February 19, 2019

Mergers, Acquisitions, And MIPS, Oh My! Market Trends For PT with Jerod Bowen, PT

PTO 39 | Physical Therapy Market Trends


Jerod Bowen, PT has spent the past nine years dealing with start-ups, sales, and acquisitions of different healthcare specialties - physical therapy, family practice, chiropractic, surgical centers, etc. Along the way, Jerod's been able to witness the trends and, thus, has a great perspective of what's coming for physical therapy. As he sees it, we're at the “tail end" of what's been happening in the healthcare industry, and that is larger organizations and networks will grow their entities in order to cover the whole continuum of care. In addition, they'll be looking to save costs in a value-based model. That means that they'll be looking to add more and more physical therapy especially since they are incentivized to provide more cost-effective care. We know we're the key to that! Whether you're looking to sell your clinic or not, you need to be aware of the changes that are coming. The way you're operating your business now won't be the way you're operating your business ten years from now.


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Mergers, Acquisitions, And MIPS, Oh My! Market Trends For PT with Jerod Bowen, PT

My guest is Jerod Bowen, physical therapist and Business Development Manager of Empower Physical Therapy. I and my business partner, Will Humphreys, owned Rise Rehabilitation Specialists in Arizona for a number of years. In 2018, we merged with a number of other clinics and put ourselves on the market, and thus formed Empower Physical Therapy. Will is now a member of that executive group, as is Jerod. Jerod, as the business development manager, is the guy in charge of finding, searching out for and recruiting other clinics to merge with and/or acquire. The purpose of bringing on Jerod is because he has a unique perspective. Although he's a physical therapist, Jerod has been working in mergers and acquisitions for a number of years, not just in physical therapy but also in other healthcare arenas, especially primary care physicians, chiropractors and surgical centers.

I thought it would be a great opportunity to bring him on and share with us his perspective of what physical therapy is currently doing, especially with the implementation of MIPS and where we might be going in the next five to ten years based on his views of what has happened with primary care physicians over the past five to ten years. They have used the program but it's not called MIPS, it's called MACRA. He gets into that a little bit and shares with us his thoughts about where physical therapy, in general, is going. The good news is the demand will always be there, considering the number of Baby Boomers that are turning 65 over the next couple of decades and the added efficiencies and efficacies that physical therapy can provide the typical patient, especially those with musculoskeletal injuries.

There are always going to be a huge demand for physical therapy. It’s just how are we, as private practice owners, going to fit into that scheme. Are we going to align ourselves with other networks - hospital networks, insurance networks or other groups - or are we going to stand independently? That's a choice each of us has to make. Some people might find it necessary to align. Some people might want to stand their ground, and if they do so, they can still be successful. I just wanted to bring Jerod on in order for you to get a lay of the land.


I've got Jerod Bowen, a physical therapist out of Phoenix. Jerod is part of my group, Empower Physical Therapy, based out of Arizona. I wanted to bring him on mainly to talk about the market for physical therapy clinics, sale, purchasing, mergers, acquisitions, that kind of stuff. In the past, I've interviewed John Dearing who shared a little bit about what it would take to get your clinic to sell and a little bit about the market. Jerod is the business development director at Empower Physical Therapy and he's doing this on a regular basis. I figured I'd bring him on and see what he has to say. First of all, thanks for coming, Jerod. I appreciate it.

Thanks for having me.

If you don't mind sharing with everybody a little bit about where you came from, your roots in physical therapy and what led you to the point where you are now.

I started off like almost anybody who's reading this as a therapist. Even though I'm a therapist, I haven't practiced much at least hands on for the last six to eight years. For the first part of my career, I was a practicing PT for about that amount of time. In the interim, I was developing businesses. I was one of those weird guys in school that knew I wouldn't practice therapy lifelong. I immediately went to get a business degree here in Arizona. I never intended to stay, but I did stay in Arizona and have an MBA from ASU. I've always been interested in business development. That's the beginning of my story. At one point, I had four offices here. Just out of MBA school, I jumped in and started expanding in private practice. I realized fairly quickly that I was making about as much money in owning four practices as I did with one. Anybody who's expanding business realizes that any of their net margins or operating capital or operating income gets funneled into the next business.

