Measuring business success usually comes down to one question: are you making money, or are you losing money? In the face of declining payer payments and staffing shortages, it is becoming increasingly difficult for rehab therapists to remain profitable on their balance sheets. That’s why we’re seeing more and more clinics looking to a hybrid business model (not to be confused with a hybrid model of care) to help maintain their financial health.

Adopting a hybrid business model can help clinics grow and reach more patients, but implementing this model has no shortage of compliance issues. So, to help shed light on this topic, we chatted with PT Brian Gallagher, Founder and President, MEG Business Management, to give you some essential information on how to make a hybrid physical therapy (PT) business model work.

What is the Hybrid Business Model in Physical Therapy?

The classic fee-for-service (FFS) model that defines in-network insurance has left many practices insolvent, forcing them to find new revenue streams. To address this, some practices have gone the route of offering cash-only payment services, or going completely off-network (OON) with insurance providers. Unfortunately, these approaches risk alienating patients and even tightening referral channels.

Gallagher recommends a hybrid business model of 80 percent traditional insurance reimbursement and 20 percent cash, health and other services, where therapists can gain additional revenue streams and expand their potential patient base. As Gallagher outlines, greater access allows you to take your clients on their journey from patient to gym membership to maintenance program, and capitalizes on the fact that “65% of patients in the top 10% of clinics in the U.S. come from returning fact business. ”

What are the best practices for converting to a mixed model?

Once you’ve decided on a hybrid model, there are some best practice guidelines to follow for a smooth transition. Managing a hybrid PT practice should be no different than starting a traditional private practice, and the first steps to getting started are developing a business plan and implementing it.

Design the right model for you.

As Gallagher explains in this blog post, the business design for your hybrid practice can take many forms. For example, subscription or membership programs (i.e. Silver, Gold and Platinum) are a great way for patients to move from an insurance model to a cash payment model after completing an End of Care (EOC). Alternatively, you can choose the à la carte route, which offers separate cash-only pricing for one-on-one wellness classes, personal training, dry needling or rehab services. We should note that patients with OON insurance still have rules to follow – such as fee schedules – but there are a number of avenues for your services to be paid for.

Draft pro forma.

What is test preparation? According to this blog post from Harvard Business School, test profiling “uses hypothetical data or assumptions about future values ​​to predict performance for periods that have not yet occurred.” In other words, you are planning how your hybrid model will bring about revenue and how much, and compare that hypothetical forecast to your current model.

Your pro forma mix model should outperform traditional models. When creating your pro forma, it is important to keep in mind that the revenue percentage for in-network insurance will remain the same, but will increase with the cash-based model and OON insurance.

Send a clear message to patients.

Figuring out how to get patients into your hybrid practice requires a marketing approach with a clear message that helps both parties grow, and knowing how to do this is critical.

Nurturing one practice grows another.

A big trap some hybrid practices fall into is adopting the wrong marketing strategy.As Gallagher puts it, “One of the biggest mistakes I see is people opening 5,000 square foot clinics with artificial turf. [and] Health/Fitness services and then marketing directly to consumers while also focusing on increasing the number of traditional physical therapy patients – meaning they are now spending twice as much on marketing. Instead, Gallagher recommends focusing on marketing one segment and then letting that segment drive internal referrals and advocacy for both businesses.

For example, if you serve a large Medicare population, your marketing efforts should focus on these patients and their in-network benefits. Once they reach the discharge point, they can join your cash-pay membership program or other hybrid offerings. Conversely, if the population around your practice is more health-conscious and willing to pay out-of-pocket for these services, market to that population while accepting in-network referrals.

How do you ensure consistent quality of care?

Just because one of your affiliate businesses is in-network and another is cash-based doesn’t mean the quality of care should be different. Regardless of patient type or payer source, PTs are expected to always perform at the highest level of their license. To help rehab therapists continue their excellent care in the new business model, here are some dos and don’ts to keep in mind.

Make your employees available and ready to participate.

Depending on the needs of specific patient and payer types, including the timing of procedures and the frequency and duration of patients, you will need some flexibility in staff hours. Providing services during non-traditional hours may be necessary for some patients, and providers who primarily treat Medicare patients may choose to receive services during the midday hours that many seniors prefer.

Providers also need to adopt the right mindset to treat a variety of patients. For example, patients paying cash may assume that their treatment will be provided by an experienced practitioner, perhaps specialized. On the other hand, traditional PT patients may be less concerned with experience or titles and more concerned with the quality of care they receive.

Educate staff to empower patients to make decisions.

Once a patient arrives at your practice—whether by accident or through your own efforts—you want them to be able to make an informed decision about whether they should choose insurance or cash-for-service services and the compliance implications of each option. That means your staff needs to be well-versed in the pros and cons of each option so they can help educate patients to make the right treatment decisions.

Patients with high copayments or deductibles are a good example of how a little education can go a long way. When it comes to insurance plans that — let’s face it — don’t offer much coverage, the cash-out option becomes even more appealing. Even better, by making these types of decisions, patients now have a sense of autonomy and ownership over their health.

Additionally, the therapeutic alliance between patient and therapist provides the perfect bridge to transition patients from traditional PT discharge to cash-based continuum of care services. The trust and relationship built during the EOC process is a real connection between the patient and their provider that can be used for further engagement.

Develop effective communication and collaboration strategies.

For most people, change is difficult—even for the better. But you can build strong relationships with employees and get everyone involved by adopting the following strategies:

• Answer the “why” of creating a hybrid business;
• Involve your team in the transition process;
• set measurable goals;
• celebrate team victories; and
• Communicate with your team regularly.

Provide comprehensive training and support.

Your hybrid PT practice needs to include ongoing training and support to keep therapists and front-of-house staff fully engaged in running a hybrid business. Understanding the different nuances of in-network and cash payment options requires employees to know:

Feedback on the performance of your hybrid PT business is encouraged.

As you venture into this brave new world of revenue diversification, remember that every business should always be looking to improve. Use and leverage NPS scores and Google reviews to provide valuable insights into your pain points and enhance your marketing strategies. And allow teammates to provide feedback on your business’ successes and shortcomings, which in turn will foster intrapreneurship across all revenue verticals.

Don’t get caught up in your regulatory pants.

As with any business, regulations and laws apply. Although you should already have most of the boxes ticked in your private practice business plan, you should be aware of some key compliance issues of running a hybrid business.

• When providing in-network and OON services under one insurance company, two tax identification numbers (IDs) are required for the insurance contract and certification.
• If your business plans to offer in-network and OON services under the same insurance company, they will need to have separate mailing addresses and business names to accompany their tax ID numbers. Having two separate physical spaces (such as Suite A and Suite B) is the first choice to avoid any regulatory issues with Medicare or other payers.
• Providers treating patients under an in-network insurance tax number should be registered as Medicare providers, whereas therapists serving OON/cash patients will be Medicare non-participating providers.
• If Medicare patients want to pay cash for services, they can only pay cash for non-covered services, at which time an Advance Beneficiary Notice (ABN) should be issued and signed. There are some loopholes to be aware of, but as Dr. Jarod Carter explains, consult a compliance lawyer before proceeding.

Physiotherapists have been calling for regulatory and insurance issues to be addressed for years, and this is the case. A hybrid PT business model is exactly the type of creative thinking every business should be doing in order to stay in the game. Aligning your workforce and business plans while marketing and cultivating one practice to grow the next will allow you to take advantage of what in-network insurance has to offer and blend it with the versatility of cash payments. By doing this, clinics everywhere can set themselves up for long-term success.