• Size Gets Your Foot in the Door . . . Value Keeps You There:


    Independent Practices Can Gain Influence through Coming Together

    “Strategy is all about being different than your competitors.  A company can only outperform its rivals if it establishes a difference it can preserve.”

    – Michael Porter, PhD, Harvard Business School


    {This is a 30’ blog especially for those of you either in private practice or who have a dream to be a practice owner.  I suggest you settle into a comfy chair with a double espresso in hand and dig in . . . better make it a triple.}


    Earlier this year, I touched on 10 critical factors of health care reform that every physical therapist must understand and around which strategy should be built.  In case you missed it, here is a link to that blog.  http://bit.ly/TPIval10HCR.  Of those 10, however, 3 stand out as the most important challenges we face, and all are tightly linked.

    Size Gets Your Foot in the Door

    With support of the commercial market and the government (ie from conservatives and liberals; republicans and democrats; capitalists and socialists), Consolidation and the move to Value-Based Payment Models are in full swing. These factors are realities that are not going away. Like it or not, health care’s powerful decision-makers and entrepreneurs have embraced both of these movements.

    But consolidation and value models are ‘things’ that, to be successful, must be delivered by talented, enthused team members who are committed to delivering the Triple Aim – measurable quality, an exceptional patient experience, and lower total cost of care. A commitment to improving quality, service, and cost factors can ensure value-based models are successful. Like others in health care advocate, we have taken The Triple Aim mission one step higher and call it the Triple Aim Plus with the ‘Plus’ being – highly engaged team members. http://bit.ly/4AIM3.

    The writing is on the wall for independent practices whose business model involves playing in the world of third party payors. In order to gain influence with health care decision-makers; to compete against therapy providers in large, well-financed organizations; and to gain long term stability, private practice owners and their clinics must come together in consolidated collaborations, organize around a value proposition, and develop a culture that can truly deliver Triple Aim value.


    Consolidation – The Strong Hand of Size

    “If your business does not grow, it dies.”                                                                                                                  

    Joe White, CPA, MBA. Minneapolis-based health care business consultant and professor, University of St. Thomas Health Care MBA Program

    Consolidation is creating dramatic shifts in alliances and power in markets across the country and warrants thoughtful, strategic analysis. As I mentioned in a previous blog, Consolidation occurs when two or more organizations come together under a single tax identification number (TIN) with a shared purpose and common management.  Consolidation solidifies fragmented organizations. Consolidation creates economies of scale, negotiating strength, and financial stability.

    Health care analysts and policy makers predict integration and growth of provider organizations Consolidation
    will continue. Financial holding company CIT reports mergers and acquisitions in health care will continue to grow in 2016, and they predict consolidated health care organizations will improve efficiencies and revenue. PwC, the world’s largest health care consulting group, states the emphasis on value and risk sharing coupled with easy access to capital will drive continued consolidation of the health care market. It is simply getting harder for small practices of any type to compete, as their rivals get bigger, more efficient, and more powerful.

    Health plans, ACOs, and large self-insured businesses appreciate working with consolidated health care entities because, compared to fragmented independent groups, they provide stable clinic access; simplify and lessen the expense of contracting and payment processes; allow for greater consistencies in care delivery; offer greater likelihood of provider accountability; create better risk-sharing partners; and, if managed well, deliver predictable results.

    Size brings provider organizations greater strength in these 7 key areas:


    1) Negotiations. Large provider organizations are able to get a seat at the negotiating table with busy health plan decision-makers, who see the big practices as critical to their success. Thus, health plans are more than willing to take the time to sit down with the leadership teams of large organizations. These big health care entities provide broad access to care and Talentdeliver operational efficiencies related to their interaction with health plans.   The health plans can’t afford to lose their business relationship with large care systems and practices, which realize they have the strength to negotiate better payment rates. They have the confidence to ‘walk away’ from bad deals, because they know the health plan will call them back.  On the flip side, small practice owners cannot gain the attention of or negotiate with busy health plan teams, so they must settle for low, standard payment rates. Even collaborative provider networks and independent practice associations (IPAs) struggle to get a seat at the negotiating table because they are loose knit groups with instability of clinic locations, inconsistent processes, and lack of accountability. Numerous small practices result in complexity in contracting and claims processing. “Take it or leave it.

    2) Financial Risk Sharing. The ACA and market pressures on the third party payors create a need for health care providers to share financial risk with the health plans. Large organizations have more clinics and providers, deliver more visits, have more sophisticated financial management, and have more capital to ‘spread the risk around’. These factors lessen the chance for failure when assuming risk. Conversely, the risk for small practices is often exceedingly high in these relationships because even a small glitch can cause the practice to fail financially. “This is way too risky.”