The Way You're Practicing Business Now Won't Be The Way You're Practicing Business in 5-10 Years. How Will You Adapt? Click To Tweet

As PT developers, we live meager as we're expanding our businesses, but that's how it is with most businesses. We roll up our shoulders and we expand. That's what I did for a handful of years. I came to realize, as part of my story, that there was more involved than just therapy in terms of healthcare and making money. I saw a development wave of urgent care is coming down the pipeline here in Arizona and other markets. That was my next big jump. I jumped into the urgent care market. I built and sold an urgent care company to Tenet Healthcare. That took about two to three years. It was a robust little program and an amazing sale. It gave me a taste of what mergers and acquisitions were like. I got my first taste of what a sell was like and I was hooked. I was a business junkie after that. Once I sold our urgent care platform, at that point I was not practicing PT. I took my PT operations and I merged them with an investor out of West Coast Investors.

Collectively, we worked together and expanded. We had about 40 offices that we owned by the time we’re done. It took us about three and a half to four years, but we bought and acquired about 40 offices. Our service lines included family practice, PCP practices, we had pain management clinics. We’re very much involved in surgery centers. Outside of that, we got involved in interventional radiology, which is an incredible up and coming field. When we ran our family practices, I had a lot of exposure in that realm to the MACRA program. It was a primarily driven program initially, but now we're seeing that come into fruition more on the PT and what this means for therapists.

What is MACRA?

The MACRA program is a system basically created by the government. The government comes together with Medicare replacement plans specifically. It's a measurement system that the government uses to align incentives. If you manage government-supported patients, Medicare programs or federally funded programs that are managing patients through healthcare which Medicare is, Medicare wants to make sure that patients are being managed in a cost-efficient way. The MACRA program is a very complex program but at the same time, it's a scoring system. It measures performance in regards to how a PCP manages a patient.

Is that different from the MIPS program that's been rolled out?

It's all tied in. Generally speaking, it's all the same.

We're experiencing a little bit of what the rest of the healthcare industry has been dealing with for a few years by going into this MIPS program.

PT is on the very back end of it coming into it. What does this mean for therapists? I have my mind wrapped around it. If you have dealt with the PCP realm and ACOs, how they're set up, and other types of businesses, PT is very much on the bud end as well as other specialty practices. PCP is more on the back end compared to the PCP market. The family practice, the PCP market, has been involved in this for several years now.

Based on your experience with how MACRA affected the PCP market, what can you predict for the physical therapist as they deal with MIPS or whatever value-based incentive program that comes along down the road?

Let me back up a little bit. If you look at how the payer systems are set up, it's interesting. You have now what constitutes five to seven major payers where ten years ago, you had all kinds of insurance plans that supported patients. The five to seven payers right now in the private market are Blue Cross Blue Shield, Anthem, Cigna and Humana. UnitedHealthcare is one of the biggest ones. If you look at what has happened in the past ten years, some of the largest acquisitions that have ever occurred in healthcare happened when these larger insurance companies came in and acquired the smaller players. When they came in and they acquired those smaller players in the market, they consolidated what now looks like more of a single-payer market in a single-payer system. The interesting thing is it's not a single-payer system. You've got about five, six, seven big companies all publicly traded.

PTO 39 | Physical Therapy Market Trends
Physical Therapy Market Trends: PT, as well as other specialty practices, is very much on the body; PCP is more on the back end.


If you look at their stocks, you can see these companies have gone through the roof over the last ten to fifteen years. They're still worth more than they've ever been worth before, some 40, 50, 60 times book value relative to where they were fifteen years ago. If you look at that trend and you ask why, all of these insurance companies were positioning themselves to comply with MACRA and for the incentives that came with it, because the government is paying these payers to outsource Medicare. If you look at these Medicare replacement plans, they are really managed plans under privately held companies. Now that these privately held companies manage Medicare plans, they are aligning themselves with Medicare to get funds from Medicare.

They're getting incentive payments on top of what they already receive from Medicare.

Medicare looks through the MACRA program. They assign a fixed cost per patient annually. They'll look at a patient and they'll say, “How do we know how much money to pay Blue Cross Blue Shield or United for each one of these patients that they're managing on our behalf?” They assign a fixed amount per patient based on how chronic that patient is and how expensive it's going to be to manage care. That measurement system comes back through this MACRA program. They're looking at the number of ICD-10 codes that are being assigned to the diagnosis and they're assigning scores to these patients. These insurance companies are getting paid by Medicare based on how chronic each one of these patients are. Inherently, the more patients you manage, the more incentives and the more money you're going to get from the government.

What can we then see in the future for physical therapy based on some of this MACRA and MIPS stuff?

