Profitability in a modern private practice. What’s all that about? By profitability, I don't mean rolling in cash... I just mean generating enough revenue to cover wages and running expenses in a typical private practice clinic.
I think Private Practice Physio is facing a new challenge as we see more clinicians treating in a "high value" manner… a manner geared toward promoting patient self efficacy and self management... and moving away from therapist dependency and pathoanatomical assessment/treatment systems. I support the intention behind efforts to provide high value care. And I don’t doubt that the value of what we do lies, at least in part, in how well we can promote self efficacy, reduce dependency, avoid unnecessary imaging, avoid pathomechanical focused models of assessment/treatment etc. I also like the fact that alongside these goals, Physios are keeping in mind “big picture” values... striving for improvements in "societal health"... reducing overall societal healthcare expenditure... and attempting to broadly raise the standard of Physiotherapy.
It seems for this new wave of Physios, it’s not just about the patient they're treating, but also the impact their treatment might have on the patient's friends, family, community, and our profession. These are admirable goals to have in mind. But this approach to providing Physiotherapy can be problematic. I think there are challenges on two fronts.
Front One (high value physio who isn't doing as well as he/she thinks)
The first, is what I think is a tendency for clinicians to unwittingly "miss the mark" in their attempts to deliver "high value" care. I think these Physios are acutely aware of the type of Physio they don't want to be (overservicing, fear mongering, dependency creating). I think the pressure to avoid being a low value care provider comes mostly from social media, and perhaps also from the university curricula. It's obviously a good thing to see Physios rejecting practices that we can collectively label "low value care". But it's one thing to know what kind of Physio you don't want to be... It's another thing to know how to be the Physio you want to be. And I think this is where Physios are struggling. I suspect they enter into clinical interactions with a mindset of "If I just do the opposite of what a stereotypical low value care provider does, I'll be delivering high value care"... As if the pathway to achieving the goals of reduced healthcare expenditure, improved societal health, improved patient self efficacy, reduced dependency on treatment, reduced medicalisation of msk problems, is as simple as minimising passive care, promoting self-management strategies and seeing Patients for fewer appointments. Of course, it's not that simple. And as a result, I think we are seeing a disconnect developing between what these Physios are delivering and what Patients value.
I think the difficulty with this thinking is that the outcomes Physios are striving toward are “off the radar” for most patients. They’re kind of intangible from a Patient's perspective... At worst, I think the Patient just feels like they haven't gotten what they came for. I'd guess that a typical Patient doesn't care about improving societal health. Nor are they likely to be worried about the financial pressure on our Medicare system… at least, not at the expense of their own immediate symptoms/problem. I'm also really sure they don’t care about the overall trajectory of care standards in Physiotherapy. They just want to get their own problem sorted out. They're far more likely to value us remembering their dog's name than us not using manual therapy or minimising the number of appointments for an episode of care. I don't think we will ever see a Patient leaving a 5 star review praising a Physio for avoiding manual therapy.
So I think our (profession wide) challenge on this first front is to understand that there is a difference between the "real" value we provide (what the patient, and more broadly our society needs), versus the patient's perceived value (what they want). If we aren't meeting the Patient's perceived needs, we are all screwed. The Patient will simply vote with their feet and move onto another clinic. Weirdly enough, in these scenarios, a Physio may be patting himself or herself on the back for a job well done... Patient is discharged with all the info they "need" after a couple sessions with a detailed plan to self manage their problem. Meanwhile, the Patient is ringing around for another Practice, still seeking out what they "want", and in the process, running the risk of landing in a Clinic that provides horribly low value care.
I think these Physios need some help to sort out how they go about pursuing their goals. How can they learn to bridge the gap between what a Patient wants and what the Physio determines they need? As long as they are "missing the mark", in terms of meeting their Patients perceived needs, I think they are going to struggle in Private Practice. They will struggle to get word of mouth referrals in the community. They will burn through new Patients and will struggle to build a caseload. And they will inevitably fail in their desire to make the big picture changes they want to make... they simply won't be able to build enough of a footprint in their community to affect change on any scale. And if that is repeated across 1000s of Physios across the 1000s of clinics, I think the private practice profession itself will struggle.
But it's not just the profession wide implications. There are personal and immediate consequences for these Physios too. The likely knock on effect is that the Physio starts receiving pressure from their employer to "increase their patient numbers". As an employer, I know I certainly can't afford to "carry" a Physio on a fulltime wage who isn't able to meet each Patient at their perceived needs. The Physio will likely resist because they are already certain they're practicing in a "high value" manner. They see themselves as clinicians doing things the "right way"... they're thinking that the boss should be happy to have such a dedicated, caring, well read and up to date employee. And they'll likely conclude that the boss is the outdated one. The boss is out of line... promoting a culture of overservicing and profiteering. The very thing the Physio is most keen to avoid.
