• PT Business Plan – Market Positioning & Pricing

    July 21, 2018 | Kevin Kasmar
  • This fifth installment in our physical therapy private practice business plan blog series focuses on your overall positioning strategy. Developing a positioning strategy is an opportunity to review your competition and the state of the rehabilitation market. The lending institution(s) you are approaching may know nothing about the rehab market nationally, regionally, or locally. You’ll educate them on the rehab market’s potential, and explain how your clinic will be superior to the local competition.

    Physical Therapy Patient Demographics

    As we recommended in our overview of physical therapy clinic business plans, you should describe your clinic’s local demographics. Patient demographics are important to an understanding of both your patient mix and your Reimbursement Rate from state and regional insurers.

    Typical demographic elements of your clinic’s catchment area (less than a five-mile radius if you are in a dense suburban or urban area) are:

    • average income level
    • general education level
    • predominant race and ethnicity
    • density of population
    • whether there is much industry in the area compared to residential housing

    In your business plan, express your understanding of the effect physical therapy patient demographics has on reimbursement levels. First, if your clinic is in a low-income area, expect more public aid patients. This will skew your reimbursement rate lower. However, if your clinic’s community has a significant population of older folks (e.g., baby boomers), then you can expect a certain reimbursement level from those patients on Medicare. And if you locate in a middle to upper income level area, expect more traditional reimbursement levels from providers such as Blue Cross Blue Shield and Aetna. Further, if you are in a heavy industrial area, you might expect a higher percentage of Worker Compensation cases. These, depending on the state you are in, can deliver a handsome reimbursement rate. Likewise, comment on whether the population is increasing or declining in numbers. Unlike a non-health care business, your Pricing and Growth will be determined by these demographic considerations.

    Net Collected Revenue Per Visit

    As part of developing a positioning strategy for a PT private practice, you’ll want to calculate with some specificity your Net Collected Revenue Per Visit. Once you have determined the demographics of the area you are locating your clinic, you have the ingredients for this. Use the above factors to guide you. This calculation will prove enormously helpful to your financial forecasts. The lenders will review for both logic and accuracy.

    Unique Value Proposition

    You will go into some detail about your Competition in a later section. Nevertheless, you should discuss in this section where competitive clinics are in your catchment area. Explain why you believe patients will choose your clinic for treatment, or will be referred to your clinic by Physicians for treatment, rather than to your competitors. Detail why patients will decide to seek your treatment (quality, trust, friendliness, success of treatment, etc.).

    Again, the more details you offer about your overall positioning strategy, the more lenders will have confidence in your business’ likelihood for success. If you have taken your physical therapy patient demographics into account and explain their impact on your start-up clinic, the higher the likelihood that you will get your needed funding.