When Blue Cross Blue Shield or Humana or these larger payers receive their revenues, they still have to pay the doctors to manage that care or just larger institutions. We're downstream from what the payers get. The payers turn around and re-assign that incentive back to doctors based on how doctors and how institutions manage that care. What does that mean for therapy? It means the more cost-efficient and more cost-effective healthcare becomes, especially for these Medicare replacement plans, the more cost savings and more profits to these larger institutions. For example, if the government is cutting Humana a check for an individual's life and that individual is managed in a cost-efficient way, then Humana just pocketed a lot of money because they manage the margin. They're also paying that doctor for managing that patient's life. Right now, it's either through standard fee for service, which is now changing to full risk or cost containment for hospital systems.

There will be power in numbers, whether that be through networks or through joining a group. Click To Tweet

A lot of these bigger hospital systems are working out a cost containment plan with the payers and going full risk on these plans. You have a larger hospital system, for example, that meets with an insurance company and say, “We will share in the risk of managing this patient's life. If we make money, we make money. If we lose money, we lose money, but we're going to come in together and work together on this.” The insurance companies are still paying fee for service, but they're going full-risk contracts with hospitals, and not just hospital systems but larger institutions to help manage this patient's life because they're coming in on a fixed rate.

To tie this into therapy, this is how this works. As we become umbrella and engulfed in this on the PT side, we're participating in the data tracking. Everybody knows that therapy, in general, is going to be much more cost-efficient than surgery or other means, as long as the outcomes are where they need. Therapy becomes a big deal now for these institutions. It’s such a big deal that they're going to start looking to either acquire PT practices or downstream practices to help manage their own care. If you look at Arizona right now, Banner did a major acquisition. They cut a deal with select physical therapy and they did a carve-out and bought out a portion of select physical therapy companies anywhere here in Arizona where Banner had a presence to push all their therapy into their own clinics to manage those plans themselves. They're not looking to make money on therapy as much as they are looking to save money down the stream on there.

They're looking at physical therapy as a way to manage costs better. They recognize that doing therapy versus doing surgery is going to cost them less. Because that happens, then they're going to get more incentives and more kickback on the back end because they manage the case better. They don't really care so much whether physical therapy is a profit center or not. They just know in the bigger picture of things that utilizing more physical therapy underneath their umbrella is going to somehow improve their incentive payments.

It's important that it makes money because they don't want to lose money, but it's not the driving force behind it. The driving force is managing. If you look at the history of the PT market, if you look at what happened in the primary care market, there's a stat out there that shows nationally about 50% to 55% of PCP practices, privately owned practices, have either been bought up or absorbed by larger institutions over the last ten to fifteen years. This happened as a result of the MACRA program. These larger institutions realized that if they can get in front of the patient and own the patients, then they also inherently own the downstream that comes with those incentives. It’s a control mechanism.

We're trailing that on the PCP side. As a private practice owner, we need to be aware that larger institutions are coming in to acquire and to absorb PT. They're going to look at de-fragmenting the market or try to consolidate and own their own therapy which is going to cut out the private practice owner. That's exactly what happened in large degrees to the independent private practice owners, the PCP market, in large degrees. Nonetheless, these larger institutions want the data, and those who manage the data best are going to be aligned for those types of incentives when it comes to the Medicare replacement plans and the private payers.

When you're dealing directly with Medicare and not an outsource plan through a privately held institution, Medicare still has their incentives. Medicare comes in and will say, “If you comply and turn this information back to us and manage it correctly, we're not going to cut your reimbursement.” It’s their way of saying, “We're going to incentivize you.” On the flip side, you have payer systems that should be coming and working with physical therapists through major incentives to help manage care because they do that with doctors. There's such a demand on the therapy side, you don't have some of these larger payers coming and saying to the private practice owner, “Let's give you some incentive for managing our patients, our Medicare replacement plan like we do the PCP.” We're not seeing that.

PTO 39 | Physical Therapy Market Trends
Physical Therapy Market Trends: Larger institutions are coming in to acquire and to absorb. They're going to consolidate and own their own therapy which is going to cut out the private practice owner.


Do you see then physical therapy trending in the same direction as PCPs over the next five to ten years where over half of the outpatient clinics might be hospital-owned or network-owned?

Absolutely. I see that trend. What does that mean for the private practice owner? They need to be aware of that because let's look at how that affected the system here in Phoenix. You have Banner, a large hospital institution which has its own payer system.

