E218 | The State Of Insurance

Today's topic revolves around insurance and practices that would like to take less of it.  What I am starting to see now is more practices wanting to take less insurance and be able to offer more cash based services.

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Episode Transcription:

Hey, what's going on, guys? Doc Danny here with the PT Entrepreneur Podcast, and I'm coming to you from my car. It's not a car; it's a truck. And I'm on my way to, on my way to the office. It's about five 20 in the morning. And I got a new one. I have a new truck, so it's not going to be as loud as my, my other one that says this one doesn't have mud tires on it.

So, it should be a little more, a little quieter. But I'm taking advantage of the drive to work today to talk to you guys about something that I was thinking about yesterday after I had a few conversations with PTs. That we're looking for some support in, in their business. And it was, it's interesting, I've been having, more and more conversations with practices that take insurance.

Previously, that was very much, not the case. Occasionally I would get that, but now what I'm starting to see is practices that take insurance, that would like to take less of it and be able to have more cash services. And I, I would, I would venture to say. That probably any practice that takes insurance would love nothing more than to have more services that they can offer that's not dependent on insurance.

And one of the primary reasons why, if you think about it, is it's pretty obvious. Ten years ago, insurance reimbursed. You know, physical therapy, more per visit, per unit, whatever it might be, then they do today. So over the last ten years, we've seen a decrease in reimbursement, potentially even longer than that.

But as far as I know for sure the last ten years, and if you think about that, like. That's a challenging game to commit to playing. You say like, all right, well, we can expect that this is going to go down. So we have a couple of options. That means we can either load up more volume, which is what many people do.

And I get it. I see it from the side of these business owners as well. Some don't care. Some do, and some don't want to do that to their staff cause they know it. It's just like a tremendous amount of volume, and it's overwhelming, and it causes a lot of burnout. And people to just start to resent their, their job.

And, and, and one of our staff members, Jake swore, he said something me the other day, you know, and he's like, dude, it's basically like having just like meetings all day. You know, like if you, if you have a job that's not service-based, every time that we go into a visit, even though the cash-based practice, it's basically like having.

An intense meeting with somebody. You're actively listening. It's mentally draining, you know, and, and we have to be mindful of that because longterm, if you don't manage that, it leads to burnout in the, in the, in the profession. And in these conversations, I've had with the primarily insurance-based practices.

These people, at least they realize that. And they also recognize that for what they're doing and, and, and what they're providing, insurance companies grossly undervalue them. You know, to the point where it, depending on the insurance contract they have and the the actual insurance group, you know it's anywhere between, on the low end, the lowest I've heard is like $35 a visit.

Kind of middle of the pack that I tend to see. Somewhere in the range of like 70 to 80. Now. They can do things like adding additional services on top of that, that is, cash, cash services that can bring their average visit rate up. Right? But when you look at it, that's basically what they're, what they're doing.

And even Medicare is, can, can be more than that, depending on how many units you're, you're billing for. But then still, you have the time required to, you know. Handle the documentation associated with that, which literature is still there. Cash a patient, but it's, it's more streamlined. There are no questionnaires.

You're not like, you know, needing to get approval necessarily. Cause it's what you say and what the patients say they want to do and how many times you want to come in, and they agree. You agree on it together. And it also is a better price point, right. So, for instance, I had a conversation the other day, with, with the practice owner and he's, he has smaller practice, and these are the people that get screwed.

And they're tiny. So, you know, not, not many providers, if it's just yourself or yourself and maybe, you know, one or two other PTs, you have no leveraging power, mostly compared to like a significant practice, a multiple location practice. You're, you're the ones that. Get that, really get an isolated by these contracts because they don't care.

They don't have to offer you more. There's no reason to honestly. So with that, they get the worst of the worst. And if you think. All right, well man, if I'm going to get, let's call it, I don't know, set, let's just call it 70 bucks a visit. So if you want to work with people in a setting where you're working with them in a lower volume setting, it's going to be hard to do because for you to be able to get the minimum needed, to achieve your monthly goals, you're going to have to see a lot of people even to get like you see a hundred visits. You're averaging $70 per visit, and then you're generating.

$7,000, which sounds like a lot of money, but it's not relatively, because that's gross revenue. That doesn't include any of your overhead taxes. You have to pay for that if you have the additional staff. If you have an administrative assistant, none of that is factored in. That's just top-line revenue, right?

So you're, you're generating $7,000 because you're seeing a hundred people and your average is 70. Now, the reason that I'm having conversations with people and that they're interested in learning how to. Move away from this, or at least partially move away from this with different contracts and, and dropping separate agreements is because what if your average, let's just say your standard, you could bring it up to a hundred. After all, you have a mixture of, excuse me, a combination of both insurance and cash services and let's say your cash service is, all right, let's, let's bring it up to like whatever.

It'd be, like I say, 120—130 range. Let's say it brings your average to a hundred when you mix your insurance and your cash, now you see those a hundred visits, and you make $10,000, so it's $3,000 more per, per month. It's a significant difference because your average price point is so dramatically different.

Now, if you go the route of a hundred percent, you know, just, just cash visits, and you can dictate what you want to charge. You're good enough at marketing—fulfilling and retaining, which are trying to three levers within the business that we see inefficiencies in most of these cash-based practices.

But let's say you got that stuff dialed in and you are at $150 is what your average visit is. Now all of a sudden, you see a hundred people, and you make $15,000. So this person that's taking insurance contracts. That is making his average, let's call it 70 and this person who's not and is charging cash and getting $150 a visit there, they're over doubling the gross revenue in a business.

