E546 | Hybrid vs Cash-Based PracticesOct 18, 2022
Welcome back to the P.T. Entrepreneur Podcast! Today's topic comes from a question I received on Instagram and it is a common one: what do we consider a hybrid practice? I discuss my perspective on this and how you should approach the two when starting your own practice. Enjoy!
- Insurance practices turning into hybrid
- How much money is a provider generating per hour on average
- How to transition from in-network to a hybrid
Up for a Challenge? Try our 5-Day Challenge Here! https://www.physicaltherapybiz.com/challenge
PT Everywhere: https://pteverywhere.com/
Do you enjoy the podcast? If so, leave us a 5-star review on iTunes and tell a friend to do the same!
Are you a member of our free PT Entrepreneur Facebook Group? Join today!
Danny: Hey, I've got a question for you. Do you know if you're tracking the right data, the right metrics, the right key performance indicators in your practice? This is something that's huge for us and really helps us make solid decisions within our business, but the prior software that we're using to run our practice made it really challenging.
To actually get that data out and use it in reports. Since we've switched to PPG everywhere, this has actually become way, way easier for us to be able to have the right data. We have a dashboard of all the things that we actually want to see, the metrics that we want to pull, and it makes our life a lot easier to pull the information that we need to make the right decisions within our business.
So if you're running blind and you're not tracking the right things, or you're having a. Hard time actually pulling everything together. I highly recommend you check out our friends at PT Everywhere and see what they've got going on with their software platform. It's what we use for our practice. It's been a game changer for us.
You can check 'em [email protected]. I think you really like it. So here's the question. How do physical therapists like us who don't wanna see 30 patients a day, who don't want to work home health and have real student loans create a career and life for ourselves that we've always dreamed about?
This is the question, and this podcast is the answer. My name's Danny Mate, and welcome to the PT Entrepreneur Podcast.
What's going on guys? Dr. Danny here with the PT Entrepreneur Podcast and today. I'm answering a question coming from Instagram again. So if you have a question for me, you can reach me pretty easily on Instagram's, Danny, Matt mate, pt is the handle, and shoot me a message. Usually I'm pretty responsive on that platform.
You can also put it up in our PT Entrepreneur's Facebook group. Those are probably the easiest places to, leave a question. I'm. Pretty, involved in both of those. But we get a question and if it's something that we think is a pretty good topic to cover in a podcast, and we'll do that sometimes.
So this one comes from Mark Gibson and he asked about hybrid practices and basically, what do we consider a hybrid practice? And then really, In my mind, I feel like it's the decision of hybrid versus cash. Because I don't really like full in-network practices. I don't really know too much about directly aside from the fact that I don't want to own one.
Just in terms of how they need to be run to be profitable. And honestly, if we really are talking about. Full, fully in network practices. The truth is all of those are really hybrid practices, just very little in regards to cash. Now granted, I, they would love to have as many cash services as they can, but even still, they still have to accept cash for, people meeting their deductibles and all that.
So it's not there's no transaction occurring in those. And people will have much more skin in the game with their insurances anyway. So whether they like it or not, Like insurance based practices are really turning more into hybrid practices. But when we talk about like true hybrid practices versus cash-based practices I think of it as being very limited in the insurances you are in network with.
Okay. And I'll let me back this up. So there's what I consider an in-network practice, which is basically they're in-network with. Almost every insurance, if not all insurances, they can be in network with. And that's your traditional practice. If you think about a higher volume practice that is, you know, treating potentially multiple people per hour and they need that because of the reimbursement, they're getting to be pretty profitable.
Although some of them I actually have really solid reimbursements with certain contracts, and it doesn't really matter. I know a practice in Atlanta here it's actually a much bigger practice than just here. They're in a few different states. But as far as like their contracts with WellStar is concerned, like the big hospital organization, they're getting like, 175 bucks a visit and they'll stack two or three of those in per hour.
And if you think about the hour that you get back with that, it's like pretty good. Even if it's one person from that insurance. And then you know, two other people from other ones you're making a healthy hourly reimbursement off of some of these. And that's not always the case.