But where does the truth lie? Is the employer likely to be pushing a Physio for the sake of huge profit margins? As a clinic owner I can say certainly not. The reality is that the pressure coming from the employer is likely nothing more than an effort to not go broke. If it costs a clinic $900 to get a new Patient through the front door, and a Physio is discharging Patients after only four sessions (~ $500 revenue), the clinic is losing $400 on every new patient that physio treats. That's like a cake shop selling cakes for $20 despite it costing $30 to make it. If, at a minimum, a Physio is not bringing in enough revenue to cover the expense of each new patient, they ultimately won't be able to deliver any value to the Patient. So it's not about an employer forcing an employee to "overservice" for the sake of excessive profit. It's about ensuring that the Physio is delivering value for all stakeholders. It doesn't matter how "high value" a physio thinks their treatment is, if there is a failure to break even point on each patient, it essentially becomes no-value care because there won't exist any business from which to provide treatment.
So there is this need to strike a balance between the true value we provide patients, and the patient’s perceived value. The trick is to learn how to bridge the gap so that the treatment becomes "high value" for all stakeholders (patient, physio and business). That’s where excellent clinical mentoring is needed.
Front Two (high value physio who is doing really well clinically, but not covering expenses)
The second front is where the "high value care" Physio is able to "hit the mark" with Patients. They're doing great. The Physio successfully "sells" the idea of self management, promoting self efficacy, deconstructing unhelpful narratives etc. It really is a win for the Patient when we consider where they might otherwise end up under the care of an archetypal "low value care" provider. So, the physio is happy and the patient is happy. But... is the employer happy? Probably not. Why? The employer will not be happy if the patient has been discharged from care without enough revenue being generated to cover the expense of bringing that Patient through the front door. And from what I can gather, this is happening a fair bit. How might this story play out?
Essentially, the outcome, if left unchecked, is the same as the Physio who is struggling to meet the patient where they're at. If a Physio can't break even, they can't really expect to be employed... even if they are ticking all the boxes regarding high value care and meeting patient perceived needs. The solution here is relatively simple. The high performing, “high value” Physio needs to increase his or her fees. If each new patient cost the business $900, and a Physio is discharging a happy, self managing Patient after 3 sessions, then the fee per session needs to be $300. This is where the rubber meets the road. This where a truly "high value" provider has to have the courage to charge what they're worth.
But would the market support that price? Would a patient actually choose to pay $300 per session? What if the Patient is "fixed" after one session? Would he/she pay $900?
How much should it cost to receive truly high value care? If a Physio providing 1-3 sessions of care dramatically changes a patient’s life, saving them from falling down a rabbit hole of expensive and arguably unnecessary assessments and interventions, how much is that worth?
You could make the argument that it's worth $1000s, maybe more. It's hard to prove though. It’s hard to put a value on cost prevention. It's harder to sell the idea that a service provided today will save $$ tomorrow. That's why there's the saying in politics "There's no votes in problem prevention". Fixing a problem here and now with a tangible solution is much more saleable. And therein lies the difficulty. Would a patient pre-emptively spend $1000s on 3 sessions of physio? Probably not. It's tricky because although it is truly significant to prevent the expense of $1000s on useless assessments/treatments, the Patient will never know that. They just ride off into the sunset not worrying about their knee or back problem because it never became the expensive, life changing problem it otherwise might have become.
Compounding that problem is that, as a Physio, it feels good to know you helped someone avoid going down an unhelpful, expensive management and possibly harmful treatment journey. And because steering them in a better direction can be pretty simple when it all works well, it feels "wrong" to take a lot of money in exchange for our work. I know I feel that way sometimes. It can be as simple as saying "you're back's ok. You don't need to do x,y,z... have a go at a,b,c instead" and that starts the ball rolling for really big changes in their life. It seems like an overreach to ask a patient to pay $1000s for that. Further compounding things, is this idea that a good clinical outcome at lower cost to the Patient can be seen as a "win" in the broader battle to "reduce societal cost of healthcare".
So, on this second front, where we have high value care clinicians providing really valuable care, we have this weird situation where the basis for the pride in the work is inversely proportional to the consultation fee. How will that story end in the long run? I think what we are observing is an insidious self de-valuing of high value care providers.
While it’s easy to say the solution is simple- raise fees. It is also difficult because it involves Physios exploring some of their (probably) deeply held values around helping others. And there's also the broader goal of "reducing societal costs" to unpack too. But these are realities we have to face as providers of care in a competitive marketplace. Personally, I think the idea that we can reduce the societal cost of healthcare by, for example, seeing Patients for 2-3 sessions instead of 6-8 sessions is wishful thinking when we view the proposition relative to the massive spending on unnecessary surgeries, imaging, injections etc.