They do their own insurance.

Containing that cost is a big deal for them. They come in and they acquire physical therapy, which means they can take all fee for service away from outside private practice owners and keep it in-house. That was painful for several practices around here. That trend will continue. They're not the only ones looking or seeking to do that. The larger institutional networks start to narrow. Look at Banner, they're narrowing network. They're not using a hundred different private practices now to manage their care. They narrowed their network down to one. They are the single provider for therapy and they employ those. That is the threat that we see as a private practice owner and that to me is where the new market of therapy is starting to develop these opportunities that come up for the larger institutions like ourselves. Empower Physical Therapy is a good example. We were private practice owners that came together and formed one larger institution to be able to play on this platform where these larger institutions are playing.

There's an opportunity there because we all know that physical therapy saves money and can help with any efficiency or efficacy. Physical therapy and the industry as a whole has a bright future for it going forward in spite of all the regulations and changes that are occurring. We also have to recognize as private practice owners, the changes that are going to come. We saw them happen with PCPs. That same trend is going to happen to physical therapy as well. We saw it with Banner. We need to be aware of these changes and recognize that if we're going to take advantage, we need to have our data. We need to know our stats, whether that's through EMRs or whatnot. We need to know our stats and we need to know our numbers and also recognize what our futures are. I talked in an episode about exit strategies. Where do you see yourself being in five to ten years? If you're going to be the independent practitioner that's not aligned with these networks, then you have to have your ducks in a row. If you're looking at an exit strategy in the next few years, then you might need to consider this as an option because we saw it happen in the PCP market. Does that sound about right? Am I aligned with what you're thinking?

It does make sense to degrees. There are some interesting things happening with therapy that did happen in the PCP realm years back. It's tough to be a PCP nowadays. The primary care doctors, just like most doctors, don't make what they used to make. Think about it, when you have five to six to seven predominant insurance plans in the market or companies that manage these plans, they basically get to pick and choose who they work with. There is no demand on the insurance side. It's more of a single-payer market. On the flip side, there is an unlimited amount of therapy clinics or PCP that they can work with. They can be selective on who they work with. This is a leading question. Think about it, if you're one of these five, six, seven payers, is it easier statistically or from a time management standpoint to go to one single private practice owner or go to a large institution and cut a deal with them to get this information pushed back?

The best way in to maintain the integrity of how therapy is delivered is to make sure those who know how to deliver it are in charge of it. Click To Tweet

If you can make one decision and work with one person versus working with a bunch of different small individuals, you're going to focus on the one person that can affect hundreds of clinics.

At the end of the day, as private practice owners, we need to realize that it's like the PCP market. If there will be power in numbers, whether that be through networks or through joining a group like Empower. We’re more of an acquisition-based model with a different mission than some of larger PT institutions out there. Our thought process and our mission's a little bit different. To summarize, private practice owners need to be aware that this MACRA program and this measuring system that pre-exists was not specified to us.

It's a more PCP-driven program, and we're on the tailend of it. The data management, just like in the PCP realm, follows the same trend. We need to be aware as private practice owners that the data management through larger institutions or larger groups is going to be more valuable to these payers than a single practice. If the incentives tend to follow in time the larger institutions as opposed to the private practice, there's a threat there. We don't see this yet but it's going to be easier for the Humanas and the Blue Crosses of the world to come in and say, “We're going to start cutting these individual practices out because we have enough and we're going to start aligning incentives a little bit more aggressively with these larger institutions,” or they may just cut plans all together.

We’ve seen a lot of mergers happened over the last few years, at least from what people are telling me as they have attended PPS. The number of large clinics that were looking to acquire individual practitioners was quite strong over the last couple of years. It seems to have faded a little bit, but I think the direction is still going to go that way simply because these insurance companies are going to want to deal with larger groups. Those larger groups are going to be able to come to the table and say, “We can negotiate and affect 50 clinics instead of just an individual practitioner that can only affect two clinics in a small niche of geography.” I think the trend is going to continue to go that way, not to say that there isn't space for the individual practitioner who has few clinics. That's why I will continue to share content for those people. You have to recognize that there is a trend out there and you need to be aware of it.

