Reaching out for help from coaches helps us gain the needed insights for the development of our practice. In this episode, we are following up on the owner of Druid Hills Physical Therapy in Atlanta, Georgia, Dr. Avi Zinn, PT, DPT, OCS, about how he has developed his business. Although he has been successful in the development of his practice to this point, Avi reaches out because he recognizes that he needs to gain more business knowledge as the CEO of the business. He shares the importance of the stuff they did not teach in PT schools, such as tracking KPIs, leadership development, culture creation, and more. Learn how he is managing as a PT business owner and get a real-life look into what a business coach can do for you and your practice.
This is the first episode that I have with an individual PT owner in which I'm going to follow along with him as he receives coaching and implement some of the coaching programs into his independent PT practice. Avi Zinn is a Physical Therapist out of Atlanta. He reached out to me to get some coaching and see if maybe we could work together to help him achieve his goals. Full disclosure, he didn't end up going with me as we talked a little bit about what I could provide and if that might fit for him. I actually offered him a couple of friends that he could call and talk to about getting coaching and consulting services with them and he decided to go with a friend of mine, which I'm excited about. Avi’s ready to grow and he needs to take the next step. I wanted to bring Avi in order to not only follow his path but also because Avi is pretty unique. He hasn't followed the typical entrepreneurial path. He didn't go through the burnout, the crash and burn stages that many of us may have gone through before. He did something different. I want to share his story with you.
I've got Avi Zinn, Owner of Druid Hills PT in Atlanta. I'm excited to bring on Avi because he reached out to me in regards to getting some coaching and we've talked a number of times about his needs and how I could help him out, but things changed a little bit. He is looking for some coaching and consulting help and I want to follow his progress essentially and see what the coach or consultant has done for him to forward his clinic and to achieve his goals. This is the first introduction of that series of interviews because I imagine that down the road I'm going to do some follow-up interviews with Avi. I'm going to show you what it's like and what you can expect out of coaches and consultants and how they can help you as an owner. Let's get to know Avi a little bit and some of his influences and what got him to the point where he was reaching out. First off, thanks for coming on, Avi. I appreciate it.
Thanks a lot, Nathan. I’m happy to be here.
Tell us a little bit about you. Tell us a little bit about your professional path. How long have you been a physical therapist? How long you've been an owner? All that stuff so we can bring everybody up to speed on.
I went to PT school in New York. I finished in 2009. Shortly after finishing school, my wife and I moved to California and we went to the Bay Area. We were in Berkeley. I started my PT journey there. I’m looking for places to work, trying to see what was there. I found a cool PT practice based off their website. They’re more independent. The pictures of the clinic looked personal. They had a good vibe. I reached out to them and they hired me on, which was cool. Starting there was a good experience for me in a lot of ways, which ultimately led me opening up my own clinic.
Did you always have aspirations of having your own clinic?
No, not really at all. When I first started there, they had just done some coaching and consulting. They were in the process of transitioning their whole business model. I soon found out that when I started on, there was a huge turnover right before I came. I didn't realize that at first, but after being there for a few months, the remaining people that were still there were starting to talk about the old days or how things were different and not necessarily bad, but I think the change of the business structure led to other people just didn't agree with what they wanted. From following your show and all the people you've had on, it seems like that's a pretty common thing. You guys talk about your culture and your team. If you're changing your business structure and you're changing your team, then you’ve got to make sure that people are in line with that. I would assume if they're not, then they're going to leave or they're going to get told to leave. That led me to start my own clinic because it was an independent clinic. It wasn't a chain and it was two owners and they had a few locations at the time. I started seeing what it was like from the owner's side of things because they were at the clinic all the time.You have to take risks in order to have something you desire to create. Click To Tweet
Whereas later on when I started working for chains or hospital systems, you don't see the owners at those clinics. You just see clinic directors or whatever. Being there, I saw that the community and the PT practice had a great reputation. People knew about it but at the same time, the employees, the staff, the PTs weren't saying the same things that the people in the community were saying about the PT practice. It was interesting to see how there could be a different perception that the patients are loving it, but the PTs aren't. That probably happened because of the change in the business structure and however that played out. I started realizing that there could be different ways of going about this business. Clearly, we're providing good service because people were talking about it and people knew about it but the staff wasn't happy. That was interesting to see. That's what really started me thinking about like, "Maybe I could do this." Everyone thinks, "I could do this." I thought, "If I am going to do this, maybe I'd make it so people are happy at their job."
