4 Strategies to Combat Shrinking Reimbursement in Physical Therapy

If there’s one thing we can all agree on, it may be this: profit margins in outpatient physical therapy are slim. And with average physical therapy reimbursement rates either staying stagnant or decreasing, this trend doesn’t look like it’s going to be reversed any time soon. The frustration I hear most often from clinic owners is that they lack control over third-party reimbursement rates. A lot of advocacy—spearheaded by the APTA, and especially the Private Practice Section—has come out of this widespread frustration. The issue, though, is that advocacy is a slow-moving beast (and insurance companies may be even slower moving), which means it may take years before we see an identifiable change to our reimbursement rates.

As a profession, we have a long-term plan, but what about your plan as a clinic owner? What are your strategies for combating shrinking reimbursements and continuing to direct your business down the path to success?

Obviously, calling up insurance companies and fighting to get your rates increased is an option, albeit probably not a very effective one. So, like any entrepreneur, you have to be resourceful and find creative solutions.

To help you do just that, here are four strategies you can use to improve your clinic’s efficiency and start increasing those profit margins today:

(Note: You’ll notice a trend throughout this post: I offer strategies, explain their importance, and talk about how to measure them. But, I’m purposely staying at a high level and shying away from giving step-by-step implementation advice, because I believe the most important thing you can do is start measuring baseline data. The solutions to these problems are highly contingent upon your clinic’s unique characteristics. With the right data, though, you’ll be able identify the steps you need to make to improve.)

1. Convert prospective patients into actual ones.

This may seem pretty simple, but successfully converting your prospective patients into actual ones is vitally important to the success of your business. Conversion is the process of taking your leads (i.e., people who are not yet patients, but are considering utilizing your services), scheduling them to come in for an initial evaluation (IE), and getting them to show up for that initial evaluation. As you would imagine, there are huge implications for a patient cancelling or no-showing their IE. Here are just a few things that take a hit:

• Your therapist’s daily productivity: IEs are typically single-booked appointments, meaning there is no one else on that therapist’s schedule at that time. That therapist could have seen one or two patients in that now-open time slot.
• Your clinic volume: An IE isn’t a standard appointment, because each one has the potential to turn into another seven to ten sessions. If your patient doesn’t come in for the IE, then you lose out on the revenue associated with all those other visits, too.
• Your clinic’s footprint: How often has a past patient referred a spouse, co-worker, friend, or child to your clinic? Every patient who walks through the door is a potential advocate who can help increase your clinic’s community presence.

Establish a baseline.

The most important thing you can do to start improving your conversions—and anything else for that matter—is to establish a baseline. So, start keeping track of:

• The number of patients who call your clinic for more information (i.e., leads).
• The number of patients who schedule an IE.
• The number of patients who show up to their IE.

This data represents your sales funnel; it will help you determine your conversion percentage and where in the process you’re losing the most leads. Additionally, it’ll enable you to actually quantify the effects of any changes you make in the future. You’ll also be able to quantify your perceived value to prospective patients. If your conversion rate is low, then you’re likely not communicating the value of your services in a way that resonates with your patients.

2. Turn 2s and 3s into 5s and 6s.

Let’s consider a hypothetical situation: your patient Bill attended his IE and scheduled a few follow-up visits. You saw him twice the following week, and everything seemed fine. But, a week or two later, it dawns on you that you haven’t seen Bill since his third visit. This is an all-too-common occurrence for physical therapists, and unfortunately, Bill’s probably gone for good. What we have here is a case of attrition. To start to understand how attrition affects your clinic, ask yourself the following questions:

• What is the average number of visits per course of care at my clinic?
• What percentage of patients complete their entire course of care (i.e., attend all of their insurance-approved visits)?
• What percentage of patients only come to one to three visits? How about three to five visits? And what about six to eight, eight to ten, and ten-plus visits?

