Cash-Based PT Practices?
A few months ago, I wouldn’t have thought I’d be writing a series of posts on Cash-Based PT practices, but it’s interesting how one thing can lead to another…
I had written The PT Project to enquire if they or any of their readers knew how the new Health Care Legislation would affect Cash-Based PT practices. More specifically, would it become illegal to refuse insurance if everyone is mandated to purchase it? I asked because I started a Cash-Based practice less than a year ago, which has quickly become very profitable, and I cringe at the idea of returning to an insurance-based model. The folks at The PT Project assured me that the government couldn’t force practitioners to accept insurance. They also said that many others in our field may be moving toward a Cash-Based model due to the coming changes, and then asked me to fill them in on why and how I started a Cash PT practice.
There is ample information available that details the dire situation our Social Security and Medicare systems face. I was recently reading a great article titled “The Global Budget Race” in Wilson Quarterly that eloquently describes this unfortunate scenario. To help answer the “why I started a Cash practice” question above, I’d like to include some excerpts from the article to give an overview of where we stand as a country, what’s likely to change, and how it will affect the PT field and health care practitioners in general …
“Not even its strongest proponents claim that the new health care law, the Patient Protection and Affordable Care Act, will solve our long-term health care spending problems. Even if all its provisions work as predicted, the CBO (Congressional Budget Office) estimates that over the next 20 years, it will reduce health care expenditures by ‘only’ $1.1 trillion. That’s a truly massive sum, of course, but in 2030, it is expected to amount to only a half-percentage-point reduction in total health care expenditures as a share of GDP, not enough to produce a substantial change in the long-term financial prognosis.” The authors go on to say that, “The hard work of cost containment has not even begun. According to President Obama, the new law took into account ‘every idea out there about how to reduce or at least slow the cost of health care over time.’ Barring some breathtaking new developments, perhaps in prevention or low-cost technology, future belt tightening will pose even more unattractive choices.” In analyzing the current health care reforms, it was said that, “By far the biggest ‘savings’ in the Obama health care law come from a cut in payments to private physicians, hospitals, and health care providers generally. All take a big hit under the new law – and much commentary has focused on whether political pressure will lead Congress to reverse these reductions. The long-term trend seems clear, though: Taxpayers in the future will not pay providers as much as they do now.”
Besharov, D., Call, D., (2010, Autumn). The Global Budget Race. The Wilson Quarterly, 34, 38-50.
The fact is that government spending on HealthCare must, and will, be cut drastically in the future (whether or not the new legislation is repealed or changed). There is simply no way that reimbursement levels and benefits for our growing and aging population can continue the way they are now and the system not go completely bankrupt. If you think things can continue in their current form, and without politically impossible tax increases, please contact the Congressional Budget Office in Washington DC. I am sure they would like to hear your ideas. With the coming changes, it is likely that reimbursement for tertiary services like PT will take some of the biggest hits.
Since insurance companies tend to follow suit with changes in Medicare, we cannot expect to continue making the same income that we do now using the same model we currently follow. Not only will our field see a decrease in reimbursement in the future, but patients will have less benefits and avenues for getting the treatment they need and want. Anyone out there remember the Balanced Budget Act of 1997? I didn’t have to live through it as a PT but I certainly heard a lot about it and the effects it had on our field. When I read reports like those above, I can’t help but wonder if the coming changes will be even worse … and longer lasting.
So when The PT Project asked me why and how I started a Cash-Based PT practice, there are two primary parts to the answer of Why: 1) I want to have the best possible chance of keeping a nice income doing what I love, even when the sobering changes mentioned above hit our field. 2) I want my decisions about patient care to always be 100% about what they need; not about what gets reimbursed. (as an aside… avoiding the paperwork, overhead, time, and headaches involved in dealing with insurance and Medicare is also incredibly nice).
