A loss leader (in retail) is a product that is priced less than it's cost to produce. For example, Office Depot might advertise reams of copy paper at $30.99 for a case for a catalog order but the Office Depot web site has that same case for $44.99.
Office Depot will take an up-front loss in order to get you to use their catalog. They are counting on higher order volume (more items) with each catalog order.
The catalog represents a fixed-cost investment that Office Depot must amortize through higher order volume. The Office Depot web site is a relatively low-cost distribution channel that can be profitable on lower sales volumes.
What has this example got to do with physical therapy private practices?
Physical therapy private practices are fixed-cost investments for their owners. The owners only get paid back on these investments when revenues exceed costs.
Once your fixed costs (such as rent, salaries and utilities) are met you must still pay variable costs.
The variable cost to treat the Medicare Advantage patient is the cost of the ultrasound jelly you smoosh on her neck.
That's not very much.
Medicare Advantage rates are (still) higher than the one smoosh of ultrasound jelly.
You make more money than you lose when your reimbursement rates exceed your variable costs of keeping your doors open.
Cash is King
Physical therapy practice owners with full-time employees realize that pay day comes every two weeks whether or not cash is in the bank or not.
High-volume Medicare Advantage patients on your caseload prevents your employee physical therapists from sitting idle.
Yes, Medicare Advantage pays less than Medicare.
Yes, you will lower your profit margin (but you will survive).
Yes, you may ask your physical therapist employees to see more than one patient per hour.
No, you may not use aides to treat your patients (any patients - not just Medicare patients).
How, you may ask, should a struggling PT private practice owner survive?
My recommendation...?
Find out why your patient hurts.
Make the physical therapy diagnosis.
Treat the cause of their pain.
Treat the actual change in 'body structure and function' that has lead to their painful, dysfunctional state.
Tell them why they hurt and why they can't lift things up and why they can't walk more than a city block.
You must have the skills and the ability to measure deviations from normal that qualify your patient for physical therapy.
The growth in physical therapy over the last 30 years is a real trend that reflects real demand.
The value of physical therapy is undeniable.
The cost of physical therapy, however, is climbing and is subject to policy and political whims.
Physical therapy will not go away with changes in Medicare reimbursement rates.
Your physical therapy practice may go away, though.
Change is inevitable.
What will you do to create the future for you, your patients and your country?
To learn how to measure, diagnose and treat your patients better get this free tutorial.