This is an example of one that. Is getting pretty good reimbursement. Some of them are just getting, 75 bucks from United per visit. So they're stacking two people in there and they're making 150 bucks an hour, which is probably like barely where they need to be at in order to, meet their profit numbers to stay in business.
Not all of these are the same. But if we're looking at like in-network, that's the way that I perceive those. So they're in-network basically everything out of network is actually cr I think confused with cash sometimes. But an out-of-network clinic technically is not in contra in a contract with an insurance company, but they bill on behalf of the the clients that they're seeing for services rendered.
And this is a. A ch a bit of a challenging game to play. Normally you have to have a pretty knowledgeable biller involved. It's not a great option In a lot of states, certain states, it's a really good option in. And what can happen with this is you basically get somebody that comes in, you check what benefits they have for out of network.
And if somebody has good out-of-network benefits, let's say they have a fairly low deductible and they have like a solid reimbursement amount for out of network you can bill for what you're doing at sort of an increased rate. And you can, you're not gonna be able to build like a thousand dollars a visit.
You could, but they're gonna reimburse you whatever their maximum allowable amount is. But sometimes it's really high, it could be a couple hundred bucks a visit out of network that's allowed for the services that we have. It just depends on the plan. And each plan can be different, right?
So let's say you can have Blue Cross, for instance, and you can have multiple. Plans within that. Some private, some public so they can have different benefits because of it. A good example for this would be the Screen Actors Guild. So we, in, in Atlanta, there's a massive amount of. Movie production and TV production that occurs.
I, I want, I think it's the second busiest place for the film industry behind I believe New York is number one, or maybe it's la, one of those, but Atlanta's it's number two or number three. It's way up there and there's, I don't know, maybe Eight or eight to 12 massive sound stages. Every Marvel movie is pretty much made here.
So there's a ton of people here that are not just actress and actresses, but people that work on those sets, right? So we would actually see a lot of set builders steady cam operators like videographers, and we'd see a bunch of stunt men and women. And the stunt men and women fall into the Screen Actors' Guild.
So the Screen Actors' Guild has their own private insurance. It's through, I forget which group. It's a big one, like a Aetna or Blue Cross. But they have their own private plan that they've negotiated and they have great insurance. We never build out of network but like we would.
Basically submit a super bill for the guys and girls that we were working with that were stunt men and women. And they would get the vast majority of whatever the cost of the visit back, which means it was under whatever the allowable amount was that they had for out of network. So out of network would be a bit different.
It's where you're basically, billing on behalf of these people after the fact. And the goal is that you're gonna get, be able to get more because out of network is reimbursing more and in some cases it will. And in some cases they have maybe terrible OUTTA network benefits and they end up having to go a different route.
So that was, that is what I would consider an out network clinic. And then you have a hybrid clinic. And the way I talk about, or the way I perceive hybrid clinics and the hybrid clinics that we work with, they're usually Taking very few insurance contracts. So they're being very particular about which ones they take.
They don't take all of them and they take the ones that are either reimbursing the best or that there is a large amount of in their area, and probably a combination of the two, honestly. So if they can get, better reimbursement. But be in network. It may be worth it for them to do that. A an example of this would be something like Tricare.
So some of the practices that we work with are in larger military towns, and TRICARE is the military's healthcare. And I think it's either Aetna or Humana that it's actually run through, but it's basically, it's the military's plan. Whatever branch of service you're in, it all falls into the same thing.
So let's say you're in an area that's a big military town. If. You take Tricare, depending on how you work with somebody. And again, this comes down to like how many units are billed and all of that. You could get a pretty solid reimbursement by working with a Tricare patient in network and still be able to see them one-on-one.
Yeah, as an example. But you may say, all right, you I don't wanna take a United contract or a Cigna contract because maybe I'm getting 70 to $80 per visit per person, no matter. How long I work with them or not. So if you're not doubling or tripling people up per hour, exchanging your time for 70 bucks.
And, getting a percentage of that, if you're using a biller, they're gonna take a percentage of whatever you're submitting. It's just not worth it. It's not even worth your effort in a private practice to try and do that. So with these hybrid practices, what they'll do is they basically have to identify which contracts, which insurances are.