The answer to How is quite extensive, and I realized that I wouldn’t scratch the surface with just a few short blog posts. So I’m in the process of typing as much as possible into an ebook (I’m up to 25 pages with more to go). The next few weekly posts will be book excerpts describing how I quickly created a successful Cash practice and the things I’ve learned along the way. For more lengthy book excerpts and advice (and in the near future, some video tutorials on effectively using digital and social media), visit www.DrJarodCarter.com.
Author: JarodCarter
17 Comments
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Comments
Jarod,
Great post and RESPEK! We are in an amazing position as physical therapists and our services are unmatched in my mind. In NYC, trainers often make upwards of 150 a session and here we are having to do 10x the amount of paperwork and hoping that we will see the money on the flipside. Moving to a cash based system and removing ourselves from the insurance world is critical to our profession. Look forward to hearing from you and keep up the great work!!!
Thanks Chris! Glad you liked the post. Though I would never expect most practices to convert completely to cash, I think at least adding some cash components will help to make it through the tough times likely to come. And yes, if personal trainers are often making $150/hr in NYC, I bet there are a ton of PTs who could do much better and don’t even realize it.
Is your practice cash-based, or have any cash components? If not, are there any specific questions you have about converting to or adding cash services?
Jarod,
Is the consumer receptive to paying out-of-pocket vs. utilizing healthcare benefits, or are the majority of your patients those without insurance? In my region, I feel like many individuals have a sense on entitlement and anything that is considered “medical” should be covered by their “top-of-the-line-best-insurance-in-the-world”. I agree, that people are willing to spend $ on “personal training” but have difficulty getting people to pay a copay or coinsurance, let alone a self-pay fee. What type of marketing do you do to make people willing to pay out-of-pocket? Are you based out of a clinic or do you do house-calls? The concept is great and I would love to be cash-based but not sure if the consumers in Pittsburgh are ready for this…just wondering???
Hi Joseph,
Thank you for all the questions. Some of them will be answered in more detail with the posts I’ll be doing over the next month, so I’ll try to keep this reply from being too long winded …
I’ve actually been amazed out how receptive consumers are to paying out of pocket for a “medical” service … the key is that they have to see the service as being much better than average and different in a valuable way. The vast majority (over 90%) of my patients DO have insurance. The sense of entitlement you speak of is certainly not limited to your area … I see it in Austin as well (especially when I worked at insurance-based clinics). But Pittsburgh is a city of over 300,000 people and over 2 million in the metropolitan area. So my guess is that even if only a tiny % of the population were willing to pay out-of-pocket, it would be more than enough to fill your clinic and many others as well. Something to consider is that when you own a clinic that accepts insurance, people coming to that clinic expect to use insurance. I know that sounds funny and self-evident, but what I’m saying is that the majority of the current patients you attract may no longer be your target market if you convert to cash-based services. But that does Not mean a market for cash-PT services doesn’t exist in Pittsburg. It just means you’ve been surrounded by patients that belong to a different market.
There are likely plenty who would be willing to pay cash if they felt your services were going to give them significantly faster and better results than their insurance options, AND you could get that message to those people. So “what type of marketing do you do to make people willing to pay out-of-pocket?” Well, the answer to that is pretty long … I currently devote about 20 pages of my ebook to this question. It includes everything from networking, to creating an expansive presence on the web; from magazine and online article submission, to how you increase word-of-mouth referrals. One thing is for sure though … effective marketing doesn’t have to cost much. I started my Cash practice less than a year ago and have spent less than $500 on marketing, and I don’t market to Medical Doctors.
To answer your other question, I began my practice doing house calls but fairly quickly moved to a clinic setting.
Jarod Carter PT, DPT, MTC
http://www.DrJarodCarter.com
Jarod,
Is there a way for us to speak by phone at some point. Would be curious to get you input on a couple matters and will gladly compensate you for your time. chris@chrisjohnsonpt.com
Thanks and hope you are well. Look forward to speaking
Of course! I’ll email you my number. Looking forward to it.
If personal trainers are able to charge $75 – $150 per hour for a session, I don’t see why PTs can’t do the same thing.
