Is there a demand for cash-pay physical therapy?
In the world of health care the traditionally accepted form of payment is through healthcare insurance companies also known as third party payers. This traditional model of healthcare was initially conceived with the idea that both the health care provider and the insurance company would receive benefit from creating this relationship. 1 For the health care provider, this meant providing a steady stream of patients which ultimately brings in revenue. On the other side of this in exchange for providing a steady stream of patients the insurance companies would be able to afford the offering of discounted rates for various services – this is great because it leads to lower costs across the board. When taken at face value, it is a perfectly reasonable and beneficial relationship and remains the primary form of business for health care providers today. However, as time passes things become more complex. More and more responsibilities such as filling claims, processing, coding, and billing have gradually shifted from the insurance company over to the healthcare provider themselves. 1
With healthcare being ever changing and costs continually rising patients everywhere grow more and more frustrated with the additional fees and hoops they are asked to jump through that present in the form of co-pays. Not to mention the increasing loop holes that can render some services uncovered and limit the total number of reimbursable visits available for the patient. Through all this one thing is certain – both patients and health care providers are hungry for a solution to these various difficulties in the healthcare world. In the world of physical therapy practice these frustrations are all but absent. Cash-Based practice may be an extremely viable model to adopt to increase patient satisfaction as well as the satisfaction of physical therapists as a practitioner and potential business owner.
The Cash Pay Model
The cash-based model has been increasing in popularity in recent years as a solution the growing problems related to insurance companies. The over-arching idea behind this model is that by re-routing the cash flow in such a way that does not utilize third party payers, clinic owners can drastically cut costs because they no longer have a need to use complicated and pricey systems for filing and processing insurance claims. This model removes the insurance middleman so that essentially patients deal directly with their insurers and/or physical therapist. 2 Perhaps one of the most important differences of the cash-based model is that it emphasizes quality of care over quantity – meaning there may be fewer visits per patient but ultimately leading to better outcomes in a timelier fashion. Within this business model as one might expect, there are no co-pays. Consequently, prices may be higher at face value which will be discussed briefly later in this paper. That being said, the cash-based model is just what it seems – it is healthcare that is paid for by the patient, fully executed by the physical therapist, and offers a much more straight forward avenue for access treatment from a physical therapist.
Advantages of Cash Pay Physical Therapy
The Cash-Based model in physical therapy has its up sides, though not all are as straight forward as it may seem. Typically, in standard insurance based physical therapy practice, patients are recommended to be seen by their therapist 2-3 times per week for about 30-60 minutes per session. Not to mention the therapist is usually seeing multiple patients at once which can water down the patient-provider experience. For traditional healthcare providers who make the switch to cash-based therapy the main goal is to be able to spend more time with individual patients and provide better care while still maintaining financial goals needed to stay alive. Perhaps the single best quality of this model from the patient perspective is that if done correctly, the face-to-face time with their therapist. This increased time spent with the PT generally leads to increased overall satisfaction with care as well as improved health-related outcomes – it becomes a win-win situation all around.
There is a growing body of evidence to show there may be significant time and cost savings to be had by patients through switching to cash-based physical therapy. Depending on where you look the average physical therapy patient co-pay is $40.00, at 3 times per week that is $120.00 per week or $480.00 per month. Add those numbers to drive time, missed work or school, all for only a small amount of time to be spent with their physical therapist. According to a cash-based PT clinic called Prue Physical Therapy & Sports Performance in North Carolina – a patient could spend $500.00 for the typical month-long program which comes to about $125.00 per visit. 2 Obviously, this is a higher rate per visit when looking at co-pay prices only, but there are more variables to consider that may still make cash-based the better way to go for patients. For example, even though the total cost per visit is higher for the patient with the cash-based model the total number of visits is less while at the same time increasing the amount of time spent with the PT. This is possible because the PT is dedicated to the patients specific tailored rehab session which leads to positive patient outcomes in a lower number of visits. If it is assumed that in a normal insurance bases PT clinic the therapist spends a minimum of %50 of their time directly with each patient over the course of a four week, 30 minute per session program that means the PT will spend approximately 180 minutes with that patient. Breaking it down to the cost per minute that works out to about $2.67 per minute. On the other hand, within the cash-based model using the same numbers the patient will spend 240 minutes with the PT working out to about $2.08 per minute with the patient. 3 These numbers are all averages and every patient situation can change based on their treatment and personal insurance policy but this example points out that the cash based model has a large potential to be both cost effective and time saving – at the very least just as efficient as traditional insurance based clinics. One other issue that comes about with insurance based clinics are the potential frustrations of dealing with deductibles. For example, if a patient hasn’t met their deductible they have the potential to get stuck with the entire bill of services at the end of therapy. Conversely within cash-based PT, if an insurance company reimburses a patient at %50 of the services provided the out of pocket cost from the above scenario decreases to $250 total for the patient – essentially cutting the cost in half of what would have been spent in an insurance based clinic.
