One question that I get a lot is: Why should your pelvic health business be cash-based versus insurance-based? There are more benefits to being a cash-based practice, compared to an insurance-based practice. Let’s dive into the pros and cons of insurance-based and cash-based models.

Reimbursement Cuts

My practice is a cash-based model. Recently, we just got news that there's gonna be a 4.5% cut in reimbursement starting in 2023. Last year, there was a 10 to 12% cut in reimbursement. Insurance companies aren’t going to inform you that they are making cuts to reimbursement rates. 

We can guess that this will happen every year. I’m not trying to be negative here, but that's just, this is just the reality of it. Due to these cuts, it makes it harder to afford to hire more employees, pay for clinic space, and even pay for additional expenses like equipment. 

Claims Cost Time & Money

When you are an insurance-based clinic, you can submit claims, but you truly don't know how much you're actually going to be reimbursed. You also don’t know if the billing person is going to be on your “team” or not, or if they're filing things correctly. There are a lot of unknowns, and that's the biggest problem with the insurance model. It is also confusing for patients, and you often get a lot of questions from them because the terminology is confusing. This confusion can cause patients to get frustrated at the facility because they thought that their treatment is going to be covered and now they have to pay for it. The patient becomes bogged down by this big bill and you have to remind them to pay for it. Sometimes, you have to chase them around and send them to collections, which is going to cost you both time and money. It’s tiring for you, your employees, and the patients. 

Limited Outcomes

When you set your business as an insurance-based model, your outcomes are limited. Because you're maybe seeing your patient for 20 minutes or even 30 minutes, and then you're sending them off to the aid for them to do exercise (or whatever else). The outcomes can be limited because there's only so much time you have with them.

Here’s my experience with outcomes. When I worked at an outpatient orthopedic place, I was the only pelvic health therapist out of a hundred plus PTs. When I sent them off to my aids, my aids had no clue what to do with them. Instead of stretching and stuff that we do to length on the pelvic floor, the aids were making the patients do athlete-level stuff. We do athletic exercises with our public floor patients too, but they are most often used on chronic pelvic pain patients. As you can probably guess, it was a nightmare, and there’s only so much training that the aides get. 

Profit Margins

If your clinic follows an insurance-based model, then your profits will be lower. For an insurance-based practice, you have to have between 500 to 700 patients a month in order for you to be able to pay your bills, etc. Slim profit margins cause you to have more stress and anxiety.

Here’s a positive thing about the insurance-based model. You can counter lower profit margins by having different services that are cash-based.

When you go to a salon to get your hair done, they might charge you $200 or $300. What do they do when you're checking out? They try to sell you additional products. For example, I only go to the salon once a year and they often sell three different things to me. Luckily, I have the willpower to say no, but some people don't and pay for the products.

For example, you may pay $300 for the haircut, and then in addition to that you might pay about $200 for those products, which will last you a year or so. For this hair salon, you are worth about $600 as a customer, which is significantly more than the $300. 

Let's bring that same scenario into the PT & OT world. When a customer comes in and they are paying an insurance-based model, we can say that they're going to more than likely stay with us.

For instance, your patients pay $800 to $1,000 with their insurance company. That being said, if you know you need to get to $1000 per patient and your patients often stop at $800. How are you going to get them to spend $1000? You can sell them additional products like that hair salon is our previous example. To sell additional products, you can put together packages of stuff that they will use during their plan of care. You're just giving it to them right then and there. They can get started on it right away. Your patients will ultimately understand how to use it because you're giving them information on how to use these products instead of advising them to purchase the product(s) elsewhere. When patients order products outside of your clinic (ex. Amazon), they might not know how to use them and the items will just sit unused at home. 

To increase profit margins, you need to think about programs as well. Can I put a nutrition program together? Can I do a wellness or fitness program? Think about what add-ons you can do that will provide cash flow to your insurance-based clinic. My prediction is that add-ons, packages, and programs are going to be how insurance-based clinics are going to survive. 

I truly believe that a cash-based model is going to be the best way. However, I'm not saying that you can't do insurance, you definitely can try an insurance-based model. Some people also do hybrid models as well. However, I think that patients get confused with hybrid models. Hybrid models only take some insurance providers and this can frustrate patients.

The Premium Model

I look at the cash-based model as the premium model. If you are a cash-based practice, then you are kind of like Chanel or Louis Vuitton. Now, I'm not treating the Louis Vuitton people and only the Louis Vuitton people. I'm treating, you know, anyone and everyone.

I think you have to know your audience to know the value that you're providing them. Do those people want that value? And those are the clients that I actually want to treat? I don't want someone that just comes into the clinic and says: “Hey, my doctor referred me. I'm just here.” To me, those outcomes aren't gonna be as good because they're not as involved in their treatment.

I want a patient whose thought process goes something like this: Look, I just paid you a fair amount of money and I want to get better. Those are the people that I want to work with because I know that I’m going to have really good outcomes with them. We all know that the more we invest in something, the more we're compliant in something. 

Reduce Burn Out for Better Outcomes

Insurance-based models are similar to Walmart because you have to have a high volume of customers to thrive.  Cash-based models have lower volume, which is a good thing. When your clinic has a lower volume of patients, you usually have better outcomes. The provider is the PT, OT, or the PTA, they're doing pretty much all the work instead of aides. 

With a cash-based model, you're not gonna be burnt out. You're not gonna go home with notes to do at night. When you aren’t burned out, you can establish really good connections with your patients. You don’t have to toggle between treating the patient and then trying to get all your notes done.

I used to feel burned out so much when I was an insurance-based model because they were just on me to do my notes correctly. If I didn't do my notes correctly, then they weren't getting reimbursed. I get it. It's not their fault, but that's all they wanted me to do is do my notes and all I wanna do is treat the patient. It was a battle. With a cash-based model, you can treat a patient’s shoulder and their pelvic floor, and that's the coolest thing. 

The Top Benefits of Cash-Based Clinics

Cash-based models make you more profit because you set the rate for each visit. That's it. There's no hidden fees. They have to pay up front. You're not chasing anyone down, and you don’t have to hire a billing person, which can cost anywhere between 50K to 75K.

We're not all trying to be millionaires here, but we do need to survive and a business has to survive with some kind of profit. You have to have some kind of profit happening, otherwise; you're not gonna be in business anymore and won’t be able to pay your employees.

If you chose to do a cash-based model, you don’t have to hire as many employees. You may have up to maybe 8, 9, or 10 employees. It's a lot easier to manage a smaller number of employees.

Which One Works the Best?

All types of models can work. Based on my experience from coaching PTs and OTs, cash-based PT clinics are the ones that do well, and are able to survive because they can pivot quickly. I’m not saying that the insurance and hybrid clinics aren’t going to survive. They have to be very unique about their marketing and be like a hair salon to actually keep their business up.

Do you want to grow your pelvic health business? Kelly's guidance can help your clinic reach its full potential.

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