You’re absolutely correct Andy … and some of us do! But $75 is too cheap… unless it’s for a half hour
Thanks for sharing your experience with this model Jarod. I think patients are quickly becoming desensitized to paying for medical services after years of physicians going out of network combined with rising co-pays. The key thing for cash-based PT practices is to provide a quality service to which patients can assign great value. If we are providing one-on-one care and getting them better, most patients are more than happy to pay out of pocket!
@Bronwyn
Thank you for sharing your thoughts as well. I think you’re correct … starting and Cash Practice 10 years ago would have been more difficult when copays and deductibles were much lower on average. I have been pleasantly surprised with how few of my patients seem reluctant to pay cash. As you said, if you’re giving a high-value service, there are more out there willing to pay out of pocket than many Physical Therapists expect.
Are you a PT in a Cash-based practice?
Jarod,
Are most of your cash based patients “off the street” or referred? I live in Alabama, one of only 2 states without some form of direct access. I just want to know if having direct access and direct marketing to the public is a necessary component to your model.
Jim
@Jim
Though Texas is considered to have a form of direct access, it’s not what most would consider true direct access. We can evaluate but Not treat under the current law. So to answer your question: most of my patients are word-of-mouth referrals from other patients and non-MD referral sources, OR they find me due to my online presence: website, review sites, facebook, etc. But they All have to get a medical referral before I can treat them. So having direct access is obviously not a necessary component of my cash-based model. I do, however, think that marketing directly to the public and having a strong online presence is necessary. When new patients call in to schedule, I explain that they have to get a referral before we can get started. It’s a nuisance but everyone goes through whatever they have to in order to get the referral. When they call due to a strong word-of-mouth referral or my reviews on Yelp.com, they’re pretty serious about seeing me and are willing to jump through ridiculous out-dated hoops to do so. Hopefully those hoops will be removed soon … for every state.
Jarod,
Excellent post. What concerns me about the health care reform is the possibility of Medicare for all or extending medicare to a younger population. The reason this is a concern is because as physical therapists we are not able to “opt out” of medicare and see medicare recipients as cash-paying patients. Conversely, people with medicare can not choose to be treated by a physical therapist who is not a medicare provider and pay cash for that service. Then there is the case that we may be able to get them better faster for less money and why would that be bad for Medicare?
Aaron LeBauer PT, DPT, LMBT
http://www.LeBauerPT.com
@Aaron I’ve certainly heard of the desire to provide “medical insurance for all” but I hadn’t heard of “Medicare for all” or lowering the age of enrollment. If possible, please send or post a link to more info on this topic … that’s scary! I guess I have a hard time seeing how they could move to increase Medicare expenses when the system is already heading for bankruptcy.
And yes, the Medicare “opt out” issue is a problem for Cash pay PT but certainly hasn’t left me with a lack of patients.
PS. I’ll be featuring your practice and our Q&A at http://www.drjarodcarter.com/ soon
Jarod,
Extending or expanding Medicare has been a somewhat popular proposal, at least by the media and politicians posturing, for the health care reforms. At least it’s stuck with me since all the talk prior to Obama’s health care reform legislation, but it’s been out there for a long time. It may also be what people are talking about, but not what they mean. I just did a google search and found links from 1999. Most recently part of a proposal was to let people 55-64 buy into Medicare, but who really knows what was or is in the law now?
Universal healthcare is one thing, expanding or extending Medicare is another.
some recent posts/reports:
http://www.huffingtonpost.com/robert-reich/mr-president-why-medicare_b_848630.html
http://www.pressdemocrat.com/article/20110203/WIRE/110209877?p=2&tc=pg
from 2009:
http://firstread.msnbc.msn.com/_news/2009/12/08/4432821-congress-expanding-medicaremedicaid
http://www.foxnews.com/politics/2009/12/11/expanding-medicare-punish-health-care-providers-raise-taxes-critics-say/