Worth taking. Like where they're gonna get a reimbursement they feel is fair. And it's also the volume is there where it's worth their time. And they may take a handful of these, maybe it's just one, it could be a half dozen different insurances, but it's not gonna be all in networks. So these hybrid practices, the vast majority of what they're doing is cash, and then it's bolstered by.
Insurance practice or insurance contracts as well. And I kind of wanna talk about, let me, lemme talk about the last one. Cash. So cash is straight up. Straight cash homie. Just like Randy Moss, give me money, I fix you. That's that's the trade off, right? Very simple, very straightforward.
You don't have to deal with really anything aside from maybe superbills and your practice act, right? Like just staying within your legal boundaries, whatever that is within your state. And and other than that, it's a contract between two people to work together to get over a muscle skeletal injury of some sort, right?
So that's cash. But when we look at hybrid versus cash, I'm a fan of both. And. When I look at a hybrid practice and my thoughts of this have changed somewhat because it just depends on a couple of factors. Number one, if you want. The most simple approach to be able to work with people due to the least amount of documentation, due, the least amount of paperwork, the least amount of accounts receivable, meaning you're, you have money that you're owed that you haven't gotten yet from an insurance company.
There's nothing that's more simple. Than a cash-based practice. There's nothing that's easier to start run. And just like as far as the logistics of it are concerned there, there's, of the options that I've mentioned logistically and operationally, there's nothing easier.
There's nothing easier on your providers either as far as documentation and questionnaires are concerned, because let's just throw Medicare in there. Let's say you're in a. Area where you have high retirement age, Florida, maybe, something like that. And you realize, oh man, I really need to take this because.
50% of this population is over this age, and they want to be able to use Medicare. It might be the right move for you to make from the business side, but then you have to throw in the headache of dealing with Medicare, which would be slightly more documentation. Questionnaires you have to do for that, potentially audits that are involved in that, and then going through the billing process and the credentialing process through them to be able to bill directly as an indirect provider for Medicare.
So these are all things that if you're just a straight cash-based practice, you don't ever have to deal with, you don't have to do anything with that. But it could be the right decision. In your area and for your practice, and it has to do with your goals, right? So one thing that a hybrid practice does have that a cash-based practice does not is the ability to scale faster and bigger.
So if you look at the landscape of insurance practices in-network, like fully in-network practices, there's many of those practices that are. Over seven figures in revenue. It's really not, it's not that hard to get there. Like when you're getting a bunch of people just shove towards your clinic for these low contracts and you have high volume and but the top line revenue or your gross revenue is one thing, the net revenue.
Is different. So net is your profit, it's what you keep. So the profit margins on practices like that are lower than cash and hybrid practices unless they're at ex like big scale. I'm not talking about you own one practice and you're in private practice yourself. I'm talking you own like 50 practices and it's a, you have a lot of weight to throw around to be able to negotiate better contracts.
And the sheer volume, you're gonna be more profitable because you have. Less profit per person in certain cases, but you have more people, so you're gonna have more overall profit and revenue associated with it. So that's like a big, that's a big scale game. If you wanna play the in-network game and some people, that's what they wanna do, a hybrid practice, you get some of the benefits of that because you can scale faster, you can fill up schedules faster.
And, but yet you don't have to run such lower margins as far as your profit is concerned because you're getting a better. Reimbursement with less time to value if you were to, when you get that cash in your hand with a, with cash clients and you get some of the volume from being in network with certain clients, with cer, with certain insurances, right?
So what you get from that is volume and things like post-ops. So for instance, let's say you, have junior clinicians and. You may, maybe they're not the best fit to function in a cash model just yet, but they can take. The, vast majority of insurance based clients and they're seeing a lot of easy post-ops in comparison to solving like much harder patient case scenarios.
That can be a nice fit for people that are running a practice that way and be able to basically layer that in along with cash patients and the ones that we work with, the hybrid practice that we work with, they tend to do best if the. In network contracts do not account for more than 50% of their revenue.
