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Can there be a successful business model for the delivery of rehabilitative health care?


Healthcare has been moving more into the spotlight as a main topic of concern for the national debate. As a result, there is an intensifying interest in the implementation and delivery of those healthcare services to the changing demographics throughout the country. The current system for delivering healthcare has been met with general frustration in what can be best characterized as services delivered with restricted hours of operations and limited opportunities for scheduling skilled care. Rehabilitative care is a microcosm of healthcare that commonly engages the patient on a much more intimate level with repeated visits within a shorter time frame than the usual healthcare exposure. As a result, this sector exposes the patient or consumer to the physical settings and fluctuating levels of skilled clinical staffing of healthcare more intensely. This sector of healthcare delivery best illustrates the labyrinth of healthcare that can extend beyond the patient and even impact family members. This article presents two successful alternative business models for the delivery of rehabilitative healthcare for both inpatient and outpatient services. Each model offers different objectives, structures and rationale in promptly responding to the changing patient or consumer demands. Surprisingly, the two diverse business models present converging goals that justify their means for the unique but successful structures.


The demographics of the United States population indicate a potential for a significant divergence in the needs and delivery of health care in the near future. The dominant expansion of that population has been towards the suburbs increasing urban sprawl throughout the country. In response to that shift, the classic model for delivering health care services has been from smaller surrounding hospitals. In the most recent decades, area hospitals have attempted to offer off-site outpatient locations. The mantra for this philosophy has been, "built it and they shall come". However, this approach has not resulted in the automatic success either operationally and financially that hospitals had projected for their future.

Heanberg Johnson (2002) discussed the modern challenges and physical problems associated with modern society. Physical therapy plays an important role meeting those changing demands of this revolutionized work place. As a result, the consumer is looking for providers that will meet their physical needs and time demands. Therefore, effective and responsive management is extremely vital for the successful delivery of rehabilitative services. These conditions and changing consumer demands presented an opportunity to create new business models for both the inpatient and outpatient delivery of rehabilitative services. Slow or resistant responses to changing consumer demands presented an opportunity to create new business models for both the inpatient and outpatient delivery of rehabilitative services.

However, this new business model would need to different for inpatient and outpatient services but have converging goals that would ultimately respond to the needs of the community. Those elements would have to confront variety of treating diagnoses, aging concerns, staffing work schedules, commuting times, family and personal commitments while maintaining a consistent high level of patient satisfaction. Utilization of services and consumer satisfaction will be the ultimate measure of success for that delivery of rehabilitative services.

The hospitals and corporate providers are reluctant to modified staffing configurations or expand hours of operations in these new independent locations. Often the community seeking rehabilitative health care services would experience difficulty in obtaining appointments, inaccessible weekend's hours, interact with overworked staff or rotating clinical staff with unfamiliar faces. Management of these factors is extremely vital for the successful delivery of rehabilitative services such as physical, speech and occupational therapy for either the inpatient or outpatient setting.

New Outpatient Model

Physical Therapy Partners is an example of an outpatient facility owned and operated by four physical therapists. The opportunity for the successful delivery of rehabilitative service business for Physical Therapy Partners is not unlike any other start up business. The large corporate providers of outpatient rehabilitative services have attempted another approach to successful delivery of rehabilitative services for the future. These typically involve purchasing a core group of owner-therapists practices that have demonstrated successful delivery of rehabilitative services. There is a usual infiltration of corporate accountants; marketing and operational staff that begins to profile the delivery of rehabilitation services as directed from a remote central location. There is an existing health care provider who currently underserves the customer'seeds or may be there is currently an absence of any health care provider for the community. The initial market survey data will typically substantiate the external components with regard to population characteristics, market potential, customer demands, competitor status, and potential growth. The business model will begin to take shape with a parallel formation of internal structural formation of the entrepreneurial stage. The typical structure is the owner (corporate or hospital) at the top with employees hired as therapists to provide the actual service with various support or clerical staff to assist with ancillary functions. However, these are usually encumbered with additional paperwork, regulations, policies and procedures that distract from actual patient care.