    3) The Value of Simplicity. While greater size brings internal operational complexities, consolidation of multiple practices makes life simpler and less costly for health plans. Compared to dealing with owners of multiple business entities, plans can build working relationships with only 1 or 2 negotiators representing the consolidated practice. Processing claims from and making payments to one large entity is much easier and less expensive than cutting checks to numerous independent practices. Simplicity brings value and better relationships to payors. “Less is more.”

    4) Money. Large, consolidated organizations have greater access to capital for growing their businesses. They are pursued by banks, venture capital, and private equity groups who are anxious to partner with them and are willing to provide finances to fuel their growth. Large health care groups have the financial resources and clout to invest in technology, people, service delivery, facilities, and business growth. Small practices, however, are deemed riskier and less attractive to lending institutions and financial partners. This makes growth more challenging. Show me the money!

    5) Talent. Look through the websites of large health care organizations and check out the pedigrees of their leadership teams. They have talented experts – CPAs, MBAs, MHAs, JDs – in executive positions, marketing, sales, finance, HR, legal, and compliance. These highly trained and educated professionals provide leadership and management at a high level. Additionally, at the clinic level, they can provide higher salaries, wages, and benefits to clinical and support staff. On the other hand, in small independent therapy practices, the owner treats patients 80% of the time and then serves as the CEO, CFO, COO, and Chief Marketing Officer. Someone with a high school degree or spouse often serves as office manager in charge of payroll, HR, and bookkeeping. Private practice owners look for ‘the cheapest’ while large health care organizations seek ‘the best’.

    6) Economies of Scale. Many day-to-day front and back office functions are scalable. Large organization, have employees who specialize in certain functions and perform those focused activities more efficiently and effectively. In small practices, employees must perform multiple responsibilities, which can result in lower productivity and accuracy. “Greater output, lower per unit costs”.

    7) Volume Discounts. Not only do the ‘big guys’ get the best arrangements from health plans and other risk-sharing payors, they can also negotiate significant volume discounts from venders and professional service providers. So not only do they get paid more, they pay out less. This is a good recipe for the bottom line. “Size matters”

    These tangible benefits of size give large practices and health systems great advantages over the small independent practices and loose knit networks. But size alone does not guarantee success in this demanding market. There is another major factor for long-term stability and success of the health care organization . . . the ability to deliver measurable value. And that requires defined value-driven processes developed and delivered by highly engaged people.

    Value-Based Contracting – The Staying Power of Win-Win


    “ ‘Think Win-Win’ isn’t about being nice, nor is it a quick-fix technique. It is a character-based code for human interaction and collaboration.”        

    Steven Covey. 7 Habits of Highly Effective People

    The market is slowly but surely moving to away from traditional fee for service, volume-based payments to value-based models. Fee for service creates an incentive for providers to do more services regardless of need or quality, and this incentive is one of the drivers of rising health care Think
    costs. Value based models shift financial incentives dramatically. They encourage providers to measure and improve patient outcomes across all aspects of health care delivery, and they should reduce total health care costs.

    Most value-based models are delivered through government and commercial health programs with hospital systems and ACOs. In 2016, Medicare is tying about 30% of its payments to quality initiatives. This will increase another 50% by 2018. Most involve per member per month payments and create incentives for hospitals to manage their care and services very closely.

    These value-based / risk-sharing payment models can take a number of forms and include:

    • FFS with a Value Component
    • Per Diem Rates (payment per visit)
    • Case Rates (payment per episode of care)
    • Per Diem and Case Rate Models with Bonus for Achieving Outcomes Benchmarks
    • Total Cost of Care (TCOC) Shared Savings Arrangements. In these models, the payor shares savings with the providers. These require historical cost data and analysis of all costs related to specific conditions.
    • Bundled Payment Models. These are similar to case rates but include all providers who deliver care or services in the case. These are gaining popularity in the payment for and management of total joint replacements.
    • Commonly called PMPM (per member per month) payments, these high-risk models involve monthly payments to providers based on the number of enrollees (patients) in their system. PMPM arrangements are common in CMS ACO models and are more applicable to payments to health systems, ACOs, and Patient Centered Medical Homes (primary care groups).


    Check out this short article “12 Things You Need to Know About Value-Based Reimbursement” http://bit.ly/2aDxHlF. While this report is mainly geared to hospital systems and ACOs, there are elements of it that physical therapists should consider in their practices as well.

