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Potential income in private practice

 
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Potential income in private practice - March 13, 2011 1:20:41 PM   
USPHSPT

 

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Joined: April 26, 2007
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Hello all,
its been a while since I posted. At any rate I have a question about what is the potential income one can generate in private OP practice in the U.S? I know its not all about income, all of the other benefits/reasons have been considered and now the one left blank for me is whether this would be worth the stress, risk from a financial return perspective.

Im a PT active duty in the service and will be retiring in about 9 years, private practice has always been a dream of mine. Unfortunately potential income in OP practice is such an enigmatic, taboo question, that I really have no one to be candid with me other than perhaps this forum.
With your response could you tell me how many patients /week would it take to generate that income, and if that is take home?
Thank you for your responses.
Post #: 1
RE: Potential income in private practice - March 14, 2011 5:41:23 PM   
Eric E Douglass, PT, DPT, OCS, FAAOMPT

 

Posts: 69
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If you take a one Physical Therapist office and that therapist averages ten patients per day at an average reimbursement of $80 dollars per visit, that therapist will generate $800.00 dollars per day, $4,000.00 per week and therefore $208,000.00/year. The trick, therefore is in keeping your costs at as low a percentage of this potential income as possible. Charles Felder (?) has done some great benchmarking studies related to average cost/visit, reimbursement/visit and profit margins in Private Practice PT clinics around the country and has presented these numbers at the Private Practice Section meetings on occasion. You should be able to find him through a google search. I have been in practice now for ten years and would be happy to answer any other questions you might have, you can find my e-mail at www.douglasspt.com. Good Luck!

(in reply to USPHSPT)
Post #: 2
RE: Potential income in private practice - March 14, 2011 7:01:29 PM   
USPHSPT

 

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Joined: April 26, 2007
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Eric,
Thank you for your response, this obviously is not taking into acct the rent, utilities, malpractice insurance, marketing etc. Perhaps a net of low 100's is more like it. I suppose the real income generator comes from adding additional staff. Great website by the way. Your credentials plus ECS certification is what Im hoping Ill have once I get out of the service. I really think having the additional skills set/credentials really make your practice stand out Especially when incorporating the latest EBP. Looks like youre havng some fun and being your own boss....! congrats

Take care
Post #: 3
RE: Potential income in private practice - March 14, 2011 9:08:13 PM   
SJBird55

 

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From: Michigan
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I don't think the answer is that easy. I think you need to know the payer mix and the contracts you would be accepting. You would need to know generally how you treat patients. Do you tend to practice where patients are in the clinic 15 minutes? 30 minutes? 45 minutes? What billable codes to you tend to use most frequently? You'd also need to know the demographics of the area... and have an idea what the insurance policies the subscribers in the area tend to have. You'd need to know if networks are closed or open to new providers.

I look at things differently than Eric. The name of the game is to have every 15 minute slot filled with a patient and providing a billable service. I don't care if a patient attends 15 minutes or 60 minutes. If the slot is filled AND treatments really are achieving outcomes then 10 patients a day might be erroneous. To be conservative, chart out a low paying code that you tend to use, like say manual therapy. Let's say, for ease of discussion manual therapy is reimbursed $25 per unit by the lowest paying payer. Assume 100% of your day is full of providing manual therapy to this lowest paying provider. The most one-on-one codes you can bill in a day is 32 units, right? So... at your lowest paying code that you might use, that gives you $800/day at 100% capacity. 100% capacity is a dream... it might not happen... so what's more realistic? Say 75%-80% of full capacity. That gives you $600-$640/day. That's $3,000-$3,200 per 40 hour week. That will bring $150-160,000 for 50 weeks. Okay, that is a LOW figure and I think to be conservative you do want a low figure - whenever you do an evaluation, you just increased your revenue; whenever you do therapeutic exercise, you just increased your revenue. Sadly, if you really do use evidence in your practice, the difficult aspect is keeping a full load. Patients aren't attending 3x/week for 4 weeks. Those metrics are outdated. I don't know a metric on the volume of patients you need when you do use clinical evidence in your practice - all I know is patients are graduating from physical therapy in a quicker turn around time and you are needing people in your doors at a faster rate. That fast turnover rate puts holes in your day... I joke with patients and tell them there is daily charge until they find someone to take their place!  LOL ;)

Personally, when I opened my doors, I didn't use someone else's benchmark data. That makes no sense. The majority don't practice evidence based practice... the majority aren't measuring their outcomes. I spent time self-reflecting on how I practice and the codes I tend to use when I sat back and thought about whether I could generate enough cash to own a practice in the location I was focused on with the patient population and contracts in the area. I compete with the hospital (my ex-employer) so I also did some thinking to see if the community could afford to have 2 clinics offering physical therapy services.

Yes, there is increased income generated when additional staff is added, but there is also increase costs associated with adding staff. In my opinion, the *real* income generator is when you can break away from traditional physical therapy and offer services where the client pays out of pocket for the service. Whenever you have an opportunity to ditch a third party payer and the opportunity has value to those in your community, you'll diversify your business in a more financially positive way.  Think, ummm... balance and falls (Tai chi)... or reducing ACL injury by doing some short performance course to athletes... reducing lower extremity problems with runners by doing gait analysis and altering gait patterns and creating programs to improve hip strength... bone health...

