Thank you for your continued work and advocacy for our profession. I have admired you and your group for a very long time and try to emulate many aspects of your business.
I've always been interested in implementing productivity-based pay. However, a few factors in our area make it challenging:
1. *Compensation Expectations vs. Reality:* No therapist in our area currently earns $85,000 annually. Yet, physical therapists are requesting three or more weeks of vacation and salaries approaching or exceeding six figures.
2. *Financial Margins:* Our current margins are $95 per visit, with patients scheduled in 40-minute slots.
3. *Productivity Calculation:* Factoring in vacation, sick days, and holidays, annual production is based on 47 weeks. With a 90% show rate, a therapist's annual production is approximately $241,110. If I were to pay 35% of their collections, their annual salary would be $84,388, which is significantly less than the $95,000 plus bonuses they are seeking.
This calculation also represents a best-case scenario. We frequently encounter challenges such as missed authorizations, errors in verification due to the increasing number of plans and employer-managed care plans, and various methods insurance companies use to deny claims. Even if this only accounts for 1% of claims, it is still a significant factor. Furthermore, we are now experiencing "payer-induced reductions" in our commercial insurance reimbursements, and I am concerned about the potential impact if Medicare continues its 3% reductions over the next five years.
I agree with the premise that we need to change how we practice. As a business owner, this means finding ways to increase our return on investment (ROI) with our staff, which is why I am exploring a paradigm shift. A 2:1 or even a 2.5:1 ROI for a clinician is dangerously low when you add on all the operational costs of a physical therapy practice. I totally agree with the clinician being paid 30-35% of their productivity. However, this rate will be significantly lower than the current salary expectations in our area.
It's interesting to note that when I visit my PCP, dentist, or orthopedist, I don't observe many differences from decades ago, apart from technological advancements. In contrast, many of the advancements we make in physical therapy, such as FDN or laser therapy, often do not get reimbursed.
Thanks for the detail, happy to drill down this using your figures if you like. The comp is inclusive of vacation-they take off, less days they get less revenues thus less collections. I think you would see increased production in this model (intended consequences) and the comp can be tiered (e.g .first 100k is 25%, second is 30%, third is 35%)-point being not to be locked into 30%. I do understand the regulatory challenbges-comp aligned helps because repeated errors on the PT end, hurt collections. Trust that the PT will be checking collections a bit more often than they do now when it is their model-exactly what happens in primary care, dental, etc. etc.
PTs that can engage with empathy and have a solid clinical base are rare and come with dynamic and volatile needs. They are easy to identify and the people that you can build a magic team around via agency and aligned incentives.
Great article Larry. Our goal should be to make our profession and colleagues THRIVE not just survive. I think the most powerful part of this article is the point that we are still operating like it is 1985. If we want our profession and our colleagues to THRIVE vs just SURVIVE we need to approach challenges with foresight and solutions and I think this article is on point with how we solve the workforce crisis, student loan crisis, AND profitability challenges our practices face.
On the other hand I've offered incentive plans & partnerships that have been turned down because the PT's didn't want to take on the risk/responsibility.
Yep, culture has to change. One consequence of this model is that PT's will in essence be in their own private practice within a practice whether they want to or not!
This may be a painful shift but right now the pain appears less - like the frog in water that eventually boils them away... Time to get out of the pot and go through a ripping off of the bandaid versus the slow journey to a boiling pot we are on now!
Once again Larry you are thinking way ahead... Who will step forward and help us get to a tipping point?!?
As an aside I bet more "owner type" PTs improve our ability to fight low(ering) reimbursement as well.
Waiting to see discussion about the pending shifts of us to mobile PT practices and how this is one solution that will help drive clinical deficits. I’m currently a Director at a level II trauma center who will retire in the next 5 years. I specialize in joint replacement rehab and will probably market a mobile practice to Ortho MDs. I think choosing a specialty like our MD colleagues is our next transition so this directly aligns with your opinion.
Hi Larry,
Thank you for your continued work and advocacy for our profession. I have admired you and your group for a very long time and try to emulate many aspects of your business.