However, in the new model, the important change is the amalgamation of owners and the providers of the service as one entity. The new structure has multiple owners as therapists being the same as opposed to one single owner (corporate or hospital) who is unrelated, either geographically or operationally, to those providing the rehabilitative services. In this new business model, the owner-therapists now have a vested financially, personally and professionally in providing consumer centered and highly skilled rehabilitative services. This element becomes crucial for the success of the business model. At the same time, it may potentially limit the model's success to that one particular clinical or community site. As the business model matures, there will be a need or a process to occur to expand the owners-therapists group in order to expand the same successful business model in multiple locations.

The maturation of the business model will ultimately need to expand the owner-therapists members that create the transition from the entrepreneurial phase to the bureaucratic phase. This will necessitate the centralization of certain business tasks in order to avoid a loss of focus by the owner-therapists as exceptional service providers. An eventual consolidation of billing, marketing, accounting and other business related aspects would need to be centralized geographically as the business model begins this transition. The consolidation of these normally frustrating diversions will represent an opportunity to improved management of resources, advance the efficiency of its service delivery practice and eventually lead to financial success of the business model for the group. This also represents successful delivery of rehabilitative services for the consumer.

Owner-Therapists Philosophy for Outpatient Model

Large hospitals and corporate service providers are inherently ill equipped to offer highly motivated service providers the same opportunities and choices over the long term. In comparison, the new business model offers the owner-therapists a financially commitment for offering a continuum of technically current and consumer focused services to their area communities. Those same providers of care are typically residents of the same community and are further obligated to maintaining that pride and dedication to the delivery of care. This significant difference is usually the driving force and genesis of the group to initiate the entrepreneurial phase of this new business model.

The Strengths / Weaknesses / Opportunities / Threats (SWOT) analysis below identifies the challenges facing the initiation of Physical Therapy Partners in the market place.


The group's developing philosophy for enhancing the delivery of rehabilitative services is a natural consequence from the frustration they felt at the various facilities at which they currently worked in, such as a large corporate providers or smaller hospital settings. The owner-therapists that begin to form this group typically enjoy their profession and engaging the consumer/families throughout their clinical treatment interactions. Characteristically, they would like to have any distractions from that patient/consumer interaction removed or at least lessened to a much smaller degree. Another driving force is the opportunity or environment to exercise greater control over the direction in which those services are being provided to the patients/consumers. These concerns become the principles and foundation of the group's philosophy for the delivery of care. It becomes their bond as partners in forming the owner-therapists core in this early entrepreneurial phase for the new business model.

Facility Design and Equipment for the New Outpatient Model

This aspect of the new business model is not unlike the current competition since there are physical barriers, accessibility, security and proximity to referral sources that are standard concerns for all providers of rehabilitative care. However, the layout of actual treatment space and types of equipment that replicate the new business model begin to demonstrate the differences in approaches to the delivery of this unique aspect of health care.

The physical space is an open gym design with two private rooms for more sensitive treatments, examinations or consultations. There is an array of treatment tables of varying heights and widths to accommodate a diversity of treatment approaches and patient needs. Exercise equipment occupies approximately half of the open space which is comprised of bikes, treadmills, stair climbers, weights, thera-balls, sport cords, total gyms and other odd-looking pieces. It is the odd looking pieces that offer the unexpected challenges to the patients in ways they have never been challenged before.

These exercises are shaped and formulated based for each individual patient's diagnoses, tolerance, mobility and strengths. Therefore, the same provider aware of their status and concerns advances the patient. As a result, the patient is eager to engage the rehabilitative session with renewed confidence and energy. This emphasizes the owner-therapists philosophy and is conveyed directly to their patients/consumers. The patient/consumer and their families perceive this service model as honest, dependable and consistent in its delivery.

Although large corporate providers and hospitals present this same type of service model in print and television advertising, the point of service or staff is not effectively communicating this same message. The patient is commonly complaining of lack of needed attention, too many unfamiliar faces, inconsistency of care by changing staffing patterns and a general frustration in the way they receive those rehabilitative services. There appears to be a disconnection between what is publicized and the actual delivery of rehabilitative services for these providers. The provider staff are not vested financially, not given enough freedom to fully exercise their clinical judgments nor given the flexibility to control the logistics of that deliver those rehabilitative services.