To the advantage of the private practice owner. Keep in mind, I'm a private practice owner. I'm not a big fan of necessarily large institutional consolidation. One of the reasons why we formed Empower is to continue to focus on maintaining as a group generally the legacy that these private practice owners have created, and making sure that the care delivery model is protected by assuring that PTs are continuing to manage and operate these clinics. On the flip side of things, let me put it this way, if you have private practice owners out there developing clinics, at the same time all the power to them because there are some good things that are trending our way as private practice owners. If you're in an area like Phoenix or Scottsdale, you have a major trend of Baby Boomers coming in. Our fee for service is going down, but we're able to counter that as private practice owners through trends of increase in volume because of Baby Boomer flux.

PTO 39 | Physical Therapy Market Trends
Physical Therapy Market Trends: It's tough to be a PCP nowadays. The primary care doctors don't make what they used to make. When you think about it, it’s worse.


What’s interesting right now for owners that can see this is these mid-market firms or these larger institutions that are coming in to acquire your therapy right now are buying into those trends. It’s something I haven't seen before. A few years ago, I had four clinics on the market. You can see the reason. These institutions - let's say the larger non-hospital institutions and the individuals that are specifically in the realm to make money and to roll up - see these trends occurring and Baby Boomers are starting to influx. This healthcare, these mid-market firms, these financial intuitions that want to acquire PT clinics, these owners of smaller platforms are being approached by these guys because of the Baby Boomer trend. That's a big plus for the private practice owner. In a good area where there are retirees coming in, your net loss per visits are going down because your fee for service being eroded by these payers is being offset through volume.

I was talking to a PPS about some of the trends. If you're looking to sell anywhere, if your exit strategy is somewhere in the next five to ten years, there's no guarantee that it's going to be as hot of a market it is now as it will be five to ten years from now. Getting on the front end of that wave would be beneficial and something to consider. That's something that we saw. We weren't necessarily on the market but you approached us and said, “Maybe we can take advantage of this if you guys are at a certain spot.” Thankfully we were and thankfully we've been able to create as a group that is not corporate per se. When I say that, I'm trying to say that all the executive positions within the company are physical therapists. They're not guys that came from some business degree or private equity firm and are forcing things down our throat. These are physical therapists that structured the company, that are established as the executives within the company. They want to maintain that physical therapy focus and the individual practitioner focus that I don't think you get when you deal with a lot of other corporate entities that are out there and own physical therapy networks.

There's the underlying joke in Empower that all of these key positions are filled by PTs, but we definitely did not want a PT as the CFO. There will be some of those areas where we just want to keep PTs out of altogether. We chuckle about that one, but absolutely, we were all solid private practice owners. I was an owner in nine clinics before Empower came in. That's just physical therapy outside of the other service lines and companies that we owned and operated. We wanted to maintain the integrity of the delivery model. I'm not saying that those larger institutions don't do that, but what better way to do it if we have the option to keep the private practice owners as directors in these companies. If you look at our CEO, Steve DiPaola is a physical therapist. He has large institution management. He's an incredible guy. He does well for us. He has division in terms of where large institutions need to go and he's a great complement to us. Sean Miller, our COO, is a physical therapist. We have business development, physical therapists, our regional directors, physical therapists.

The best way in my opinion to maintain the integrity of how therapy is delivered is by making sure that those who know how to deliver it are in charge of it. That's a big deal for us. One of the differentiators with the Empower model is we wanted to make sure that that was protected. What better way than to make that the case. It's an exciting platform on that end. Then to comment a little bit further on valuations, let's say it was 2011, 2012, I interviewed a lot of different buyers for the company that I owned on the PT side. Urgent care got gobbled up quick. I had six or seven people bidding for that, but not for my PT clinics at that point. It was very interesting. One of the reasons why we were able to put this deal together is because the market is special right now. It wasn't six years ago and it wasn't ten, fifteen years ago prior to that. We're in a unique situation where you have money markets out there or financial institutions or mid-markets or private equity firms that are looking to consolidate.

If you're going to align with one of those companies, what are their values and where are they going? Do they have a vision of what we just talked about in terms of large consolidations? Tapping into that new market of therapy which comes through this narrow network that we talked about, taking advantage and position yourself against this wave that's coming and has been coming for some time. There's a lot of money right now as the market starts to trend downward. It will affect all industries. Therapy will trail it. Who knows where valuations are going to be. Right now, there's a trend towards therapy acquisition. It's been going on for the last handful of years. It tends to follow the Baby Boomer influx.