I think the best way we (in a private practice setting) can more effectively reduce useless spending in healthcare generally, is by replacing it with useful spending. I don’t think it’s the amount of spending that is problematic. It's the quality of the product being purchased that counts. If a Physio is able to deliver "high value care" and discharge a patient to effective self management within only a 2-3 sessions, and those 2-3 sessions truly allow a patient to get on with life and avoid other wasteful spending, that is a huge win for the Patient. They are getting a great outcome that they would not get in most other clinics. I think it's really important that the fee for that service should reflect the true value of that session. And we shouldn't be scared to charge our value for it.
This is the challenge for Physios on this 2nd front. If they truly are able to deliver favourable clinical outcomes in fewer sessions than other clinicians, there is a need to increase the fees charged per session. Not because the goal is to charge more for the sake of it. But because at a minimum, the expense of providing a new Patient needs to be covered. There is absolutely no value for us as providers in getting a patient to the point of independent self management if doing so falls short of breaking even.
Let's consider a hypothetical set of business numbers from a hypothetical clinic to demonstrate the point;
total expenses per year (wages, super, running costs)= $500k
profit = 0 (owners wage already included in wages above)
number of new patient per year = 600
cost per new patient = $833
Let’s say this a well run clinic with no wasteful expenses. It’s running as lean as it can. Now let's say this clinic has 3 physios who each get an even split of these 600 new patients. How much does each generate in revenue from treatment sessions provided?
Lenny see 200 new patients and generates $167k
Carl sees 200 new patients and generates $167k
Ned sees 200 new patients and generates $100k
So on a per new patient basis
Lenny generates $835 per new patient, for a profit of $2 per new patient
Carl generates $835 per new patient, for a profit of $2 per new patient
Ned generates $500 per new patient, for a loss of $333 per new patient
In this hypothetical scenario, let's say that Ned is the archetypal (successful) high value provider. He is delivering on all fronts. Patients love him. They're getting back to doing what they love. And it's all happening with an average of 2-3 sessions of treatment. Lenny and Carl on the other hand, are seeing patients for 6-7 sessions on average. They're patients also love them. And they're happy with the care they receive and the outcomes they're getting. But they just don't get the same result as quickly as Ned does.
This also seems backwards, right? On one hand we have a great Physio like Ned working his butt off to stay up to date on research and update his practice accordingly. And it actually translates into a measurable performance difference compared to his colleagues. But on the other hand, those efforts are not being rewarded with appropriate remuneration. Why? Because the wages we earn are derived from the revenue we generate, and the revenue we generate decreases as Patients become more independent. Meanwhile, the dodgy physio/chiro down the street is capturing a good chunk of the market, drawing patients into a routine of weekly manips for years on end.
I have heard stories from so many clinic owners who are stressed to the max over their employees who have been burning through new patients without generating enough revenue. The Physios dig their heels in because they're sure they're practicing the "right" way. The owners dig their heels in because they simply can't afford to carry the burden of an "unproductive" Physio. So what gives? From the owner’s perspective, I know one thing for sure. It makes me terrified to hire a new Physio!
What Can Physios do?
I think Physios who identify as being “high value care” providers need to be able to step outside themselves and consider whether they are providing truly high value care for all stakeholders. It’s not enough to simply practice in a manner that gets you plaudits from your favourite social media silo. It’s worth reflecting on your work and asking yourself, “Am I effectively bridging the gap between myself and my Patient. Have I worked out what story the Patient wants to hear? Have I worked out what story I think the Patient needs to hear? And am I able to bridge the two with a meaningful narrative and treatment plan.
If you can answer yes to all those questions, but you’re still getting pressure from your employer to increase your patient numbers, I think you have to back yourself to raise your fees. Put your high value treatment where your mouth is, so to speak. If you’re as effective as you think you are, people will pay above market rates to see you. And if doing so works well, that is a win for everyone. You generate more revenue to support your wage. Your employer stops losing sleep over your “numbers”. And the business thrives as a place for more patients to come and get better.
But if increasing your fees, scares away your patients, then you need to ask yourself, “am I really as effective as I think I am? Is my service offering as valuable as I think it is? In this scenario, I think the onus is on the Physio to decide that something needs to change. The onus is on the Physio to accept that there is more to delivering truly high value care than he/she has been shown or has learned to put into practice. It might simply be that the market itself will simply not support a higher than average fee for service. In this scenario, I think it is time for the Physio who identifies as a high value care provider to be ok with the notion that he/she is also an under performing physios. These two things can co-exist. And when they do, it is time to bite the bullet and engage in mentoring from those who can help you to learn how to deliver value to all stakeholders involved in your employment.