The allocation of expenditures should reflect of those elements that mirror the new model for the delivery of rehabilitative services. Since the staffing or providers of rehabilitative services are the most important feature to this success, the highest percent of costs should be relegated to salaries and benefits. In the example spreadsheet of the new business model below, the costs for salaries alone comprise 42.4% of the overall costs.

This spreadsheet represents the costs and revenue related to one owner-therapist to help simplify the multitude of factors involved in the entrepreneurial phase of the new business model. The opportunity to double the revenue with two owner-therapists offers the prospect to grow the business with cost being lowered for some areas. The space would accommodate two therapists. The utilities, loan service, marketing, supplies and other minor costs would remain the same also. Expanding the owner-therapists group will increase the revenue by 100% from $190,800 to $381,600 but only increase cost by approximately 50 to 55%.

Increasing the owner-therapists group to a manageable size of four or five therapists would promote growth potential, expand the appointment opportunities, and allow for increased marketing and program development. As this new business model begins to enter the second maturation phase, the addition of ancillary staff is required to perform billing, housekeeping, office tasks that would normally represent frustrating distractions for the owner-therapists. The addition of ancillary staff bring supplementary costs but at a much lower relative impact on the operations.

The clinic would be expected to maximize its current physical space within a three-year period. At that time, growth would come from leveraging the success of the new business model by expanded programs to reach out to occupational injury rehabilitation, wellness, women's health issues, and summer exercise training series for young athletes. The owner-therapists would need to consider expanding to adjacent communities that market surveys have revealed as being underserved again. The new business model becomes the format to establish an expanded location offering the same exceptional rehabilitative services.

In order to fully leverage the earlier success, the group itself would have to expand and find that therapist ready and willing to adapt the group's philosophy. The opportunities remain the same for that new addition as the established group, financial and professional controls with distractions minimized to afford that unique deliver of quality rehabilitative care. The final maturation would be the geographically centralized location of ancillary support staff to efficiently manage billing, accounts payable and receivable, marketing and growth of the new business model. A concerted effort must be made by the owner-therapists to maintain a sharp focus on the provider of that rehabilitative care. Supporting that individual financially, professionally, advancing skill levels, supplying requested equipment and removing distractions would continue the overall philosophy and success of the new business model for the foreseeable future.

New Inpatient Model

HealthPRO Management Services, Inc is a small rehabilitation company that provides management services to rehabilitation hospitals and subacute facilities. The HealthPRO Management delivery model is focused on the patient and the provider facility. The HealthPRO Management model is able to provide all the sophistication and expertise of a large national rehabilitation company with greater flexibility and quicker responsiveness to the consumer. Todd Bergstrom, OTR, and Fred Stem, PT, owners are directly involved with staff hiring, training, development of rehabilitation systems and analyzing the fiscal/outcome trends. HealthPRO Management Services is able to provide computerized documentation and outcomes system linked to billing.

The HealthMAX computer documentation system was developed in collaboration of HealthPRO staff and is updated, supported and configured to match the specific needs of each facility. HealthPRO Management Services provides designated facility rehabilitation staff and managers with ongoing regional manager oversight. HealthPRO Management provides facility training by national experts in content such as Prospective Payment Systems, Outcomes, and documentation, dependent on the needs of the facility and the clinical staff. HealthPRO benchmarks quarterly against national and regional healthcare providers for fiscal and functional outcomes. Monthly fiscal reports and quarterly functional outcome reports are designed to meet the customer needs such as for marketing, fiscal management, and effective patient care.

HealthPRO has listened to their customers and have developed rehabilitation models, which can progress a facility as their needs change. HealthPRO feels that the customers need flexibility in their rehabilitation services to survive the constantly changing tides in reimbursement. HealthPRO offers their customers a variety of therapy models from full contract service to computer management.


Quality starts with the people involved. Along with a well-nurtured staff, carefully thought-out programs and procedures are critical to quality care. Business should revolve around the delivery of quality services and care while gaining public trust through openness with those in the community. Both HealthPRO Management Services Inc and Physical Therapy Partners build their reputation on a solid foundation on the delivery of quality services. It is not quantity but quality that drive these two businesses toward excellent services.