    Movement to value-based models will be slow with more of a ‘dip your toe in the water’ approach by payors and providers.   Application of value-based models with physical therapists will be even slower than it has been for medical groups and hospitals. In our negotiations with commercial health plans in Minnesota and other states, we have found their decision-makers to be sincerely interested in learning how physical therapists can help drive down the total cost of care for musculoskeletal conditions, and most are also very excited to collaboratively develop value-based arrangements for physical therapists. However, we are often ‘moved to the back burner’ as the plans deal with higher priority initiatives related to ACOs, pharmacy costs, the health exchange complications, and other more costly and urgent situations. The one value-based model we have had since 2010 with the largest health plan in the Twin Cities has resulted in significantly higher payments to our member practices, reduced operational costs to the health plan, and a stronger relationship between our MSO and the plan’s leadership. Reduced costs for the health plan and rewards for us as providers is truly a “Win-Win

    In spite of the methodical progress toward value-based models with physical therapists across the country, all therapy practices must start to prepare to engage in them now. As you strategize around ways to get your foot in the door and sell your value proposition to the decision-makers at the health plan, think ‘Win-Win. Here are 5 key actions physical therapy practices must take to prepare to propose value-based relationships and manage the risks around them:

    1) Culture: Create a Culture to Support Triple Aim Value Delivery. If you ultimately want to propose and engage in value-based models, every team member must embrace each aspect of The Triple Aim. Value delivery, value measurements, and care management must become your culture. Never underestimate the power of your culture, and never assume you can Culture
    deliver an initiative without full engagement of your team. Every team member must clearly understand how the value-based efforts will benefit her, her patients, and the practice.

    2) Outcomes: Measure Manage Market Your Outcomes. If you are not measuring your outcomes yet – better get crackin’! We advocate FOTO because it has attributes highly valued by payors – risk adjusted, valid and reliable, used by over 3,000 clinics, and it has been used as the outcomes tool in value-based models. But simply measuring outcomes is not nearly enough. For outcomes to actually benefit the practice, expectations must be set, everyone must be well-trained, the outcomes processes must be well-managed, and the outcomes should be used to improve care, improve clinical skills, and promote the practice.

    3) Metrics: Analyze Your Data. To prepare to create and propose value-based models to health plans and ACOs, you must fully understand key data points. At a minimum, you must measure, understand, and plan around the following:

    • Payor mix relative to
      • Revenue
      • Visits
    • Visits/New Patient (or Visits/Episode of Care)
      • All conditions in total
      • By payor type
      • Per 10 most common conditions
      • Revenue/Visit
      • All conditions in total
      • By payor type
      • Per 10 most common conditions
      • Revenue/New Patient
      • All conditions in total
      • By payor type
      • Per 10 most common conditions
      • Functional Outcomes
      • Per all conditions in total
      • Per specific condition or body part
      1. Be Innovative: Develop Possible Value-Based Models. Look at the various value-based models and how your metrics and outcomes could successfully feed into one or more of them. Define 2-3 possibilities and commit to delivering and managing your care to succeed in those arrangements.


    1. Relationships:. Reach out to Private Practice Owners as Your Allies. If you are going to sell value, you have to get your foot in the door of the powerful decision makers in your health care market – the health plans and ACOs. Reach out to your private practice colleagues. The ones you trust; the ones you respect. They can be your allies, not your competitors. See if they are willing to rally around value with the hopes of coming together in a meaningful way. Organizing in a consolidated format can bring you the size you need, and there are ways to do so without giving up your business ownership. For more detail or a review of creating strategies for plans and ACOs, look back at two of our earlier blogs – http://bit.ly/TPIvalHealthPlans and http://bit.ly/TPIvalueACOs.


    Now it’s time to get your team fired up. Engaged.

    The Triple Aim Plus – Quality, Service, Cost, and Engagement

    Leaders at all levels in care delivery organizations are struggling with how to focus their leadership efforts and achieve Triple Aim results for the populations they serve. Triple Aim results represent the shift from volume to value, which demands that health care leadership at every level focus on improving the experience and outcomes of care provided and reducing the cost of care for the populations they serve.”                                                                                                                

    High Impact Leadership: Improve Care, Improve Health of Populations, and Reduce Costs. Institute for Healthcare Improvement.

