I was recently interviewed by a doctoral student on cash-based PT practice sustainability and about my business model in general. Here is the second part of that interview …

What financial methods did you take in order to be able to open your own private practice?

I was pretty adamant about not taking on any debt to start my practice and I did not have more than a few thousand dollars to cover my personal and business expenses until I became profitable.

So the pressure was on and I worked extremely hard up front to get patients through the door. With that said, my start-up costs were extremely low compared to the standard PT clinic with modalities, exercise equipment, multiple treatment rooms, etc. My treatments are primarily manual therapy so all I need is enough room for a treatment table and a little space to teach a home exercise program.

I started out by treating patients in their homes, but soon found a nice old house that was converted to a spa-type facility with individual treatment/massage rooms available for rent. The key was that I could pay per session. If I wasn’t making money, I wasn’t spending it. This scenario is often called a “booth rental” in a full-service facility (ie, common waiting room and bathrooms, use of office equipment, furnished rooms, and often a receptionist depending on the facility).

After I had a full schedule, I was able to find a full time location. But even now, I have a nice waiting room and treatment room that together make less than 500 sq feet. It’s all I need, and by keeping my overhead low I was able to start without a loan and be profitable almost from day one.

How long did it take for you to obtain a full schedule and successfully sustain your practice?

First I should clarify what I consider a “full schedule.” Each treatment is a full hour, one-on-one with the patient. Since I am doing all my own admin, scheduling, and marketing duties, I decided that five hours of treatment each day was enough. That alone is a lot of wear and tear on my hands, and it also gives me time for other business-related duties.

Within about six months I began having a decent amount of fully booked days, and by month eight I was staying fully booked each week. At one point right around the one-year mark, I was scheduling new patients 1-2 weeks in advance.

I should also note here that my schedule did slow down over the summer (2011). I feel that was likely because I had diverted my energy away from networking/marketing in order to work on my cash-practice guidebook. After I published the book, I was able to fill my schedule again within a couple months (primarily through a lot of networking). I guess I will know for sure after this coming summer (2012) because I won’t be writing another book just yet. Perhaps it’s just a seasonal thing in which I will always be a little slower in the summer but I doubt it. [Note: as of publishing this blog post, things are going quite well and staying very busy]

What are financial concerns you face with a cash-based system versus the “typical” system?

I guess the main concern would be whether or not enough of the area’s population is willing to pay out-of-pocket for Physical Therapy. I have found the answer to this question in Austin, Texas is a resounding “yes,” but I don’t know if that would be the case in all other cities.

Outside of that, I can’t think of any financial concerns that don’t also exist for insurance-based clinics.  My style of cash-based practice has a much lower overhead than most insurance-based clinics, so this is an area where cash practices can have an advantage (ie. focus primarily on Manual Therapy and Therex that can be completed without expensive equipment or modalities).

How are you able to fully optimize your autonomy as a practitioner compared to those in contract with insurance companies?

Well, I would say that optimal autonomy is a natural result of getting out of the insurance/Medicare systems. In Texas, I of course still have to have a medical referral to start treatment, but I don’t have to jump through all the documentation hoops and fighting to get paid that insurance-based practitioners have to.

Do you think a cash-based system is logical for any city or location?

In short, I do not think 100% cash-based clinics would be viable in every city/town. However, I do think that adding cash-based treatment and ancillary services, while maintaining some insurance contracts, is possible just about anywhere. If a clinic owner can increase his/her percentage of private-pay income, he/she will have a much better chance to survive as the bigger reimbursement cuts hit our field.

Some people have said if PT moved to fee-for-service or cash-based, then people would just do without PT. Do you find this true for the area/people you treat? What about the city of Austin makes PT a necessity rather than a luxury?

If all PT practices converted to a fee-for-service system (and did so quickly), I’m not sure exactly what would happen but I’m sure it would be interesting. My guess is that there would be plenty of people that simply avoid treatment for minor pains when they would have sought out treatment otherwise; but not for too long …

At first, there would probably be some backlash and plenty of people who purposely avoided PT because they disagreed with the change. However, over time the population would become accustomed to the idea that you simply have to pay more out-of-pocket for Physical Therapy. They are completely fine with doing so for massage and personal training, and our education and services obviously go way beyond those professions. Over time, as more Physical Therapy businesses choose (or are forced by reimbursement cuts) to convert to more of a private pay model, it should become more accepted by the general public … especially if they see that paying more out of pocket equates to higher quality treatment; the importance of which is nicely covered in a recent post by Mike Reinold.

Simply put, pain is an incredible motivator and Physical Therapy is the best option for the treatment of musculoskeletal pain. I am confident that the majority of the population would still seek out Physical Therapy treatment for this type of pain and for physical performance/functional issues, even if it they have to pay more out of pocket to do so.

As for the other parts of your question, the majority of my patients do have insurance but choose to see me anyhow. They do so because the treatment experience and results they get are viewed as “worth the out-of-pocket cost.” Austin is a highly active and fit city where physical fitness and performance is made a higher priority than in many other cities. This is great for all the PTs here, whether cash-based or not.

Interested in the cash-based private practice model?

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