HealthPRO Management Services Inc and Physical Therapy Partners are two small rehabilitation providers in Massachusetts continuing to provide quality care in today's healthcare market. Both have identified and responded to the needs of the customer. Both providers have direct ownership involvement in day to day operations such as hiring, training, and managing of their employees. The owners are part of the delivery of care as well as the day to day operations; they are able to see first hand the needs and the demands of the patients and the clinical staff. Cooper (Feb, 2001) stated that we, as entrepreneurial clinicians need to build a sense of trust, as well as an active interest in the needs of the customer to sell the services and products that are likely to achieve our desired goal.

HealthPRO Management Services Inc and Physical Therapy Partners not only establish a solid foundation of trust that is demonstrated through daily interaction with their consumers and employee. Collaboration is encouraged and expected with the owner and therapists for fiscal and clinical decision making. Ries (2002) found that effective interdisciplinary teamwork is the key to ensuring that patient needs are met with the push to reduce healthcare costs. Ries (2002) stated that the "three interrelated keys to effectiveness." These keys include understanding the roles of those on your team and how they relate to each other, establishing and maintaining open lines of communication, and putting into place effective process to reduce the risk of distraction and loss of focus.

HealthPRO Management Services Inc and Physical Therapy Partners are able to be flexible in their delivery of services. They are able to modify staffing configurations and expanded hourly operations to meet the demands of the consumer without corporate red tape. Both providers of care are able to customize services and design programs to meet the needs of the consumer by providing quality services with less overhead costs than normally found than national rehabilitation providers since there are less administrative costs. Both providers not only customize services to meet the needs of the consumer, but also have the ability to customize contracts established with different payor sources for reimbursement.

A healthcare business is often dependent upon referrals from patients and their families, as well as from employees. Marketing is vital in small business growth. Cooper (Dec, 2001) proposed that in order to market successfully, businesses must consider interaction styles with the consumer. Cooper (Dec, 2001) suggested that we look for clues when meeting potential customers in order to build relationships with the customer. Considering interaction styles can be very valuable in not only marketing, but also in building teams that are working toward establishing a better and more cohesive service.

Smaller business can customize the workplace to meet the demands of their staff. This ability to customize is beneficial to the working sense of the team. Zimmeran (2000) identified strategies to implement for employees to be content in the workplace. Strategies include providing learning opportunities for their employees to develop with appropriate training. Todd Bergstrom OTR/owner meets with his regional managers and program managers monthly to disseminate new information and review any updates and material. Mr. Bergstrom provides training in areas such as documentation/software, fiscal management, and policy and procedures directly to his employees to ensure proper distribution of material. Zimmerman (2000) found was that to be competitive, employees need to understand how a business is compensated. HealthPRO Management Services monthly meetings are designed to educate all management staff in fiscal management strategies and a clear understanding as to the costs associated to delivery of quality care. It is both HealthPRO Management Services and Physical Therapy Partners philosophies that understand that when an employee is better educated in understanding the fiscal management component of providing quality services, then the employee can better appreciate the operational needs of the business especially in an owner-therapist model.


Consumer demands and reactive management capable of consistent delivery of rehabilitative services will predict the landscape of successful business models. The shift in spending trends towards more effective approaches will create a perception for improved health care delivery. As everyone in the business world recognizes the old adage, "Perception is reality." This will be the mantra for the new business model for the delivery of rehabilitative services for the future.
Business Model Market Potential High Market Potential Low

Consumer Growth Meet consumer needs, Crowded competition,
 High Diversify practice, Marginal skill offerings,
 Committed therapists Limited physical setting
Consumer Growth Underserved
 Low community Limit consumer needs,
 Limit appointment Limit scope of practice,
 hours Frustrated staff
 Narrow practice focus