    The concept of the Triple Aim came out of a health care think tank called The Institute for Healthcare Improvement (IHI) in Massachusetts. IHI provides input on health care initiatives for the government and commercial health policy makers. They not only spearheaded The Triple Aim concept, but they also advocate the importance of a new leadership model in health care where patients and their families are partners in their care, providers compete on value, providers design care models aligned with payment models, and everyone on the team is important (engaged). Check out IHI’s insightful white paper called High Impact Leadership: Improve Care, Improve the Health of Populations, and Reduce Costs. http://bit.ly/IHIHighImpLead

    The Triple Aim is truly about value – quality, service, and cost. Think of it . . . the 3 components of Value
    the Triple Aim appeal to all who have a stake in health care . . . those who receive care and their families (patient), those who pay for care (patient, health plan, employer, government), and those who provide care. Effective leaders realize team members who are engaged are happier and achieve better results than their disengaged counterparts. http://bit.ly/TRIPLEaimPLUS. Those leaders know that employee engagement comes from two main sources – the individual and his or her manager. Great leaders work hard to keep everyone enthused, positive, committed, and happy. Check out this link from Gallup – http://bit.ly/MGRmoreCEO. The individual and the manager both contribute to employee engagement.

    Take a look at the components of The Triple Aim Plus:

    1) Measurable Quality: Great outcomes. Measurable quality means we can’t just talk about quality, we must quantify it. Policy makers seek to find and reward those providers who achieve high level results with their patients. This short article talks about 3 ways health care leaders can shape quality measures http://bit.ly/outcomes3

    2) An Exceptional Patient Experience: Great service. As providers you will get greater Triple Aim+
    patient engagement if they feel everyone on the team sincerely cares about them. Welcome each patient by name; create easy, convenient access to appointments; be respectful of their time and feelings; help them any way you can; be kind . . . empathetic. Find out and focus on what is important to the patient. Greater patient engagement inspires better compliance, and better compliance results in higher-level patient outcomes.

    3) Lower Total Cost of Care (TCOC): Lower cost.   TCOC means more than just the cost of physical therapy. In fact, physical therapy is a low cost component of total costs for musculoskeletal conditions. The challenge for physical therapists is selling your value and getting high-level outcomes so patients do not seek more expensive interventions such as imaging, injections, opioids, or surgery. Help your patients make good health care choices by ensuring they achieve their functional goals.

    4) Plus: Employee Engagement. Signing a value-based contract does not guarantee success in that arrangement. Value can only become a reality when team members are engaged in the process of delivering value. Team members become engaged when they get to do what they love to do; when they know they are making a positive impact on their patient’s lives; when they are proactively benefitting their practice; when they are helping their community; and when they feel valued by leadership. When employees are engaged they will more enthusiastically make necessary changes, do what is best for the team, and achieve positive outcomes with their patients. So how do you get engaged? How do you help others become and stay engaged? Well . . . we are all different, but there are 5 sure fire ways for all of us.

    1) Strengths. Let team members work in their strengths and passion. Gallup has found that team members who can use their strengths at work create an engaging, productive culture. http://bit.ly/SFNGage

    2) Learning. Create a learning and growing culture. Take it from engagement expert Travis Bradbury in his short article – http://entm.ag/2b7QC8z.

    3) Transparency. Be transparent with information about the practice. Leaders and managers should share as much information as possible with team members – especially expectations, feedback, results, and analysis. Transparency increases people’s awareness, confidence, and trust in the practice.

    4) Listen. Value others’ ideas. Great leaders and managers seek feedback, input, and new ideas from their team members. They listen to their contributions and concerns and make appropriate changes. Team members feel valued, and valued employees get engaged.

    5) Recognition. Recognize and reward team members. Although everyone has different expectations and comfort zones, we all want to be recognized and rewarded in some way for exceptional efforts and a job well done. When people are recognized, they feel valued. Engagement grows. http://bit.ly/EErecognize

    The influential health care provider organizations in your communities are figuring out the strategic importance of the size and value combination. ACOs and Patient Centered Medical Homes have no choice; they must deliver measurably high quality care to large numbers of people, and they must manage the cost of that care. And the orthopedic and other specialty practices are beginning to see how size and risk sharing put them in a position to gain market share and achieve greater financial success.

    So where does physical therapy fit into this consolidating, value-based market? Here are my thoughts

    Physical Therapy in our Changing Market – Size, Value, Engagement, Accountability

    “The appropriate process to achieve the desired outcomes must include evidence and scientific approaches to show improvement in the patient’s quality of life. Physical therapists are in a perfect position to sell their value to their patients through trusted relationships.”

    Tom Marr, MD, former chief medical officer, HealthPartners Health Plan; faculty member University of Minnesota Masters’ in Health Care Administration. Collaborated in development of first value-based model between Therapy Partners and HealthPartners using FOTO.