So once they can be at that 50 50 mark, it's, it seems like a much better place to be from a financial standpoint as well as just like a consistency standpoint. And a lot of them are actually trying to be lower than that. They're trying to be, maybe 20%. In-network, 80% cash. That would be ideal.
I don't know why anybody, if you were getting the same amount of money from a cash client versus in-network, I don't know why anybody would take insurance because it's a pain in the ass to work with. But it can make sense if you're trying to bolster volume in your practice. So you can definitely scale faster.
The other thing you can do is maintain. Lower volume. So if you want to take insurance, but you don't want to see two to three people an hour, then being a hybrid practice really allows you to still maintain a solid hourly rate for when you're seeing people. Cause if you look at your average visit rate, and this is a big key performance indicator that we look at, we want to know how much money is a provider generating per hour on average.
You know that they're seeing somebody and. Let's say you're getting reimbursed $120 for a visit that you're getting as far as insurance is concerned. And let's say you're getting $160 cash whenever you've seen somebody and you're, you have a mix where it's 50 50 that average would be one 40, so it would be, Half is one 20 half is one 60.
So the two together divided by two equals one 40, and that's your average visit rate. Now if we see, if somebody's one-on-one and they're taking in-network exclusively, and let's say they're averaging 120, 115 to $120 a visit. That's their average visit rate. Unless they're trying to add cash services on somewhere else, their average visit rate is gonna be like 115 to $120.
That's a big difference. At scale it's a big difference, if you're adding a bunch of volume into that. So being able to get your average visit rate up because of running a hybrid model is a very nice advantage to a in-network model if you don't wanna load multiple people out per hour.
This is the biggest distinction. If you are totally fine with. Loading clinic clinician schedule up with 20 people a day, then you could go in-network all day and it would work. The numbers work. But if you find that like something that you don't want to do, which I never wanted to do then it, it just never made sense to me because I want a lower volume amount for our clinicians and for myself because I like to work with people in a more kind of one-on-one manner and not.
Burn people out because of massive volume and all the, all the documentation associated with that just really adds up. It's very hard to keep up with. So if you want to go to the network route, that's the trade off that you have to be able to make with yourself. When you look yourself in the mirror and you wake up in the morning, you're like, okay, are you good with that?
And if you are, then cool. And if you're not, then you're probably not gonna want to go that route now. If we look at a cash model in comparison, I think the cash model is actually the least scalable of everything that we've mentioned. It's slower to grow. It's harder anybody if they have a conversation of using their insurance versus not using their insurance it's not even a question.
It's very straightforward. So when I look at those, the reason that you go with a cash model is because you're, A clinical artist, it's what you do. You want to work with people in the most pure setting that you can, where they're very bought in and they're actually like wanting to come in work with you.
They have skin in the game, so when you pay attention. So I think that, for those of you listen to this, if you look at from a pure business standpoint, a cash business is not as good of a business opportunity as the other ones, but it is still a very solid option to be able to grow. So if we look at scalability, it's slower, but it's also.
Very possible to grow a cash-based practice to, to a seven figure business is very possible. It will take you longer than if you have a hybrid practice, but ultimately you can still get there. And if we look at the margins on that, the cash model is typically gonna have the highest. Profit margins.
So net profit, meaning how much money you're actually keeping versus how much you're making on the top line. So if you're looking at just purely, hey, this is how much money I made. Imagine let's say you say, okay, I have a clinic. It makes a million dollars a year top line revenue, and you make personally $200,000 from that practice.
So you're bringing home 20% of every dollar that comes through that business. That's okay. I think that's fairly standard. For the industry. But if you look at a cash practice and you say, okay, there's as far less moving parts of this and there's far less little things that chip away at your profitability.
It's not uncommon for a practice that's making, let's call it five, $600,000 in top line revenue to make $200,000 in net profit. So you're basically. Just as profitable as a business that's twice the size of you because you have lower overhead, you have less things you have to pay for. And so the profit is what I really care the most about.