Don't try to compete with mature markets. Target areas where trends are increasing. Click To Tweet

The physical therapy owners out there need to know that they are dealing from a position of strength, whereas a few years ago, they weren't. If you know multiples and EBITDA, you could have bought a physical therapy practice at a multiple of one or two, whereas now that's doubled or tripled at this time or even more, depending on the size of your clinic. There's a real positive trend that's going on right now and we don't know how long that will last.

Here's what gets confusing with private practice owners. You're a great example. You said it yourself you weren't for sale. Most of these small, robust PT platforms out there that are developing are not for sale and rightly so. They're capturing the Baby Boomer influx, they're growing, and margins are decent. There isn't a big reason to sell. That's why coming back to who are you partnering with? If you were dealing with the right platform in the institution, we try to profile our owners a little bit. If there's an owner that wants to retire and be gone out of that platform but still preserve their legacy, there are exit strategies. That's not the case with the mainstream market out there.

Mainstream market or guys like you and I, Nathan, that have our own clinics, we're fine where we at. The question is what are you still doing to hedge your risk against what's up and coming with these narrow networks? At the same time, is there a way that I can partner with a group and continue to grow and expand with all the financial incentive I could have had, in many degrees, a major and financial incentive to continue to grow and expand, whether that be through equity or elsewhere, and reduce my risk and take some chips off the table right now with this market? That would be my recommendation for any private practice owner.

A lot of people think a sale’s final and I'm out of my company. It doesn't work that way when you're looking at the right partners. That's what we realized even with Empower Physical Therapy. We're not in this to go in and buy everybody out and say goodbye. It doesn't work that way. We're looking for good owners, great owners, to join us and to continue that ride with us. We've got the structure to make that work. To summarize, you can still take advantage of everything the market has to offer right now as a private practice owner and enjoy the benefits of continued growth after capturing some of those synergies. You can attest to that.

We weren't looking to sell. We had been approached a number of times over the years to sell our practices. We’re not intrigued to give up 70% of our clinic and then essentially become clinic directors and only have 30% ownership. When we decided to merge with you guys and put ourselves on the market, it was a great opportunity for us to take some chips off the table and become a part of something bigger that's looking to expand and grow and listen to the voices of the owners that were coming into the group, that let us create our own culture and let us create our own mottos and logos and become a bigger version of ourselves, to the point now that Empower Physical Therapy is spread across California, Arizona, Louisiana. Am I missing anything?

Texas and other cities.

PTO 39 | Physical Therapy Market Trends
Physical Therapy Market Trends: Most of these small, robust PT platforms out there that are developing are not for sale.


We're looking around, talked to some guys in Idaho in the past. Nonetheless, how many clinics does Empower entail right now?

Close to 30 right now, but we've got ten more that will be part of our team. Our goal is partnering with private practice owners like yourself, like myself, helping them position themselves for what's up and coming and helping them also to take advantage of all the synergies this market has to offer. The last thing we want is for them to vacate. For the retiring physical therapy owner, it's just the opposite for them. We can work to maintain their legacy and also work on a strategy where they can exit in a shorter period of time or whatever period of time works for them. It's about the private practice owner and customizing the plan that best fits for them.

What advice would you give to those guys who are just starting their practices? Maybe they’re in the first couple of years or thinking about starting a practice. They're not necessarily the people that you're targeting to merge or acquire with. What should they know or what should they be focusing on at this stage in their clinic development?

Making sure that if you're just starting out, if you don't have your contracts, depending on the area you're in throughout the United States, I can tell you in Arizona and other states, some plans are closed panel whether they be Medicaid plans or whatnot. Do your research and find out, especially if you're a new graduate coming out and you're looking to say, “I want to own my own practice.” It's not as easy as opening your doors and hoping that these insurance companies will credential you. Remember, they have all the demand, they have all the power, and so they’ve already narrowed these networks. You need to make sure before you open a clinic that you have all the insurance plans available to you. If you do not, the first thing you want to do is to look for a private practice owner that you can work for and possibly take that practice over or look to acquire those contracts. Buy them out right off the bat. That would be the advice I would give to the young guys and gals coming up that are hungry and eager to get into their own clinics.

What if they niche? What if they figured something out in terms of vestibular or women's health or pediatrics or something like that?