I've always been interested in implementing productivity-based pay. However, a few factors in our area make it challenging:
1. *Compensation Expectations vs. Reality:* No therapist in our area currently earns $85,000 annually. Yet, physical therapists are requesting three or more weeks of vacation and salaries approaching or exceeding six figures.
2. *Financial Margins:* Our current margins are $95 per visit, with patients scheduled in 40-minute slots.
3. *Productivity Calculation:* Factoring in vacation, sick days, and holidays, annual production is based on 47 weeks. With a 90% show rate, a therapist's annual production is approximately $241,110. If I were to pay 35% of their collections, their annual salary would be $84,388, which is significantly less than the $95,000 plus bonuses they are seeking.
This calculation also represents a best-case scenario. We frequently encounter challenges such as missed authorizations, errors in verification due to the increasing number of plans and employer-managed care plans, and various methods insurance companies use to deny claims. Even if this only accounts for 1% of claims, it is still a significant factor. Furthermore, we are now experiencing "payer-induced reductions" in our commercial insurance reimbursements, and I am concerned about the potential impact if Medicare continues its 3% reductions over the next five years.
I agree with the premise that we need to change how we practice. As a business owner, this means finding ways to increase our return on investment (ROI) with our staff, which is why I am exploring a paradigm shift. A 2:1 or even a 2.5:1 ROI for a clinician is dangerously low when you add on all the operational costs of a physical therapy practice. I totally agree with the clinician being paid 30-35% of their productivity. However, this rate will be significantly lower than the current salary expectations in our area.
It's interesting to note that when I visit my PCP, dentist, or orthopedist, I don't observe many differences from decades ago, apart from technological advancements. In contrast, many of the advancements we make in physical therapy, such as FDN or laser therapy, often do not get reimbursed.
Best regards,
Earl
Thanks for the detail, happy to drill down this using your figures if you like. The comp is inclusive of vacation-they take off, less days they get less revenues thus less collections. I think you would see increased production in this model (intended consequences) and the comp can be tiered (e.g .first 100k is 25%, second is 30%, third is 35%)-point being not to be locked into 30%. I do understand the regulatory challenbges-comp aligned helps because repeated errors on the PT end, hurt collections. Trust that the PT will be checking collections a bit more often than they do now when it is their model-exactly what happens in primary care, dental, etc. etc.
PTs that can engage with empathy and have a solid clinical base are rare and come with dynamic and volatile needs. They are easy to identify and the people that you can build a magic team around via agency and aligned incentives.
The other 90% will continue to serve the fries….
Does your practice do magic or fries?
Great article Larry. Our goal should be to make our profession and colleagues THRIVE not just survive. I think the most powerful part of this article is the point that we are still operating like it is 1985. If we want our profession and our colleagues to THRIVE vs just SURVIVE we need to approach challenges with foresight and solutions and I think this article is on point with how we solve the workforce crisis, student loan crisis, AND profitability challenges our practices face.
agree 100%, we have to think “PT First” not just for accessing care!
I agree with all your points.
On the other hand I've offered incentive plans & partnerships that have been turned down because the PT's didn't want to take on the risk/responsibility.
Yep, culture has to change. One consequence of this model is that PT's will in essence be in their own private practice within a practice whether they want to or not!
This may be a painful shift but right now the pain appears less - like the frog in water that eventually boils them away... Time to get out of the pot and go through a ripping off of the bandaid versus the slow journey to a boiling pot we are on now!
Once again Larry you are thinking way ahead... Who will step forward and help us get to a tipping point?!?
As an aside I bet more "owner type" PTs improve our ability to fight low(ering) reimbursement as well.
Very valuable information, thanks Larry
Very insightful, Larry - thank you.
I agree with the ethos of the piece. However, I think most PCPs would disagree with this:
"Dr. Johnson, Primary Care Physician ... Nobody’s micromanaging her treatment plans."
Waiting to see discussion about the pending shifts of us to mobile PT practices and how this is one solution that will help drive clinical deficits. I’m currently a Director at a level II trauma center who will retire in the next 5 years. I specialize in joint replacement rehab and will probably market a mobile practice to Ortho MDs. I think choosing a specialty like our MD colleagues is our next transition so this directly aligns with your opinion.
yes it does! Best of luck, great idea
yes it does, good luck to you, great plan