That's, that, that's for me was one of the main priorities. I always wanted to have a profitable business and I never wanted to just run it up to where it was a big top line number and I didn't make any money off it. Cuz that's actually a really. That's a sketchy place to be.
There's a lot of risk associated with any business. So running a business that has low profit margins, it just puts you in a precarious situation more so than if you have more profit profited in a lot of ways. It's just safety. It allows you to, Buffer mistakes and ups and downs within the business better.
Versus, if you are running a really thin margin business, it can be complete opposite. You can go outta business pretty fast. So it's the simplest way to go. It's less scalable, but it's also far less documentation. So if you look at quality of quality of life for yourself, starting out as well, as far as, as well as your clinicians as they scale.
Their own schedules. It's just so much less work outside of the patient care. And I don't know about you, but I just never wanted to do these additional questionnaires and shit that I would have to submit to insurance because I needed to get verification to work with somebody more. And it's just this redundant stuff that you don't have to deal with ever.
As well as it's very simple documentation. It's defensible documentation where you are just justifying what you did, why, and then what you're gonna do next If somebody is getting better, saying the same, or getting worse, right? You're not necessarily trying to document in a way that's gonna allow you to get more visits or anything like that.
Like it's, it takes you. I don't even know, less than half the amount of time to write a note or less from what I've seen in a cash setting versus in a, in-network setting. And that would include hybrid too, because if you're submitting to insurance, you're gonna have to do things slightly differently.
And the last thing is really there's so many more recurring revenue options that I've seen from these cash practices, and part of it is you have a buyer that is already like down to invest in themself to pay out of pocket. And That segues really well into recurring services. So meaning it could be digital, it could be in person it could be recurring visits that they're coming in for.
You don't see that a whole lot in an in-network practice. It's just a different type of consumer. In a hybrid practice, you're gonna get some of that, not as much as a pure cash practice. So I think what you. Lack in volume with the cash practice you can make up with lifetime value of people by adding on recurring services on the backend that help them achieve their health and wellness goals of whatever those might be.
So I think that's a really distinct advantage to that business model. So that's my. Pros and cons of all of them. I think the things that an in-network practice does really well is just the opportunity to scale. If you really wanna scale up and end up being able to exit a practice for, 10, 20 million or something, like a big practice, multiple location, fast growing, sell a private equity, and then move to the beach and never have to work again.
Yep. You gotta, you could do it there. That's not easy to do by the way. But it's possible. Can you scale a hybrid practice up the same way? I don't think it's as easy to do that. I think it's harder but it's more scalable than a cash practice. So it's a nice sweet spot for people that still want to take some insurance, but they don't want to be.
All in with insurance, they want to pick and choose which ones they're gonna use. I think a hybrid model is actually a really solid compromise. And if you really are, if you really feel compelled that you wanna work with a Medicare population, then you know, maybe a hybrid works for you and you take Medicare or you're in a, again, a military area and you take Tricare and other than that you don't take anything.
So you're just like a hybrid practice that just takes. One other group. Cause maybe there's a lot of volume of that or you really wanna work with that population. So I think it's a really good compromise and it's more scalable than a cash practice. A little bit less profitable in most cases.
But, you can definitely build volume up faster. And then a cash practice, I think is the, so the simplest model. It's typically gonna be the most profitable model. You can't scale it as much. You're not gonna be able to grow your top line revenue as fast as you could with the other business models.
But it's simple. It's a great type of setting to function in as a clinician, and I think it's a really good setting to function in for your staff. Clinicians as far as work-life balance is concerned because they have just less ancillary work to do associated with insurance companies if you're, submitting for reimbursement and things of that nature.
That's it, man. That's my thoughts on those models. I think you gotta pick the one that makes the most sense to you. The vast majority of the practices we work with are cash practices. I would say it's probably like 20% of the practices we work with are hybrid practices. But I love nothing more.
This is actually like a guilty pleasure of mine. I love nothing more than taking an in-network practice and then, Transitioning that in network practice to a hybrid practice and in some cases they go straight cash. Cause it just is such a better quality of life for those practice owners. We've now done this, dozens of times and it's great.
