Last week, WebPT published a blog on The Consolidation Myth: Is the Independent PT Private Practice Really Going Extinct?
This blog—written by Erica McDermott—discusses the topic of consolidation in physical therapy and presents research data to prove whether private practice is going extinct within the industry.
Private practice is, in fact, a thriving market! There is, and will always be, a demand for private practice physical therapists. However, there is a major shift happening in the industry towards consolidation. Many large physical therapy practices are snatching up smaller businesses—but this isn’t necessarily a bad thing!
President of WebPT, Heidi Jannenga, says, “Physical therapy is ripe for consolidation.” Meaning, NOW is the time to figure out what is going on in the PT industry and where you fit in.
Physical Therapy Industry Data
WebPT conducted an industry-wide survey and collected more than 5,200 responses from rehab therapy professionals (you can download this survey here). This data collection consists of, “the rehab industry’s demographics, trends, frustrations and motivations.”
In summary, the majority of survey-takers were “small-to-medium-sized” practices. “Small, independently owned practices account for roughly 45% of the entire rehab therapy market,” (IBISWorld). Most respondents only had one location and fewer than 10 employees. However, it is expected that the number of multi-location practices will increase over the next several years, based on previous trends in other healthcare sectors.
PT Market Trends
McDermott explains that large PT organizations, and those “backed by private equity dollars,” were negotiating acquisition deals more than ever before. Because “the healthcare market [and specifically physical therapy] has never been more saturated with consumers,” and “physical therapy represents a $30 billion industry with an annual growth rate of 7% within the US,” private practice acquisition is a highly lucrative investment move for qualified buyers.
Due to increasing pressure for compliance and strict regulations, private practice owners are consolidating and the industry overall is becoming more complicated. This sentiment was echoed by many influential people in the PT industry. So, large organizations are making moves to meet their numbers. Heidi Jannenga says, “one of the easiest ways to do that is to start merging with—and/or acquiring—smaller practices.”
Jannenga also notes that hospitals are quickly acquiring private practice PT clinics to focus on the cost and quality of their patient outcomes.
The great thing about consolidation right now is how different it looks from past years. Rather than “hired CEO guns” at the head of these mega-corporations and PT groups, you have business-minded PTs maintaining power within the industry.
Options for Independent PTs
McDermott and Jannenga stress the importance of understanding industry trends and getting your financials in order if you haven’t already. You should know the following (at least) about your business:
- Your company’s valuation (i.e., its worth)
- Your goals as they relate to your business (e.g., would you prefer to keep it at its current size or expand?)
- The amount of money you need to reach your goals
- The role you would like for yourself within your business going forward (i.e., are you ready to move on to something new, or would you like to remain involved?)
- The type of arrangement that would most benefit you, your family, and your staff—both personally and professionally
- The values, vision, and culture you want the other person, team, or company to uphold
Once you have an understanding of the points above, you can better evaluate potential negotiations regarding your practice. If you can get “trustworthy, business-savvy, and legal-minded individuals” on your side, it will be easier to determine where you fit.
If you choose to remain solo—that’s okay! There will always be a market for the private practice PT. However, it is suggested that you evolve in terms of the value you deliver to your patients. Many PTs think the only way to combat the challenges of declining reimbursements and increasing costs and competition, is by increasing patient load. However, this is NOT the way to make more money. A shift towards valuable care and prevention is the answer. Click here to see how Independent Physical Therapists Have the Power to Change the Future of Healthcare. This is the only way you will be able to bring in new patients, improve patient satisfaction and compete with large corporations.
The physical therapy industry is already in flux, and there is no time to waste when it comes to guaranteeing the future survival and success of your practice. You may have the opportunity to join a peer-to-peer network of PTs or even acquire smaller practices—depending on your situation. Either way, it’s time to figure out what is going to keep your practice thriving.
If you’d like to see the original WebPT article, click here.