Additionally, there are benefits for the Physical Therapist as well from being part of a cash-based clinic. As mentioned earlier, the PT will be afforded the ability to spend more time with their patients and less time doing paperwork, filing claims, and dealing with insurance – the overwhelming majority of physical therapists would consider this nothing but an increase in job satisfaction. Running this type of clinic can eliminate the need to deal with insurance companies, which can ultimately lead to lower costs of overhead and remove the need to hire extra staff just to deal with insurance and paperwork logistics. It especially important for small businesses to be able to manage their overhead expenses as these can be reason many businesses shut down. Cash-based practice can solve this problem by eliminating the need to pay a percentage of its generated revenue to outsource the work related to insurance filing and policy. Furthermore, depending on the philosophy of the PT, they would not have to feel pressure to have certain modalities available at the clinic if they do not use them (E Stim, Ice, Ultrasound, etc.) – this can be another way to keep costs down, especially upon opening the facility. All of these things lead to an increased profit margin and contribute to a healthy environment from which positive patient outcomes can thrive.
Disadvantages of Cash Pay Physical Therapy
As with any business plan there are upsides and downsides to tailoring the model to fit the needs of the health care practitioner as well as the patients. Cash-based physical therapy is no exception to this rule, as there are plenty of reasons that may cause both patients and physical therapists to shy away from trying this model out. One potential downfall is that patients need to be able to truly see value in the services the PT is provided because %100 of the revenue being generated is from that patient’s pocket. It can become difficult to have to justify the costs of cash-based practice to your patients, especially when they already have health insurance provided through their work place or spouse. Adding to this, the PT may limit the population attracted to his or her clinic due to the fact that people who are willing to pay straight out of pocket for these services are often times the same people that view exercise, health and wellness as important and vital to health. This may not be true for patients being referred to rehab from different walks of life. Another disadvantage is that upon adopting this model the PT will effectively rule out all Medicare patients who are seeking rehab. 4 If the clinic is set up as a true cash-based PT office this means they will have absolutely no relationship with Medicare and those patients will not be able to seek care with the PT unless the services provided have been labeled as “non-covered”. 2 Finally, a last potential downfall to this model of physical therapy, as with many entities in modern society, is that it is still driven by money. Even though the idea is to create a better environment for both the patient and the PT, the bottom line still comes down to finances and the focus can shift away from patient centered care if not kept in perspective.
Summing It Up
Overall it seems that there are more benefits to the cash-based model than the traditional model. Of course, that statement makes several assumptions, but there is evidence that the cash-based model can deliver more from a cost-benefit perspective, from a time perspective, and from a quality of care perspective. In both models upon start up, the head of the clinic will need to have patients and good communication skills in order to grow the practice into what it needs to be. The debate between traditional insurance based physical therapy and the cash-based model is ongoing, there are many pros and cons to both. In reality it is best to keep both options around to ensure access to as many different patient situations as possible.
References
| 1. | Morrisey MA. Health Insurance. Health Insurance. 2nd ed: Health Administration Press; 2013. |
| 2. | APTA. Cash Practice: Considerations for Physical Therapists. American Physical Therapy Association. November 5, 2015. Available at: http://www.apta.org/Payment/Billing/CashPractice/. |
| 3. | Prue DK. How Using A Private Cash Pay Physical Therapy Practice May Actually Save You Time and Money. December 4, 2014. |
| 4. | Wendel A. Compliance and Cash Based Physical Therapyy Services. WebPT. July 28, 2014. Available at: https://www.webpt.com/blog/post/compliance-and-cash-based-physical-therapy-services. Accessed November 20, 2016. |