Rick Gawenda's Ascend Appetizer: A Budget Plan to Nourish Your Practice

There are many events and meetings that I (and other PT movers and shakers) look forward to each year, but the one that holds a special place in my heart is WebPT’s Ascend conference. If you can only attend one annual event, make it Ascend. I've enjoyed attending since its inception in 2014, and this year will be no different.

As with any conference I attend, I am often bombarded with questions about new regulations and billing conundrums. As I expect this trend to continue, I chose to speak this year on a topic I feel many small private practices are sorely lacking sound knowledge of budgeting and business finances. This may surprise some of you, but just over half of small businesses in the US use a budget, and based on conversations I have had in years past, I am willing to bet that number is even smaller for rehab therapy practices. So to get Ascend attendees—or any new private practice owners—ready for 2025 budgeting, here are five reasons why every private practice needs a therapy practice budget plan.

1. A therapy practice budget plan sets you up for success next year

Although most practice owners and managers didn’t get into private practice because they loved the business side of PT—it certainly wasn’t for the margins—the most successful private practice owners will tell you they couldn’t do it without creating a budget for the year ahead. Without a business budget, you have no way of preparing yourself or your staff for the upcoming year regardless of what headwinds (rate cuts anyone?) or tailwinds you encounter.

Better still, having a business budget for the upcoming year will empirically tell you what needs to be done for future business success, and what key performance indicators (KPIs) you need to track to ensure that success becomes a reality. Managing your business finances effectively, including budgeting, tracking expenses, and separating personal and business finances, is crucial. You can even level up your budget a bit more with a monthly or quarterly budget.

2. A budget plan clearly shows you where your money comes from

In the simplest of terms, determining your income-per-visit is a key metric that must be tracked and differentiated. Why? Well, in 2024, getting paid for rendering treatment to patients is a lot more complicated than just sending a superbill to the patient or insurance company. Play a game of “Eeny Meeny Miny Moe’’ and whichever commercial insurance company you land on is likely to have different rules and regulations from the rest, including payment-per-visit.

For example, one insurance company may pay for services based on the Current Procedural Terminology (CPT) codes that dictate units and the respective values of each treatment and intervention while other companies may only pay a flat rate per visit—regardless of the number of units and time you bill. Within each of these two distinct payment methods lies a great deal of uncertainty that you keep a metric for to accurately reflect what your actual cash flow is. (That’s not to exclude other forms of income-per-visit like cash pay offerings, direct-to-employer contracts, and more, that further complicate your cash flow picture.)

With a steady tab on your income-per-visit numbers, you should have a decent idea of how much money you will make in the coming year—and catch that tiger by its toe. But what good is that number if you don’t know where those funds are going after they’re received? Reviewing your bank statements to track and categorize expenses is crucial. This helps identify all expenditures, including forgotten ones, and deduce both regular and one-off costs for budgeting purposes.

3. A therapy practice budget helps you understand exactly where your money is going

Perhaps just as important—or the ying to income-per-visit’s yang—is the business metric cost-per-visit. How much money must you spend to be able to bill for one visit of physical therapy? This number is less influenced by insurance companies and more so reliant on the nuts and bolts of running your own private practice—and other expenses.

It is crucial to distinguish between personal expenses and business expenses when managing finances in a private practice. While individuals may be familiar with budgeting for personal expenses, creating a business budget involves different considerations and essential costs that must be accounted for separately to ensure the practice's financial viability.

To start, the largest piece of overhead affecting your cost-per-visit is staff wages. Not only do you need to account for the treating therapists, but you also need to factor in front office staff, aides and technicians, and any other ancillary staff that do not have a direct treating role, but function as a part of your private practice.

On top of that, there are added insurance regulations where therapy assistants are paid less for their services compared to the licensed PT, OT, or SLP. But don’t stop there! You must still factor in how much an assistant costs vs the supervising therapist. If the assistant takes a $15 hit to payment—hello CO/CQ modifiers—but is $20 less in wages compared to the supervising therapist, having the assistant on staff can still make a good deal of financial sense.

Once these numbers are known you should also consider factors like utilities, malpractice insurance coverage, office space, and other expenses so you can collect on the income-per-visit noted above.

4. A budget plan set for the year gives you the best chance to attain financial goals

Once you have a budget for the next year set and ready to go, you should try to stick to it as best you can regardless of what happens in the future. Hopefully, you have a monthly or quarterly budget to use for short-term challenges like sudden staff shortages due to parental leaves, but even more, permanent staff losses should not change the KPIs you set forth for the coming year. 

Additionally, having a set budget will allow you to reset your table and see if a current or new insurance contract is a good one. When vetting different insurance contracts on whether or not what is offered is a good business decision for your practice, you need a budget to know where that specific red line is between earning money and listing money—not to mention the possible pros and cons of going in-network or out-of-network with a payer. For many years, PT private practices have been too complacent in accepting outright bad contracts from insurance payers and this is partly to blame for some of the extrinsic strains we see in staff turnover and wages today. By budgeting for next year and being a more astute practice owner, you will create an environment for business success while keeping your palate fresh for growth.

5. Bonus: Learn more at WebPT's Ascend 2024 in Chicago

Managing the budget and business expenses of a physical therapy practice is not easy, nor is it much easier to sit down and read for hours on end to get all the need-to-know facts about running said business. I find it much easier to soak up knowledge from my peers and other industry leaders when I can see them in person, hear them in person, and—most importantly—network with them in person. 

So, come see me—and other professionals in the rehab therapy industry—at Ascend in Chicago September 12-14, and get more details on how to set your own private practice up for success in 2025 and beyond. The menu is full this year from private practice gurus tackling leadership development to innovative technology-infused presentations all curated for your long-term success. 

More Therapy Practice Tips and Tricks...

To hold your appetite over for therapy practice business tips, WebPT’s Intelligence Hub is a free resource to supplement your clinical expertise and business budgeting menu. The Medical Group Management Association (MGMA) is also a valuable resource for comparing budgets and utilizing industry benchmarks. From the simple start of opening and running a private practice to resources for your marketing efforts, WebPT is here to help you achieve therapy practice success, find more clients, and create the ideal private practice for you.