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Just as many physicians are questioning the future of the solo practitioner, some hospital-based therapists and administrators are wondering if the days of the private practice therapist are numbered. With increased paperwork demands by managed care organizations, declining reimbursements, and strong competition, can the private practice survive?
The answer, say therapists and consultants interviewed by Rehab Continuum Report, is an emphatic "yes."
"I think in the end that managed care has made us more efficient as outpatient providers," says Larry Fronheiser, PT, senior executive officer of Allegheny & Chesapeake Physical Therapists Inc. in Allegheny, PA, and chairman of the American Physical Therapy Association’s private practice section. "Many private practitioners have done a pretty good job of coping with managed care because it has been insidious; it just didn’t hit on January 1 like some of the Medicare provisions. So we’ve had the opportunity to adjust, figure out our costs, and take advantage of continuing education choices."
But private practices also serve Medicare patients and thus have been affected to varying degrees by provisions of the Balanced Budget Act (BBA) of 1997. Fronheiser says he typically divides private practice therapists into two groups: physical therapy independent practitioners and rehabilitation agencies. The agencies work substantially more with Medicare patients.
For rehab agencies, the $1,500 annual cap on each Medicare beneficiary’s rehab services represented a 30% to 60% reduction in the practice’s annual Medicare reimbursement, he says. As a result, many agencies have reduced the number of hours staff therapists work, eliminated staff positions, or switched therapists from a straight salary to hourly pay. (For more on the $1,500 cap, see Rehab Continuum Report, May 1999, p. 57.)
For independent practitioners, the $1,500 cap represented an increase, Fronheiser says. Those practitioners formerly had worked under constraints of a $900 annual per-beneficiary cap.
Independent practitioners also were affected favorably by a BBA provision that eliminated a requirement that the owner of a physical therapy independent practice must be on the premises in order for care to be delivered by a licensed physical therapist. As a result, many independent practices opened satellite offices after this provision went into effect Jan. 1. But they didn’t escape the wrath of the BBA entirely. They now are dealing with legislation that requires a physical therapist in private practice to provide direct in-person supervision of rehab care delivered by physical therapy assistants.
"That’s considered onerous," Fronheiser says. "If you sent a physical therapy assistant [alone] into a room to do a [patient] evaluation or deliver care, you can no longer do that. Some private practices who traditionally employed physical therapy assistants now are considering whether to even employ them."
Building alliances builds strength
The answer to dealing with the stricter and more time-consuming payer demands is similar to what physician practices have experienced in the last 10 years: The bottom line is that there is strength in numbers.
"Form alliances," says Lyndean Lenhoff Brick, JD, senior vice president and principal of Murer Consultants Inc., a rehab consulting firm in Joliette, IL. "It’s very hard for a single-site PT to compete with someone with eight offices and 120 therapists. The number one thing a therapist needs to do is look around and see where there are direct alliances, whether it’s with a local hospital or other independent practices."
Another option is to affiliate with a centrally managed physical therapy network such as PTPN in Woodland Hills, CA. This option works, Brick says, if you can quantify the benefits from affiliating with such an organization.
The initial push for independent practitioners to join a physical therapy network came about five years ago, Fronheiser says. "Now, we’re kind of at a maturation point. People are evaluating their decision whether to join" in terms of whether they are getting their money’s worth from the monthly fees that network affiliates must pay.
The main advantage of joining a network is leverage in managed care contracting, says Nancy Rothenberg, vice president of PTPN. "Over time, the managed care organizations prefer to deal with networks. Instead of having to deal with 300 therapists in a market individually, they just sign one contract. "Moreover, networks like PTPN can alleviate what’s known as the managed care hassle factor: dealing with credentialing, contract administration, claims issues, and other paperwork.
One practice that has made the affiliation strategy work is Lennox PT in Freehold, NJ. The practice is affiliated with PTPN, but the network is not its sole source of patients, says Rita Pessel, office manager at Lennox PT. At any given time, the practice has about 50 active patients through network contracts, out of a total patient volume of 65 to 100. "Through PTPN, we can choose whether or not to accept a [managed care] contract. Generally, we won’t accept anything under $50 a treatment."
The practice has used two other strategies to remain competitive, Pessel says. First, it has kept its quality standards high. "I think we’ve kept our doors open because of our reputation. We won’t shortchange anybody. Our owner doesn’t want to differentiate patients between those who are managed care patients and those who aren’t."
The practice also has a healthy volume due to returning former patients or referrals from former patients, Pessel says. "Some of these patients will return to Lennox PT even if the practice is not in their health insurance network because they have been satisfied with their level of care at Lennox PT, which is no comparison to the lack of attention with corporate PTs."
Networking reveals common interests
Networking with other practices also has worked well for Pessel. She and two other office managers formed an office managers’ network eight years ago for practices within close proximity, which has been a good source of information and tips. The group grew from an initial membership of three office managers to 35 members. They meet quarterly or more often if there are pressing legislative issues that need to be discussed. Often, members of the group can find someone who has dealt with similar problems or learn names of helpful individuals at particular payers.