This month, CMS came down with its final ruling on the Physician Fee Schedule, which is going to cut Medicare reimbursements for physical therapy services by 8% in 2021. This was in no way a surprise, even though the APTA called it a “surprising decision.”

It’s not the APTA’s fault. It’s no group’s fault. It’s no individual’s fault, or the profession as a whole. It’s just math.

In just a moment, I’ll describe what I mean by “it’s just math” and more importantly: what you can do about these ridiculous cuts to Physical Therapy reimbursements to make sure your practice continues to thrive… especially if your current practice is heavily reliant on Medicare reimbursements. 

I know a lot of practices out there that are already running on such thin profit margins that an 8% reduction in Medicare reimbursements for physical therapy services could be the nail in the coffin.

But it doesn’t have to be that way! Luckily, we have a little bit of runway before this particular cut happens in 2021. But there are a lot of things that take a good amount of time when shifting to more of a cash-pay business model, especially when it comes to Medicare beneficiaries and skilled therapy services.

So in other words, the time to start working on a solution to these cuts for your private practice is NOW!

Why Cuts To Medicare Reimbursements For Therapy Services Are Mathematically Unavoidable

Many who have been following me for a while know I wrote a guidebook called Medicare and Cash-Pay Physical Therapy.
I’d encourage you to check it out for in-depth information and strategies on this incredibly complicated topic. You can also get the first 22 pages of the book for free here.

Alright, let’s dive into some of the math behind the latest (and future) cuts to Medicare payments for skilled therapy services.

What do I mean when I say this is nobody’s fault, “it’s just math”? …

The US has already had years when the Social Security-Medicare system has paid out more money than it has brought in. And this is at a time when the majority of the baby boomer population has still not completely left the workforce!

The number of Medicare beneficiaries drawing from Medicare will double in the next 15 to 20 years, and that means the ratio of workers paying into the system versus beneficiaries taking money out will completely skew in the wrong direction.

Back in 1965, there were more than 4 workers paying in to Social Security-Medicare for every one beneficiary taking money out of the system. In 15-20 years, we’re likely going to have less than 2 workers paying in for every 1 beneficiary taking out. This is bad. 

Back to my statement above: In the last ten or so years, there have already been years where the Medicare and Social Security system has paid out more than it has taken in. So, when I say it’s simple math, I mean there is no way the system (already losing money in some years) can continue operating as  is — It is mathematically IMPOSSIBLE to keep paying out the same amounts for healthcare services and medications as it does now without going bankrupt. There is no arguing this point any more than one can argue that 2 minus 3 doesn’t equal -1 … it’s just math.

Will Medicare’s financial problems affect your private physical therapy practice?

Since the biggest costs and overhead for the Medicare system are its payments to healthcare providers, who do you think is gonna be on the chopping block first and foremost as politicians are forced to reduce costs to keep Medicare alive?

Physician services and medications that keep people alive?

Or will it be the “tertiary services” like Physical Therapy, Occupational Therapy, Speech Therapy, and Chiropractic?

As much as we’d like to argue that the emphasis and financial support should go to therapies that keep people moving and functioning well so they don’t end up with life-threatening illness and needs, it doesn’t matter.

I hate to say it, but we are not part of a healthcare system… this is a sick-care system.

And though I’m extremely grateful for my colleagues that work so hard to change this reality, Medicare is never going to place our services as a higher priority than drugs and physician interventions.

So we must recognize that our services will be cut first and worst over time. And there’s no amount of visits to Washington DC or connections to politicians or whatever everyone’s trying to do that will change the simple math of our situation.

If these statements piss you off and you disagree, that’s totally fine and I respect your opinion on the matter … please explain in the comments below (but be nice, that’s all I ask). You can double down on your lobbying efforts, but I’ll be busy making my practice reimbursement-cut-proof and helping others to do the same.

What can you do to protect your private practice from the Medicare reimbursement cuts?

So what can you do if you have a practice that’s heavily reliant on third-party payer reimbursements? — especially Medicare? The answer is simple, though the path to creating that answer in your business will take time, work, and good information … you must figure out how to transition away from being so reliant on third-party payers!

… It’s not about figuring out how to negotiate better with insurance companies, or lobby harder in DC.

… Getting better at coding will only do so much, and it isn’t gonna significantly offset these massive cuts or those that are sure to come in the future.

Stop fighting for scraps, and take a seat at the table … or better yet, create your own table!

Sorry for being Captain Obvious here, and repeating myself a few times, but for some reason after decades of the same trend of falling reimbursements, many practice owners still won’t admit that they must reduce reliance on 3rd-Party-Payors in order to sustain a profitable private practice now and especially in the future.

In short, doing so can come from a combo of two things:

1. Adding non-covered cash-pay services to your offerings.
2. Dropping contracts and providing normally covered services on a private-pay basis.

But specific to Medicare, it’s not as cut and dry as simply “dropping that contract” and offering therapy on a cash-pay basis. There is a TON of information that you and your attorney need to be aware of to make the best decisions about how you can legally provide cash-pay services to Medicare beneficiaries.

But if you learn how to capitalize on certain opportunities in a legal way, those opportunities will only grow as more and more of the baby-boomer population become Medicare beneficiaries.

That’s right, there are huge opportunities. But there are also big risks.

I’m probably a little more conservative than most practice owners with what I’m willing to provide to Medicare beneficiaries in my cash-based physical therapy clinic. Many practices out there are very aggressive and take risks I’m not comfortable with… But that’s their choice. I think the key here is making sure that choice is an educated one, and guided (and protected) by an attorney or at least a compliance expert.

My Medicare and Cash-Based PT guidebook simply lays out the rules and laws as they are written and leaves it up to you and your attorney to decide what kind of risks you want to take and what opportunities you want to pursue. It saves attorneys a TON of time to have links to all relevant parts of the law surrounding this obscure topic, and therefore saves book purchasers a ton of money.

I’ve run all the information in the book through a number of compliance experts and attorneys and discovered there are a lot of gray areas on this topic — depending on how you interpret things. So no suggestions are made, just information provided … information and expert feedback that took me 5 years to curate.

All that is explained in the book, so you and your attorney or compliance expert can understand what’s clearly defined and what’s a little nebulous (or completely gray in some cases). This equips you with what you need to decide exactly how you want your practice to approach the amazing opportunities of the aging population without getting crushed by the Medicare reimbursement cuts to therapy services, and minimize your risks along the way.

For details on everything covered in the book, click here.

To get the first 22 pages for free, click here.

The future of your private practice

It’s in your hands what you do with your current or future practice. Don’t blame things on the APTA. Don’t blame it on Trump. Don’t blame it on whoever is in your office at that time. As practice owners, we always have control over what we personally do in our businesses.

At the time of this writing, we’ve got a year and a half before these cuts happen… it’s time to work. It’s time to protect your practice and make sure you can serve your clients for years to come, and continue to build the lifestyle you desire.

And if you’re worried about the risks of taking action and providing cash-pay services to Medicare beneficiaries, please also consider the even bigger risk of doing and changing nothing. The cuts are coming no matter what and there will be even more after 2021… The math promises it. So if nothing else, at least learn how to create services and offerings of NON-covered services which carry very little risk to your practice when done correctly.

Wishing you all the best in your practice and many thriving years ahead of you!