 Total Annual % Of Costs % Of Revenue

Cash Inflows (Income):
 Revenue--HMO--Rehab 168,100
 Revenue--Private/other 34,700
 Other: outside consulting 6,000
 Total Cash Inflows 190,800
Cash Outflows (Expenses):
 Advertising 13,800 8.4 7.2%
 Bank Loan Service 9,000 5.5 4.7%
 Bank Service Charges 860 0.5 0.4%
 Credit Card Fees 212 0.1 0.1%
 Health Insurance 9,200 5.6 4.8%
 Business Insurance 2,700 1.6 1.4%
 Accounting Fees 2,400 1.4 1.3%
 Interest 410 0.2 0.2%
 Office Supplies 2,800 1.7 1.5%
 Payroll 70,000 42.4 36.7%
 Payroll Taxes 12,350 7.5 6.5%
 Professional Fees 388 0.2 0.2%
 Rent or Lease 29,400 17.8 15.4%
 Subscriptions & Dues 195 0.1 0.1%
 Therapy Supplies 7,325 4.4 3.8%
 Taxes & Licenses 583 0.4 0.3%
 Utilities & Telephone 2,250 1.5 0.1%
 Educational 3,000 1.8 1.6%
 Miscellaneous 3,000 1.8 1.6%
 Total Expenses 169,873 100.0 86.4%
 Potential Gain $25,927 13.6%

How Does HealthPRO Compare
To the National Rehabilitation Providers?

 HealthPro National
 Management Competition

 1 Computerized Documentation and Yes No
 Outcome System Linked to Billing
 2 Designated Facility Rehabilitation
 Staff and Manager Yes No
 3 Facility Training by National
 Experts in PPS, Outcomes, and
 Documentation Yes No
 4 Productivity Standards based on
 Facility needs and standards Yes No
 5 Monthly Fiscal Analysis Yes No
 6 Regional Benchmarking
 (Quarterly)--Fiscal and Outcome
 Measures Yes No
 7 Owners directly involved with
 facility Management Yes No
 8 Outcome Marketing Presentations
 by Outcomes Experts to referral
 sources Yes No
 9 Ongoing Regional Manager
 Oversight and Auditing-Weekly
 Involvement Yes No
10 In-House Transition Option Yes No

S.W.O.T. Analysis


--Group of four physical therapists

--Majority is residents of town

--Prior experience in private practice

--Clinical skills well demonstrated

--Experience in work related injuries

--Known to referral sources

--Willingness to offer flexible hours

--Cost effective choice for private pay

--Plan to diversify patient payer mix

--Plan a diversified referral base

--Practice location down the hall from large orthopedic & medical practices


--Potential referral sources are not known as well locally

--HMO's are somewhat reluctant to open to new local provider listings

--Additional capital may be needed to fund purchase of capital equipment

--One of the physical therapists a new new graduate to the profession

--Additional competitors may enter

--Hospital may reject services associated with the new practice


--Reduce a portion of the competitor's business in the under served population

--Capitalize on the aging demographics

--Create a market in the occupational and work related injury settings

--New programs for school athletes

--Maximize the potential physician referral base within the same building and out of area physician groups

--Gain market share by offering convenient hours for physical therapy

--Offer services to the surrounding Chiropractic and Podiatry practices


--Inability or delays in securing various HMO providers contract relationships

--Additional competition to the area

--Legislative Medicare and Medicaid insurance reimbursement changes

--Narrow or restricted referral base

--Lack of internal execution of the practice or its members

--Limited or ineffective marketing plans and implementation

--Lack of necessary capital to sustain delays in Insurance reimbursements


Cooper, B. (December-2001) So that's why you said that! PT Magazine of Physical Therapy (9) 12, 28-29.

Cooper, B. (February-2001) Get in sync! PT Magazine of Physical Therapy (10) 2, 4043.

Hearnburg Johnson, L. (2002) The challenges of modern society. PT Magazine of Physical Therapy (10) 10, pp. 40-45.

Ries, E. (2002) Filling an acute need: PTs and team collaboration in the hospital. PT Magazine of Physical Therapy (10) 9, pp. 34-41, 83.

Zimmerman, E. (2000) HR lessons from a strike. Workforce, 36-42.

Patrick J. Carley, Assistant Professor of the Division of Physical Therapy Dr. Laura Martorello, Assistant Professor of the Division of Physical Therapy School of Health Science American International College Springfield, MA 05109
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Author:Martorello, Laura
Publication:American International College Journal of Business
Date:Mar 22, 2002
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