While there will always be a market for private practice physical therapy, all signs point to a continued push toward consolidation in 2017 and beyond. And this isn’t the first time our profession has been at such a juncture. In fact, in my more than 20 years as a PT, I’ve seen the pendulum swing twice. First, in the mid- to late- 1990s, whales like Novacare, HealthSouth, and Physiotherapy Associates dominated outpatient physical therapy, but many private practices still held their ground. Then, when the HMOs went bust—and Medicare non-compliance and fraudulent billing stories made the news on the daily—many company leaders fled large corporations to open smaller private practices.
Physical therapy is ripe for consolidation.
Today, due to the fragmentation of our current market—and the ever-growing pressure for providers to remain compliant with increasingly stringent regulations—we’re yet again facing a rise in consolidation. And this isn’t just my opinion; in this Rehab Management article, Sturdy McKee, MPT, the CEO of San Francisco Sport and Spine Physical Therapy Plus, noted that “the physical therapy industry is consolidating and becoming more complicated”—and that was way back in 2015. In that same article, Tim Richardson, DPT at Fyzical Physical Therapy—an organization with more than 300 locations throughout the US—and Josh Bailey, DPT at Rehab Associates of Central Virginia, concurred.
Additionally, because private equity money is still abundant and debt is still cheap, many enterprise-level organizations that accepted funding are now in a hurry to meet their growth numbers. And one of the easiest ways to do that is to start merging with—and/or acquiring—smaller practices. Even hospitals are on the hunt for new clinics to add to their dockets—especially given the rise of bundled payment models, where hospitals are being held financially responsible for the cost and quality of their patient outcomes. Hello, more consolidation.
So, what’s a private practice PT to do?
Well, first of all, if you find yourself on the receiving end of an offer to purchase your practice—whether it be a part of your practice or the whole thing—it never hurts to consider the proposal. Because once you know the terms of the deal, you’ll be in a much better position to make an informed decision—one that takes into consideration your needs as well as the needs of your family and patients. To better prepare for any merger or acquisition opportunities that may come your way, be sure you know (at least) the following:
- Your valuation (i.e., how much your company is worth)
- Your goals for your practice (e.g., do you want to keep growing it or maintain its current size?)
- What you need financially in order to reach your goal
- The role you personally want to play in your business going forward (e.g., do you want to stay at the helm or move on to something new?)
- The type of arrangement that would fit your professional and personal plans
- The values, ideas, and strategies you want in the person or company you’ll be working with
While you’re at it, make sure your financials are in order—and it never hurts to have a few trustworthy, business-savvy, and legal-minded individuals you can lean on to help you understand the details of the deal. This’ll help you not only make the right decision, but also make your way through the transition in the smoothest way possible—if you decide to accept, that is.
Remaining in private practice may require some adaptation.
If you decide to remain in private practice, McKee agrees that there’s a market for that, but it may require some adaptation. “With industry consolidation…there is an inevitable shift from volume to value, particularly for those practices who do not wish to consolidate,” he said. “This is an opportunity for PTs, if they can deliver measurable value, to drive down total costs and improve healthy outcomes.” In order to be successful in this new era of healthcare, the above-cited article paraphrases McKee as saying, “PT practices must deliver value and will need to create meaningful relationships with powerful decision-makers, such as ACOs, self-insured businesses, and more individual healthcare consumers.” As explained in this post, fruit baskets aren’t going to cut it anymore—we need data to develop these types of relationships. More importantly, we need quality data that holds meaning across disciplines as well as the technology to ensure it seamlessly transfers from one provider to another.
Technology companies are feeling the shift, too.
And speaking of technology, EMR companies are feeling the consolidation push, too. As it stands, there are simply too many siloed systems that aren’t evolving fast enough—and private investors see this as an opportunity to create larger companies with enough resources to keep up with the pace of healthcare reform. We’ve already seen examples of this: In 2016 alone, TherapySource became Casamba and PTOS went out of business. While it may not seem like these changes are positive (especially if you used PTOS), the tightening up that’s occurring in our industry will help software companies develop and launch the technological solutions—think ones that are interoperable and cyber secure—that healthcare providers need.
With all of this mind, I’m very proud to say that my company, WebPT, has never been more stable. We’re private-equity backed and number one in market share, and as a result, we’ve been able to evolve our platform, products, and support to effectively serve outpatient rehab therapy businesses of all sizes—from single-therapist practices to multi-clinic enterprises. In other words, we’re not going anywhere.
Want to know what else is coming down the pipeline for PT private practice in 2017? Check out this free webinar I hosted with WebPT’s CEO, Nancy Ham in which we discussed the future healthcare trends that will impact our industry most.