If you don’t know the answers to these questions, it’s time to start collecting more data. Having a realistic view of how you’re doing in this department is incredibly important. Most therapists believe they’re very good at establishing relationships with their patients, progressing them through their course of care as needed, and getting them to discharge day as happy campers. But, reality is in stark contrast to these perceptions: on average, only 30% of patients attend all of their insurance-approved visits.

Establish a process.

Data on attrition—or retention, depending on how you want to look at it—is relatively easy to track, and you need nothing more than an Excel spreadsheet and someone who’s willing to update it once a week. Simply keep track of the number of visits each patient attends and the number of visits his or her insurance approved. What you’re measuring with this data is your clinic’s patient retention rate (PRR). This data will help you pinpoint where your biggest opportunity lies. For example, if you find that 33% of your patients attend one to four visits, then you know that there is significant room for growth, and by altering the way you interact with all patients during the first few visits, you may be able to reduce that percentage and drastically increase average visits per patient.

Establish your value.

For clarity, when we’re talking about average visits per patient and patient retention rates, we’re really talking about how valuable a patient finds your service. The biggest reason someone stops participating in a given activity is that he or she doesn’t see value in it. By taking a critical look at your policies and procedures during the early stages of your patients’ care, you may be able to identify areas of improvement that can significantly alter the patient experience and incentivize your patients to continue coming to their appointments. With this concept in mind, you can start turning two-to-three-visit-patients into five-to-six-visit-patients in no time.

3. Monitor true patient satisfaction.

If you’re only gauging patient satisfaction at discharge, then you’re collecting heavily biased data. After all, the only people you’re surveying have completed their entire course of care (and thus likely bought into your value proposition early on). This leads to extremely high satisfaction scores, many pats on the back, and absolutely zero actionable data. And the real reason for monitoring patient satisfaction is to identify areas ripe for improvement. In order to do this effectively, though, you need to survey every single patient who walks through your door, because collecting feedback from people who are dissatisfied with your service is extremely valuable. As Bill Gates put it, “Your most unhappy customers are your greatest source of learning.”

Establish a schedule.

To get the highest return rate on your satisfaction surveys, I recommend sending them via direct mail and email. To make this manageable, send surveys at the end of each week to a select group of patients (e.g., those who had their initial evaluation one month prior). Once you collect patient satisfaction data, you can cross-reference it with patient retention rates. Then, you can start to understand the mindset of a patient who drops out and formulate strategies to better engage this type of patient.  

4. Make sure everyone on your staff is on the same page.

This is absolutely necessary in order for the above three strategies to be successful. So, if you are considering implementing any of these strategies in your clinic, I’d suggest starting here. Converting potential patients and increasing patient retention is heavily dependent upon your ability to develop a plan, articulate it to your staff, and foster their buy-in. All members of your team—front desk personnel, therapists, assistants, and techs—should understand the plan as well as their responsibilities in making it successful.

Establish a common goal.

One of the most effective ways to unify your staff is to focus on a single metric. Let’s say, for example, that your goal is to improve your clinic’s average visits-per-patient by 15% in the next three months, which is a good example of a SMART goal. In this case, you should let the members of your staff know that everyone’s performance, including your own, is going to be measured based on whether this goal is met. From there, you can work with your staff members to identify particular areas they can work on to achieve the goal (e.g., front desk staff confirming appointments ahead of time and clinicians spending a set amount of one-on-one time with each patient). Ensuring that the people on your team know they are all working toward a common goal will promote accountability, encourage teamwork, and help improve your chances of success.

That was a lot of information to digest, I know. But, as I said at the beginning of this post, the most important thing you can do to ensure clinic success is to start measuring baseline data—today. That way, you’ll be able to easily identify the aspects of your clinic that need your immediate attention. Once you see improvements there, you can expand your approach to make positive changes in other areas, too. And be sure to celebrate milestones—both big and small—along the way. That will help keep you and your team engaged in the process.

Have you already implemented strategies that have helped your clinic combat shrinking reimbursements? If so, we’d love to hear what’s worked for you in the comment section below.