a whole?

Koster: Our company is partnering with several employers and benefit administrators to help improve member/employee
outcomes and generate cost savings for musculoskeletal conditions. These programs focus on differentiated access to
care, aligned metrics, achievable targets, and getting patients to the most appropriate site of care to manage their
condition effectively.

As healthcare continues to make strides in value-based healthcare, we see physical and occupational therapy as the
leader of musculoskeletal management. While many payers are focusing efforts on things like bundled payments for surgery
as a cost-containment strategy, we believe it’s important to avoid those high-cost services, when possible, by early
intervention of appropriate and high-quality care. When we align incentives and get patients into therapy earlier, they
have better outcomes and lower overall costs for their musculoskeletal episode of care.

Carter: Only large corporations and hospital systems will have the negotiating power to maintain decent payments for
services. Small private practices that continue to rely primarily on in-network reimbursement from third-party payers
will continue to get squeezed by declining reimbursements. I believe those small practices will be forced to do one of
three things:

  1. Sell to a larger entity.
  2. Go out of business.
  3. Drop low-paying contracts and increase their cash-pay revenue.

So over time, we will see a growth of larger physical therapy entities and cash-based/OON practices, but not much will
be left in between.

Guzzardo: Unfortunately, I think payment reduction will have a huge negative impact on our profession. Already, physical
therapists are coming out of school with six figures of debt, but starting salaries are far lower than other medical
professions that have similar or less education required. This troubling debt-to-income ratio is creating negative
feelings toward physical therapy. New grads are choosing to take positions that may offer a few thousand dollars more
but have very high productivity requirements, or they may take a second or third job just to save to buy their first
home. This will create burnout among our newly graduated physical therapists, leading to ineffective and uninspiring
treatment plans, which will lead in turn to cheapening our profession as a whole. Our patients should come away from
their physical therapy experience being blown away by the care, attention, and expertise their clinician was able to
provide. Anything less than that is a disservice to our patients, our peers, and ourselves.

What is currently being done to manage payment challenges at your company?

Guzzardo: In 2018 we decided that if we didn’t increase our revenue per visit, our company would not exist in its
current form by 2023. We were committed to not increasing volume to generate revenue, as we believed that the patient
experience was paramount to our success. We also knew that we couldn’t just complain about our reimbursement; we had to
do something. Here are some things we did across the company:

  1. Improved our billing practices. Our billing team is the best in the business. We focused on educating our billing
    team to ensure that we’re maximizing the return on our claims.
  2. Implemented detailed insurance checks. We verify benefits before each visit and collect copays and deductibles. Our
    front desk teams are collectively at a 98% collection rate, which saves us time and energy tracking down payments on the
    back end.
  3. Trained our therapists on billing codes. We ensure our therapists are well-versed in how to bill effectively and
    accurately. We emphasize not overbilling while making sure that we are not leaving any meat on the bone.
  4. Negotiated new contracts. Through organic growth of our company as well as the formation of the Independent Physical
    Therapy Associates, a collective group of like-minded small practices, we have more than doubled our total number of
    offices as well as our geographic coverage. This has enabled us to get a seat at the table to renegotiate our rates, and
    our data and outcomes have been able to get us an increase from several of our main payers.
  5. Focused on our why. We have our company’s mission and core values hanging in each office, discuss them at our monthly
    meetings, and emphasize them on a daily basis. It is easy to want to stray to make an extra buck, but once you lose your
    why, you have nothing to fall back on. Your community and staff will see the change in your company philosophy, and that
    may result in irreversible damage to your reputation. Any decision we make as an organization must be in line with our
    mission and core values even if it doesn’t turn into an immediate profit.

Koster: Collecting payment at the time of service is imperative, because when a patient leaves the clinic, the
likelihood of collecting their portion drops significantly. With the increase in high-deductible health plans, it’s
important that clinics provide education on patients’ benefits, cost estimates as to what they might owe, and payment
plan options. We have many tools in place to assist the clinicians and front office team to collect open balances from
patients.