Niche markets compliment the larger mainstream flow of care. Click To Tweet

Remember, niche markets complement the larger mainstream flow of care. If you look at outpatient physical therapy, I think we could all say that outpatient orthopedic-based therapy is the main driver in the realm for a lot of these groups. To come in and create a specialty practice, if I were to look at that, I would look at doing one of two things. If you go independent, it's a little bit challenging in the sense that a group like ours, if you want to look at joining or selling out at some point, those companies are a little bit more challenging to buy out if you're a larger institution. You’re better off being developed internally. If you have that skill set, then you want to do one of two things. You may want to look at a larger institution and help them develop that in a larger platform because you're going to have an automatic feeder mechanism. If you have enough business on the referral side and relationships established, you may break out and do that on your own independently. Just realize again that it's difficult to deal with larger institutions that are looking to acquire because there aren't very many of those types of facilities and they're very hard to replicate.

If someone was able to scale a niche practice, let’s say pediatrics that has a nice footprint in a geographical pattern and a solid referral base, does that make it more attractive?

Much more attractive. Then again remember there’s a Baby Boomer trend going on. Probably the best advice I'd give anybody right now is target areas where those trends are increasing - retirement communities or little niche markets or fast-growth markets. Try to be a de novo in one of those fast-growth markets. Don't try to compete with mature markets. If you look at larger cities, they've been developed for a long time. You're better off going into a very mature market with a lot of competition. If you want to try to exist in that kind of market, look to buy somebody out who has a market position already. Otherwise, go create your own market somewhere. Don't be afraid. Look at you, Nathan. You had clinics in rural areas. Back in the day, people didn't want to expand there. Look what that did for you. You're a great example of that. You did something that nobody was willing to at that point in time. Look where you ended up because of that risk you guys took. I wouldn't be afraid as a young entrepreneur to step out and say, “I'm going to go tackle a new market, even if I have to drive another 30 minutes to get out there, whatever the case is.” You got to be thinking that way.

PTO 39 | Physical Therapy Market Trends
Physical Therapy Market Trends: It's difficult to deal with larger institutions that are looking to acquire because there aren't very many of those types of facilities and they're very hard to replicate.


I was always happier to be a big fish in a small pond. It worked out well. Anything else you want to share with us, Jerod, from your experience in the past and in the present market?

If any owners want to reach out and chat, it can be casual. It doesn't need to be a business pitch in any way or form. I'm coming from that angle of private practice. I am a private practice owner. I'm a big advocate of private practice owners, whether they're part of larger institutions like ours now. This is new to me, but the larger institutional play, I understand it and I get it. That's why we did it and brought it together. My DNA is in the private practice realm, the smaller setting, and my goal is to preserve that with the company that we formed. At the end of the day, my goal is to preserve it whether with or without us. If you have private practice owners out there that need some guidance or want to elaborate a little bit on what I've shared, I'm very open to elaborating further. Beyond that, I’m glad you had me on, Nathan.

How do people get in touch with you?

I'll give you my email, JBowen@EmpowerPT.com.

It's great having you on, Jerod. It's not an exciting topic, that's for sure. I hope it was educational for some of the physical therapy owners out there to see what's coming down the pipe, just so that they're aware. Hopefully, this didn't come across as something that's scary or something to worry about, but it's something you need to be aware of. The way we're doing business now isn't going to be the same way we're doing business ten years from now. As the owner and leader of your clinics, you need to be looking ahead. You need to be the visionary and see where you're going and what you need to do as a clinic to stand out, to work into the system or take a stand and be outside of the system, and know exactly what you're doing as you're outside. Just know where you're at. Thanks, Jerod. I appreciate your time.

Same to you, Nathan. Take care.


Important Links:

About Jerod Bowen

PTO 39 | Physical Therapy Market Trends


· Physical Therapy Graduate School in Houston, TX – TWU (2003)

· Master’s in Business in Phoenix, AZ – ASU (2006)


· Actively treated as a physical therapist from 2006-1012. After 2012, focused 100% on start-ups, mergers, and acquisitions.

· Started an urgent care business in 2010 and sold to Tenant Healthcare in 2012.

· Owner of 4 outpatient PT locations in Phoenix from 2006-2012. Merged PT practices into a new start-up company and worked on start-ups, mergers, and acquisitions in various healthcare service lines.

· From 2012-2018, owned and operated close to 40 offices in 3 states. Businesses included physical therapy, family practices, pain management, surgery centers, labs, and outpatient intervention radiology.

· In 2018, orchestrated the development of Empower Physical Therapy with select private practice owners in Phoenix, AZ. Sold out of my previous platform and joined Sheridan Capital and the Empower Team as VP of Business Development for Empower PT.


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