(in reply to USPHSPT)
Post #: 4
RE: Potential income in private practice - March 15, 2011 7:46:19 AM   
USPHSPT

 

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Thanks for perspective SJ,
I was thinking that something else to consider is reimbursement rates, which I hear average 65-75%. I know its quite difficult to offer ball park estimate of revenue for this business, but its nice to know a hypothetical successful range and a not so glamorous range. I think Eric was providing a ball park hypothetical estimate, assuming a 100% reimbursement rate...correct?
With Erics scenario If I add more staff, If still have to pay salary benefits etc, Would it be fair to say for any additional staff added bring in an additional 50% take home revenue?
With all of the associated costs, risks I often think if it would be more financially rewarding to work for the military as a civilian PT, their salary range is usually in the six figures and with my military retirement added I think that I could bring in close to what a small OP PT clinic makes. I met a PT lady once who told me her small clinic brought in about 100-150k. To be honest for what PTs are compensated these days It may not be worth the stress, and risk if take home is close to what I could make by simply providing PT services. Civilian PTs in the military start at 100k.

Thanks for the discussions!

(in reply to SJBird55)
Post #: 5
RE: Potential income in private practice - March 15, 2011 9:25:15 AM   
Eric E Douglass, PT, DPT, OCS, FAAOMPT

 

Posts: 69
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Hey US, thanks for the compliments on the website,

Let me add that SJ is absolutely correct in that all of the things she mentioned need to be considered, what I presented was a starting point scenario, i would disagree with her as to the importance of looking at benchmarks, the data related to cost/visit vs reimbursement/visit is very useful and what you will find is that the profit margin for most clinics is much less than what the general public and especially the general public of staff PT's might imagine. Benchmarks also show you information such as ratio of salaries to rest of expenses, space utilized/PT and so on. You will find salaries as your biggest expense followed by space costs (lease vs. own). I have ten years of data on my facility, we have 7 PT's, all manually certified or working on it, we are 65% medicare, see all of our patients one on one and are out of network with all insurance except BCBS (have not been able to bite that bullet yet but ortho net is driving me to the edge). I can tell you that in my clinic a new grad, new to the clinic, will generate between 120-140k in their first year and will increase that revenue by about 5% each year until it flattens at a point that is based on the number of hours the individual is willing to work, especially in season. We base our wage/salary benefit package on being able to afford to pay a Therapist between 40 and 50% of what they generate and still keep our doors open (another area where benchmarking helps). It is not easy, you can make more money doing home health, and doing it badly, but, anyway, hope this was helpful.

(in reply to USPHSPT)
Post #: 6
RE: Potential income in private practice - March 15, 2011 4:18:13 PM   
SJBird55

 

Posts: 3332
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From: Michigan
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The numbers I used were the reimbursed dollar amount.

I guess the benchmarks aren't really needed, in my opinion. If you know the reimbursed amount and you know how you practice, you can guesstimate the revenue generated. Then, you just gotta crunch your anticipated monthly or annual expense. I think you need to be careful with adding any new staff. In my mind, how the new staff practices will be important too. I mean, if you hire a PT who tends to charge 4 units per hour, but those units are ultrasound, hot packs, electrical stimulation and manual therapy - you're screwed. That PT isn't providing services that will provide the optimal outcome AND those procedures reimburse horribly. IF you decide to pay this therapist say $50-60,000/yr plus all the benefits, you're going to run your company into debt. I just think benchmarks are over-rated. The devil is in the details and benchmarked numbers aren't detail oriented enough, in my opinion.
Post #: 7
RE: Potential income in private practice - March 22, 2011 9:34:03 PM   
Physiogenius

 

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If you're doing it just for the money it's not worth it, but with you I don't think that's the case. What you need to do is a business plan, it may seem a little hokey at first but it should answer all of your questions.

That being said....just go for it! A Physiotherapy clinic is a relatively low risk venture. If you don't do it you'll probably regret it for the rest of your life.

(in reply to SJBird55)
Post #: 8
RE: Potential income in private practice - April 8, 2011 2:37:47 PM   
SSPTnFL

 

Posts: 34
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USPHSPT,
Another thought to throw in the ring here. Are you planning on doing this solo or have you entertained a corporate partner that can complete the research, financial pro-forma studies, development and operational support? There are a significant # of variables that have been posted and all have a factor in a private practice clinic making it. TX is a good state for reimbursement, FL is not. There is a $15-20 net rev per visit swing between the 2 states. The single biggest factor is volume. Can you grow a business quickly with the relationships you have and will build to generate the required volume to generate (+) cash flow? If you don't have that then you don't have an open business in any field/profession. The average clinic will run $150,000 to $2000,00 to start up also if you look at pre-opening expenses and 3-4 months worth of line of credit to keep you afloat till volume creates (+) cash flow.

(in reply to Physiogenius)
Post #: 9
RE: Potential income in private practice - April 9, 2011 1:51:52 AM   
ehanso

 

Posts: 392
Joined: September 15, 2004
From: Minnesota
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Many states have a small business development office that can give you great information and assistance in setting up a business plan and even help find financing.

(in reply to SSPTnFL)
Post #: 10
RE: Potential income in private practice - June 14, 2012 7:53:54 AM   
amoskowitz

 

Posts: 3
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Wow! I am shocked to see how little people are making as owners of practices. Are there any innovative models being rolled out into the industry? What I've seen in California is that people are working more hours and are not able to make all their hours during the week. Would it make sense to add a premium to services offered on the weekends?

Thanks,

Aaron

Physical Therapy.Com

< Message edited by amoskowitz -- June 14, 2012 7:56:23 AM >

(in reply to ehanso)
Post #: 11
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