Our company also partners with a third-party vendor to provide e-statements and paper statements with QR codes for easy
payment. As we continue to evolve with launching our patient portal, it will allow an even deeper and more real-time
integration and awareness for the patient regarding their balance.

Lastly, our payer relations team is engaging with willing partners to discuss our value and outcomes while understanding
rewards and risks on both sides. We must be willing to be innovative, vulnerable, and ready to lead through the clinical
decision quality and operational plans to be a successful partner.

Carter: My practice is 100% cash-based, so we don’t have payment challenges related to insurance. We set our rates to be
nicely profitable while paying our staff well, and our patients pay us at the time of service.

Do physical therapists need to diversify revenue streams in the future or just tighten up on the main service line?

Koster: Payer mix diversification can absolutely be achieved through opening the door as wide as possible to the
communities you serve. At Athletico, we have over 50 different service lines that all have unique rehab needs,
utilization, and payer mix Net Revenue Per Patient Visit (NRPVs). These services range from dry needling to pelvic
health to workers’ compensation and employer solutions, to name a few. They all support the ecosystem of serving the
communities we partner with in outpatient rehabilitation. Our goal is to cultivate the best and most passionate
clinicians and support that further with continuing education and mentorship so we have the type of clinicians they’d
want treating them! When you can unleash the strengths and passions of your clinical team by investing in their skill
sets and then widen the door to the community by doing so, that is a winning equation. To tie it back to payment, if you
can prove that you are the best landing spot for “X” type of patient, you can then tell that story to the community and
be rewarded for it with more patient flow.

Guzzardo: There is some credence to the hedgehog concept, but there is also the potential need to change your game plan
if the environment or the game has changed. We are big believers in only selling or recommending services that we
ourselves would use and in doing what is best for our patients and coworkers. If there are additional revenue streams
that fit with your company’s mission, then by all means, look to diversify. If these revenue streams would take you away
from your why, then you should probably look at tightening up on the main service lines. Our practice has done an
amazing job over the last several years in terms of growth in size, revenue growth, and revenue per visit growth without
adding additional revenue streams.

Carter: If you don’t diversify revenue streams and increase revenues that are not reliant on third-party payers, you
will end up having to choose between selling to a larger entity or going out of business. With that said, there’s still
certainly an argument for also tightening up systems and components of your main service line, as long as that doesn’t
involve providing lower-quality care, less time spent with each patient, or burning out your staff.

What’s clear from all of our expert contributors is that the payment challenges we face today are not going away.
Therefore, we also wanted to see how these challenges were perceived by students and what they’re doing about it.
Fortunately, our own Impact Board member Emily Hoertz, SPT, provided insight into how declining payment has already
affected her and her classmates.

A Physical Therapy Student’s Reflection on Payment

Emily Hoertz: Payment trends and the impact on our future careers is a topic that is talked about frequently among my
classmates. Throughout physical therapy school, we discussed salary and payment trends, but not in significant depth.
When you think about your future as a physical therapist, unfortunately the prospect of needing to pay off your student
loans accompanies that thought. Many of my classmates were initially interested in the outpatient setting but began to
consider inpatient and home health due to the potential for a higher salary.

We do learn about payment in school and on clinicals, and we are starting to piece together how decreased payment could
affect us. It is becoming a significant factor all physical therapy students must consider. Unfortunately, it will
become an even bigger factor in the future, but I’m also hoping this can open up alternate revenue avenues. I’m not
positive what those look like, but I do believe in our ability as a group to find innovative solutions to problems.
Some may look toward cash-based practice, but I’m not sure what that entails for future physical therapists regarding
payment, either. I personally want to work in an outpatient clinic, but I also know that means I probably won’t be paid
as much as others. A big takeaway for physical therapy students and new graduates should be to consider how we can
change the public’s view of physical therapy.

I know it would be difficult to change the views of insurance companies. However, for individuals who don’t know much
about physical therapy or who have a distorted image of what physical therapy has to offer, I think we play a vital role
in shaping that image and potentially creating a new outlook on our profession as a whole.