I always enjoy it. It's a scary process for people. To be able to drop insurance and then move to cash. But what they get back is just time, like time and mental bandwidth. And that's huge. Even if we had one practice we worked with and they basically, their revenue didn't really change at all.
They were maybe six, $700,000 in revenue and two years later there's still six, $700,000 in revenue. But instead of that being all in network, that's. Basically all cash and their profit is way better and their free time is way better. So they have like way more time outside of the practice cause not dealing with all of the bullshit that goes along with, dealing with insurance companies and the amount of hours they saved in the week was just like exponential in terms of getting that back, but then also being able to spend their.
Time with their family and friends and like doing things they like outside of the business, but while having a business that if you looked at it, you say, oh, this is basically the same top line, but take home was better. And then the amount of hours they were working dropped significantly. So it's just an exchange that some people really wanna make especially if they wanna hold onto the business for a long time cuz they wanna run it, they want it to be something that is sustainable and more profitable.
And in that case, it can be a really good fit. So I love taking. Pull in network practices that are just frustrated and burnt out, helping them transition, cut some of these these poor reimbursing contracts cutting those down, seeing. That people will do, find what they do valuable and then for them to move to where they're at least a 50 50.
That can be just life changing for a lot of these folks. Cuz these small in-network practices, like I really do feel like they get they get it worse than really anybody else because there's less leverage. They have less negotiation power. They have less buying power because they don't have as, as much.
Revenue coming in. And it's tough. It's a tough place to to be, especially, if they're trying to niche down and be really focused on something, it can be much better to be in the hybrid area versus a all in network. That's my thoughts. Mark, thanks for the question. I hope that you find this helpful.
I hope that if you're listening to this, just in general, I hope you find this helpful. I hope you make a decision on what to do. I'm obviously more on the bias side towards cash. That's something that I've done and I really. I really like, but I'm also a big fan of the hybrid practices. Not such a fan of running a high volume in-network practice.
So that's not really my thing. But the hybrid practices I like and the cash practices I really like. So that's my 2 cents. I hope you guys like it, and thanks for listening and catch you next week.
Hey, Pete, entrepreneurs. We have big, exciting news, a new program that we just came out with That is our PT Biz part-time to full-time, five day challenge. Over the course of five days, we get you crystal clear on exactly how much money you need to replace by getting you. Ultra clear on how much you're actually spending.
We get you crystal clear on the number of people you're getting to see, and the average visit rate you're going to need to have in order to replace your income to be able to go full-time. We go through three different strategies that you can take to go from part-time to full-time, and you can pick the one that's the best for you based on your current situation.
Then we share with you the sales and marketing systems that we use within our mastermind that you need to have as well. If you wanna go full-time in your own practice. And then finally we help you create a one. Page business plan. That's right. Not these 15 day business plans. You wanna take the Small Business Association, a one day business plan that's gonna help you get very clear on exactly what you need to do and when you're gonna do it.
To take action if you're interested and sign up for this challenge is totally free. Head to physical therapy biz.com/challenge. Get signed up there. Please enjoy. We put a lot of energy into this. It's totally free. It's something I think is gonna help you tremendously, as long as you're willing to do the work.
If you're doing the work and you're getting. Information put down and getting yourself ready to take action in a very organized way, you will have success, which is what we want. So head to physical therapy biz.com/challenge and get signed up today. Hey, real quick before you go, I just wanna say thank you so much for listening to this podcast, and I would love it if you got involved in the conversation.
So this is a one way channel. I'd love to hear back from you. I'd love to get you. Into the group that we have formed on Facebook. Our PT Entrepreneurs Facebook group has about 4,000 clinicians in there that are literally changing the face of our profession. I'd love for you to join the conversation, get connect with other clinicians all over the country.
I do live trainings in there with Eve Gigi every single week, and we share resources that we don't share anywhere else outside of that group. So if you're serious about being a PT entrepreneur, a clinical rainmaker, head to that group. Get signed up. Go to facebook.com/groups/pt entrepreneur or go to Facebook and just search for PT Entrepreneur, and we're gonna be the only group that pops up under that name.