Negotiating Physical Therapy Reimbursement Rates in 2024

Negotiating Physical Therapy Reimbursement Rates in 2024

Successfully negotiating physical therapy reimbursement rates

How One Practice Increased Physical Therapy Reimbursement Rates by 15%

Private practice owners have been hit with a double blow over the past few years. Inflation has driven a significant increase in operational costs. At the same time, the physical therapy industry as a whole has experienced reimbursement cuts:

If you think there’s nothing you can do about physical therapy reimbursement rates, you may be surprised.

While many practices have seen profit margins decrease, Kinetix Physical Therapy in Gainesville, Florida has almost tripled revenue in the past six years. One of the key components of their success has been their ability to successfully renegotiate with insurance providers. This has allowed them to secure better reimbursement rates.

The practice has been able to increase PT reimbursement rates by an average of 15% over the last couple of years.

At Breakthrough’s recent Patient Demand Summit, Tony Cere, Co-Owner at Kinetix PT, shared his exact experience with renegotiating reimbursement rates. You can watch that session or continue reading for the key takeaways.

Tony Cere, Co-Owner of Kinetix PT, shares his experience renegotiating physical therapy reimbursement rates

Growth Oriented Practice Seeks to Increase Physical Therapy Reimbursement Rates

Tony and Melissa Cere opened Kinetix Physical Therapy in 2008. At the end of 2016, Kinetix PT partnered with Breakthrough to help them compete locally and grow. They attribute great gains in their business to this partnership.

In just two years, Kinetix PT’s revenue doubled from $950,000 to $1.8 million and expanded the size of their clinic. And that was just the beginning.

In 2022, they grew to $2.8 million in revenue and are now opening another clinic. This will allow them to double their current practice size.

Working on the Business, Not In It

As part of the Breakthrough community, Tony learned the importance of focusing his time on his responsibilities as a business owner. This meant backing out as a full-time clinician. This transition proved to be a real game-changer. As a result, he is able to identify revenue growth opportunities. One of the most valuable activities he is now able to spend time on is negotiating better physical therapy reimbursement rates with insurance providers.

In 2020, Kinetix PT—like everyone else—saw expenses increase and reimbursements continue to decrease. There seemed to be little light at the end of the tunnel. Their saving grace? At the time, it was cash-based services. By adding cash-based services such as Lightforce lasers, foot levelers, diagnostic testing, and MSK ultrasound, Kinetix was able to provide significant buffer to its profit margin. Last year, Kinetix PT brought in around $340,000 in cash-based revenue.

However, as a physical therapy practice, the Ceres felt the practice should be profitable without relying on cash-based services. These added services should only cushion their already-healthy revenue. So they took a closer look at their payer mix and average cost per visit.

A Shocking Revelation About Physical Therapy Reimbursement Rates

When he dove into the numbers, Tony realized they were actually losing money by seeing patients with certain insurance providers. It was time to decide to either drop those payers or renegotiate their contracts.

The Process of Negotiating Physical Therapy Reimbursement Rates

The Ceres decided they would try contract negotiations first. The process was challenging and required significant commitment and perseverance. But Tony says it’s one of the most valuable things he’s done for the practice. It’s helped to secure healthy physical therapy reimbursement rates. Not only for 2023, but for years to come.

Tony started negotiations with one of their biggest payers. It made up 35–40% of their patient population. The process entailed multiple rounds of trying to find (and then reach) the right contact person within the insurance company.

Tony set up detailed presentations stating their case. He showed the significant inconsistencies between reimbursements for their private physical therapy practice and other institutions such as hospitals. The report also included figures explaining how some patient visits were actually draining practice finances due to the low reimbursement rate. He highlighted cost increases over the past few years and the lack of reimbursement adjustments to compensate.

Frustrated with declining physical therapy reimbursement rates? Discover effective strategies for negotiating reimbursement rates.

The Results of Contract Negotiations

Tony conducted continuous follow-ups and escalated their request to more senior staff members at the company to get noticed. Eventually, it worked. He negotiated a 10% increase annually in 2021, 2022, and 2023. This totaled a 30% increase over 3 years and raised their per-visit reimbursement with that payer from $62 to $83. Factoring in the volume of patients over 12 months, this improvement has had a noteworthy impact on their revenue.

