Practice Management

The case for starting a cash-based physical therapy practice

Our complete guide for physical therapists on dropping insurance plans and going out-of-network.
Published 6.4.2020

Like Tom Brady jerseys in Central Florida or TikTok dances, cash-based physical therapy practices are certainly in vogue; but is the hype real?

PT influencers and voices across the spectrum are speaking on it—maybe you've seen the blog posts or heard the podcasts. But why are PTs even talking about this? How is this approach so much better than remaining in-network with insurers?

Well, here’s what we know:

  • The hype is definitely real. 
  • It’s getting easier to start this sort of practice.

So let’s take a look.

How does cash-based physical therapy work?

Cash PT encompasses PT services offered by practices that are not contracted into any insurers’ networks. When you’re out-of-network as a provider, your service transactions and billing cycles will change to reflect your new relationship with insurers—or lack thereof.

Ok, what does that mean?

When someone comes to a cash PT practice they’ll utilize their out-of-network benefits. Usually, that means a higher co-pay and deductible. However, it also changes the way you’re able to provide care. And when we say change we mean for the better.

That also means that submitting claims will be different: No longer can you use the insurers’ friendly portals. Claim submission is paper from here on out. At least, that's the case without an out-of-network solution.

This is typically how cash-based practices deal with that: Have the patient pay in full upfront and hand them a superbill with the services provided and codes for those services. The patient will then file the claim himself or herself and receive reimbursement directly from the insurer.

If you can sell the change in cost - and it’s not that hard with some practice! - out-of-network care can be a win-win for your practice and your patients.

What’s so bad about being in-network with insurers?

If remaining contracted with insurers is right for your practice, then nothing at all! However, for a variety of reasons many PTs feel that remaining in-network with insurers isn’t right for them or their clinics.

First and foremost for plenty of those PTs is patient care. They feel that remaining contracted with insurers diminishes the quality of care they’re able to provide. Aaron LeBauer noted that he once saw 43 patients in a single day. 43!

It’s difficult to expect PTs to provide quality care with that sort of patient flow. Or to even have personal lives at that rate.

Additionally, cash PT can be the most cost-effective route. You get to spend more time on patient care and less time on filing claims and dealing with insurers. Plus, you get paid upfront!

So a cash-based physical therapy practice is the answer?

If the issues above sound familiar to you, then the answer is probably yes. You, your staff and your patients will probably benefit from a cash-pay PT approach.

What options do I have for my cash practice?

There are a couple of ways you can run your cash PT practice: You can either go all cash or take a hybrid approach.

Hybrid PT practice

A hybrid practice is in-network with some insurers and out with others. This can be for several reasons. Maybe one insurer in your area has great reimbursement rates. Or perhaps you consider it an obligation to serve those in Medicaid or Medicare.

Whatever the reason, PTs with hybrid practices have chosen to stay in-network with at least one payer. And for all the others?

Patients use their out-of-network benefits and pay in full at the time of service as described above.

Cash pay PT practice

If you see no reason to remain in-network with any payer in your area then all-cash is your best bet. When you go this route then the process is similar for every patient: They pay you and you hand them a superbill. That is unless you have an out-of-network solution.

Many PTs claim cash-based practice helps them provide better care.
Many PTs claim cash-based practice helps them provide better care.

What do my practice and patients get out of this?

Ok, you get it. Cash-based PT means you’re out-of-network and patients pay you upfront. How does that help?

You get to build patient treatment plans

Payers are looking for more patients and more appointments. That’s how they make their money. And if you’re able to effectively treat people that way then great!

However, many PTs find themselves wishing for more time to build out custom treatment plans that work better, faster.

Data indicates this sort of care produces results. A study of cash-based PT services found average patients’ Numeric Pain Rating Scale score dropped to 1.1 from 6.9 through the course of treatment.

Run a more cost-effective PT practice

Not only is it possible that cash-based PT leads to better patient care; it may also produce a more cost-effective practice.

The aforementioned study also observed the cost-efficacy of care at cash-based practices. It found that the cost of care for the cash-based practice dropped compared with in-network providers.

Researches discovered that the average number of visits per episode of care rose from 7.3 to 8. However, the average cost of care for the cash-based practice was $780—$156 lower than for in-network providers.

You control your own rates

When you’re a cash-pay practice you’re no longer tied to the rates insurers are willing to reimburse in-network providers. Instead, consider the following:

What is your care worth?

Price your services according to what you think the care you provide is worth. Cash-pay PT rates provide the flexibility needed to ensure your practice generates revenue—and a lot of it.

You’re motivated to build a niche PT practice

You might ask “How is this a benefit for me?”

Let us explain. There’s probably something you enjoy right? Especially in the scope of the care you’re qualified to provide: Sports injury, geriatrics, oncology, etc.—all represent potential specialties that you care about.

By focusing on that one area you get to:

  • Provide the care you enjoy most. 
  • Improve your knowledge of the specialty over time.
  • Target to a single audience for more cost-effective marketing.
  • Build stronger relationships with patients. 

You get to experience the entrepreneurial rush

For some people, it may be why they got into PT in the first place. For others, it’s certainly no small part of it. The freedom and feeling of running your own practice are hard to resist.

For many PTs, that feeling remains elusive until they go out-of-network. They feel cash-based PT is the only way to run your business as you see fit.

Building your cash-based physical therapy business plan

So you’ve made your decision: Cash-based is the way for your practice. Now you need a new business plan: Do you have a niche? How are you going to market your cash-pay practice? Will you use an out-of-network solution?

These questions will help you build out a business plan for your new cash-based approach. From there you can begin the process of going out-of-network with insurers. And then you’re on your way to cash PT success!

Connor McGann
Connor McGann, Content Marketing Manager
Connor McGann is Anagram's content marketing manager. He joined Anagram in February 2020. Previously he was a finance writer and animation project manager at a marketing agency, and managed content for a live chat provider that serviced various industries including health care and plastic surgery.

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