And not, not just that, but also it's more efficient because. Usually, they do not have to deal with any sort of billing agency. I don't know. I don't want a cash-based practice. It does. There's no percentage coming off the top with that. Most people are not just billing for themselves. If they're a small practice, they typically have some sort of biller in place, which could be anywhere between.

Four and 10% of what you're charging. So off the top, they're already less, less efficient. And I don't know about you, but if I want to see a hundred patients, a hundred patient visits in a month, I would instead make $15,000 from my time than seven. And this is the conversation, you know, that we, that we are having is like, how do we take this clinic that you have attracted the people that you hit a home run with, you know, that, that are willing to pay out of pocket.

And, and. You know, the other thing that you have to realize too, and those of you that are in business for yourself, you see this, is people's deductibles are getting higher and higher. It's not like their insurance health insurance is getting dramatically better for the most part. Like usually, people have a reasonably high deductible now.

You know they, they've got a lot of skin in the game regardless. You know, even my, my wife's stepmother, I was talking to her mother. She works for a pretty, pretty good-sized consulting firm that is associated with a group called Salesforce, which is a large organization. And, even with her, being in this big group that has a private plan, she has an HSA.

With them. And she still has a $5,000 deductible before her benefits kick in, except for like preventative care. And that is something that most people are looking at. So if they're staring down $5,000 and they don't even know it, you know, and you get, can have an informed conversation with them, all of a sudden, you know, you can position yourself in a, in a different way that dramatically increased the likelihood of them wanting to come in and, and work with you and pay out of pocket.

Because they're going to be paying out of pocket no matter where they go, you know? And, and if they can get fast results, they can get better quality care. They can streamline the process more if you can save them time. That's, these are all selling factors to people when it comes to cash services, or cash PT or whatever you want to call it.

So, you know, as you look at this, the trend that I'm seeing, the direction that I have seen over the last five years in particular, since I've been out of the military and in business for myself. Is that even insurance-based practice? Big ones are, they are actively looking for ways that they can add on cash services that can increase their average value, that they can stabilize, fluctuations in insurance, you know, contracts cause that can, that can be a huge hit for people.

I mean, imagine if an insurance contract goes from, okay, we're, we, we're paying you $100 per visit now we're going to. Only pay you 80 so quickly—20 % of your net revenue. If let's say that's a significant portion of your contracts, your payer mix is just gone 20% down, that'd be, that would be equivalent to somebody coming in my office and telling me that now we are charging, you have to cost $40 less per visit out.

I would have a real problem with that. We know we would probably have to let a staff member go if that was the case. And you know, so for them, what they're looking at is how do we, how do we normalize fluctuations that are inherently probably going to happen with insurance by taking more, cash services or adding more cash services into what they're doing with us.

 Return to the sport. Whether that's, you know, some sort of like a high end like coaching program that they have involved in it, whether that's like selling things on, you know, are there, whether it's a, I don't know, something for them to use that at home supplements. any number of things that you can add in that just increased the average

Customer value is the direction they're going. So for those of you listening to this, my, my whole point of this is for those of you looking to this that are going into a cash-based practice for yourself, you're doing the right thing. And in my opinion, from what I see, you're already going the direction that so many people are heading in.

You may decide, Hey, I, I, you know what? I want to have a hybrid practice, and I want to take Medicare only, and I want to have. You know, cash paid for anything else, and that might be your choice. You might be in a, in a place where there's a high a Medicare percentage, and it might be very worth it for you to do that.

But you have to learn these skills to get people in the door to pay cash, a cash rate. And if you can take insurance is easy. It's a, and it's is so much easier because inherently you've come such a better marketer and better at sales that you can have those conversations with people on a much deeper level. Hence, they understand why they're coming in to see you, what problem they're trying to solve.

And they're less price-sensitive as well. They're more likely to stick around whenever their, their benefits have, you know, been used up. So for those of you in cash-based practice. Keep doing the right thing, and then you're, you're, you're heading the right direction. For those of you that have insurance-based practice and you're looking to add more of this kind of cash services onto it, I get it.

You know, let's, let's have a conversation. There are ways to do it. If you're the right fit, if you're, I don't know the best way to put this, but like, if. Like, if you're, if you're a practice that's owned by private equity that only cares about revenue, we're not having a conversation. That's just not happening.

And, and, and part of it is you don't need it. And, and this, it's who ruins our, our profession. So no way in hell I'm helping those motherfuckers. But for those of you that have a practice, your private organization, you know, you want to be able to work with people. And, and help your staff have excellent jobs and enjoy what they do for a living.

That's who we want to help. So, anyway, guys, have a good Thursday, or I guess this is Tuesday. Have a great Tuesday. Enjoy, enjoy the week. If you're chipping away at the cash-based practice, keep going. I know. It's tough. But man, it's worth it. And, and. One day, he may have your, your friend down the road that owns an insurance practice.

Come knocking at your door, trying to figure out what the hell you're doing as their insurance contracts go down and down. And we were able to stabilize our, our revenue, and even increased whenever we want, which is a really cool place to be. We have ownership and say over what we do or don't do, ultimately within our business.

And that's the way we want it. So guys, enjoy the rest of the week. Take care.

Do you want more cash, PT, biz help? If so, get a copy of my book. Fuck insurance. It's your playbook—so successful performance, PT practice, and never having to deal with insurance again. You can get a free copy at Finsurancebook.com. Inside this book, you'll learn the direct techniques that we've used to become one of the fastest 100% cash PT practices in the country.