    Outpatient, orthopedic physical therapy is essentially delivered across 4 basic ownership models:

      1. System. Care System or ACO Clinics – owned by the care system


      1. POPTS. Physician Owned Physical Therapy Clinics – fully owned by the physician practice


      1. Corporate. Multi-State Corporate Therapy Clinics – financed by private equity or venture capital


    1. Independents. Independently Owned Practices – principal ownership, financing by therapists

    Each of these 4 ownership models offers strengths and weaknesses in their ability to deliver size, value, and employee engagement to health care decision-makers (health plans, ACOs, workers’ comp groups, employers/self-insured businesses, and individual patients). In my opinion, if under the direction of a skilled leader, an independent practice is best suited to engage its team members because physical therapy will always be ‘Job 1” and physical therapists’ contributions will be highly valued.

    It is difficult for Care Systems and POPTS to keep PTs highly engaged because in many cases physical therapy is undervalued and will never be held as the most important service in the organization. It is also hard to keep physical therapists highly engaged in large corporate PT organizations because, inevitably, as corporate headquarters gets farther and farther from the therapist and patient, it becomes more likely that productivity becomes the primary focus. That occurs naturally because productivity measures are the most quantifiable metrics and the easiest to manage from afar. Physical therapists become disengaged when money and productivity are the focal points of management. Disengaged employees don’t go the extra yard or achieve high-level outcomes making it hard to be successful in value-based contracts. Employees become complacent and bring the culture of the organization down.

    “I don’t feel valued” or “It seems like it’s all about the money around here.”


    Ultimately, managers must hold team members accountable for achieving expected results. Entropy is nature’s law stating isolated systems will always have a tendency to move toward disorder, or randomness. Order and predictability only occur with the application of effort and energy. The same holds true, for the most part, for human behavior. Over time, most people’s efforts and activities move down the path of least resistance toward less order and lower predictability. In order to achieve defined change, high-level outcomes, and the expectations of value-based models, organizations must provide excellent leadership, management, and oversight of all processes necessary to deliver Triple Aim Value.

    Oversight and management of outcomes processes and care management become increasingly difficult the larger and more dispersed the business is or if physical therapy is not a priority of the organization.  Independent practices whose leaders demonstrate the importance of measuring and managing outcomes and the Triple Aim can more effectively put systems in place because they are closer and more connected to the therapists and their patient care.


    So what is the future of independent physical therapy practices during the challenges of a consolidating, value-based market? Well . . . in spite of the fact that independent therapy practices have a more difficult time gaining strength of size and employing experts in financial and executive management, private practices do offer a greater chance of delivering and managing value-based models, engaging their team members, and holding everyone accountable as compared to their larger competitors. The decision-makers in families, local businesses, coaches, and other community members positively view locally controlled independent therapy practices where decisions are made within a few feet or a few miles of the physical therapist and patient. These practices have a greater potential to inspire truly engaged team members.  Triple Aim value-based Physical Therapy is Job 1.

    But with each passing day, private practice becomes more challenging. The time has come for independent therapy practice owners to soon come together with a strong value proposition in their local markets, or their big competitors will grab greater and greater market share.

    If they have effective, visionary leadership, any physical therapy provider organization can deliver on all of the critical aspects for delivering size, value, and employee engagement to their local market. However, as far as I have seen thus far, very few independent practices have engaged in the size-value movement. Individual private practices and networks of independent therapy practices in most markets have not gained the attention of health plans with innovations or a willingness to share financial risk. If independent practices can come together in a local merger or MSO arrangement in order to gain size and the financial wherewithal necessary, they stand a stronger chance of long-term success and stability.

    Since 1999, our Therapy Partners (TPI) MSO has been able to achieve Moderate to High Level status in all areas noted in the table above, and our TPI team and member practice owners feel the MSO model is a great way to effectively deliver size and value to the market. If you want a brief overview of MSO consolidation, check out the 4th in that series of blogs – http://bit.ly/TPIstrat

    While some physical therapists and other health care providers will find niches outside the traditional health care delivery system of patient-provider-third party payor, most of us will serve a vast majority of patients who seek services covered by their health insurance. If you and your practice are going to work with commercial third party payors and large health systems, we feel the best approach is to consolidate with trusted private practice colleagues.

    In the words of the old African proverb, “If you want to go fast, go alone. If you want to go far, go together.”

    Jim Hoyme, PT, MBA
    Chief Executive Officer
    Therapy Partners, Inc.

    Jim has over 30 years of experience as a private practice owner and leader of Therapy Partners MSO, which serves 15 independent practices and 31 clinics in Minnesota and Wisconsin. The focus of his MBA was on organizational leadership.

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