Tony followed the same procedures with other network partners. He achieved some reimbursement increases from these as well. Results have been mixed. But even a $5 reimbursement increase per visit adds up to a great improvement over 12 months.

9 Steps for Renegotiating Your Physical Therapy Reimbursement Rates

Private PT practice owners are all facing the the same challenges Tony and Melissa have tackled over the past few years.

But most don’t realize they can do something about it.

Tony and Melissa’s perseverance and strategic approach shows us there’s hope. Try applying these best practices to achieve the same success negotiating with insurance providers.

1. Identify the payer(s) you want to negotiate with

Prioritize negotiations with the insurers that have the highest patient volume and lowest reimbursement rates. Payment levels can vary significantly amongst different providers.

2. Decide what rate you would need

Look at your revenue per visit and cost per visit. Decide how much more revenue per visit you would need for a healthy profit margin. For instance, Tony aims to make 20% revenue on top of the cost to see the patient.

3. Find the right person to talk to.

Tony recommends talking to the provider relations department of your insurance carrier. Aim high and get in touch with the most senior-level contacts you can.

4. Be persistent in your outreach.

This process takes time. You may not get a response right away. They may even say no. But keep going. Contact them by phone and email. Keep following up regularly until you reach someone who is willing to talk. If needed, set up a follow-up schedule for yourself. Once you have success with one company, it can give you further motivation and hope for others.

5. Gather your data.

Once you get a meeting with the insurance carrier, ensure you have all the necessary data. Use figures to highlight that current rates are non-viable for a private physical therapy practice to provide high-quality care. Your numbers should include PT total compensation costs per unit, per patient, and total per visit costs. Organize it clearly and concisely in a graphical format (such as PowerPoint) for maximum impact.

6. Write a letter to your contact requesting a rate increase.

Include the following steps, 7 through 9, in your letter.

7. Make it clear how you are a benefit to your community.

Show how you excel above your competitors in the area. Use patient reviews and testimonials if available. Emphasize your differentiators and high success rates. If your practice is great at physical therapy marketing and attracting patients, highlight that as a differentiator.

8. Explain how your business costs have increased.

Support this with documentation. Show how the current physical therapy reimbursement rates you’re receiving from them are causing financial losses for your practice. If you haven’t received a reimbursement increase from this payer in a long time or ever, be sure to note this.

9. Describe how financial losses negatively impact your patients.

Reiterate that a fair and sustainable reimbursement structure is crucial for deliver high-quality care to the insurance company’s members. Express your commitment to providing exceptional care.

Perseverance is Key

Many practice owners believe their practice is too small to negotiate with payers. But in fact, payers can benefit by working with you. Even with an increase in your rate, they’ll still be reimbursing you less than what they pay to hospitals.

If you set out with a well-formulated argument and willingness to persevere, follow up, and persevere some more, you can successfully turn your bottom line around with better payer physical therapy reimbursement rates.

Get Support to Increase Your Physical Therapy Reimbursement Rates and Improve Profit Margins

Running a physical therapy practice is harder than ever. Inflation, declining reimbursements, and decreasing physician referrals require practice owners to step up their commitment and innovate if they want to succeed.

If you’re reading this, my guess is that you’re looking to increase profit margins and gain financial stability.

You don’t have to reinvent the wheel. Many practice owners have achieved success and want to share their knowledge and experience with other practice owners to benefit our industry as a whole.

That’s why Breakthrough has launched a new program called Profitability Under Pressure: A live 13-week masterclass exclusively for PT practice owners.

Through weekly calls, templates, group support, and one-on-one guidance, you will:

  • Conduct a financial analysis for your practice
  • Create a custom plan to increase your profits
  • Discover how to drop your lowest payer and renegotiate insurance contracts
  • Learn about the different cash-based services available and how to implement them
  • Start systematically attracting better-paying patients
  • Create consistency in your patient volume flow year-round

As part of this program, you’ll benefit from structure, accountability, community, and the accumulated shared knowledge of dozens of practice owners.

Click here to learn more and apply for Profitability Under Pressure.

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