There are a couple of different reasons why people open up their own PT clinics. Either they have an entrepreneurial spirit and they want to own the job and that's something that they have a burning desire to do. I'm sure there are many other reasons, but the two that come to mind are the second one being, "Maybe I can do this better or maybe I can create something that I can fill a need or I can create some value that I don't see in my current position. I can treat the way I want to and expand on that.” There are a number of different reasons in your situation, in particular, you're thinking, "The owners are doing great. They've got a great connection with the community, but the internal structure and culture could be improved. Maybe I could do that myself and create my own thing." Is that about right?
Yes, that's right, Nathan. You have to remember, I was in the Bay Area, that's a hotbed for startups and entrepreneurs. I do think that was a part of it. I remember a good friend at one point. I was talking about a startup and entrepreneurs. He even said something to me that I could be an entrepreneur if I started my own PT clinic. At that time, I didn't know what that meant to be an entrepreneur. I didn't realize that starting a PT clinic would be the same thing. Getting that entrepreneur bug, that's what I'm sure we'll end up talking about pretty soon in The E-Myth what Michael Gerber talks about. I think doing it better though and realizing that maybe I can do this in a way that would provide that service and also have the people that work there happy as well. What I was seeing at that clinic that combined with getting that entrepreneur bug, those two started the process of me thinking about at one point starting my own clinic.
You eventually went to Atlanta and decided to do that?
My wife is from Georgia. She grew up in Savannah and I'm from St. Louis. We were in California and we didn't know totally, but we started thinking that we would want to be closer to family. Atlanta seemed like a pretty good city. My wife did an internship in Atlanta and that was when I stopped that job. We went to for the summer to Atlanta to do the internship, but also see if Atlanta would be a city we'd want to move to. We liked it and when we went back to the Bay Area, we knew we were going to move there. I knew I wanted to open up my own thing or start my own clinic, but also knew we were going to move at some point. I never really wanted to do it in California. At that point, I started doing other jobs and experiencing different types of PT. I did work comp for two years. I started doing home health, which was interesting. I did that for a bunch of years.
Eventually, we did move to Atlanta and started doing home health when we got here to learn the city also. It was a good opportunity that I learned the city, but I was driving around for home health. I was trying to get a sense of where I would want to start a practice. It all happened at a time where I was ready to do it. This location opened up right in my neighborhood. Literally, a four-minute walk from my house. It's on the main street. It's across the street from this big shopping center on this road where they say 50,000 people drive by every day. It was perfect. Everything worked out. That's when I started to get things going because we found this place and I had been thinking about this all these years. It was time when this place opened up.
How long ago was that?
That was the end of 2017.
During this time, had you been reading any books about business ownership or accessing any resources?
When I was doing home health, I was driving all the time and I stumbled upon Paul Gough's podcast. That was really the first one that I started listening to. That was talking about owning a business and how to run it. I don't know if this is exactly what he said, but this stuck. He said, "You don't have to have the best PTs, you just have to have good PTs. You can hire the good PTs and you have to be the one who's working on the business.” The truth is I could be combining that with some of the other, like Michael Gerber, your show, but I believe he did say that stuff and it started making me think about how I was going to set up a practice and what that meant.
The cool thing is that it set up a mindset for you, knowing where you are. You don't have to be the best physical therapist. Soft skills are more important than hard skills. You already had an idea that you were going to bring on some other physical therapists anyways. It wasn't going to be the obvious in a physical therapy clinic and a one-man show. You had aspirations for more right off the bat. You've opened up your clinic and how did you start working in it? How did you start developing it, so that it wasn't obvious in physical therapy clinic?
When I was trying to figure out what to call it, I was really against calling it my last name, Zinn. A little back story. My father-in-law has his professional experience. He opens a lot of businesses. He was able to guide me through a lot of this in the beginning. Helped me set up the LLC. When I was looking at this place to rent and lease it out, he guided me through with creating a pro forma and talking to the landlords about having my financials in order, even though we didn't have the financials in order. Getting that set up and he was set on calling it Zinn PT. He wanted me to do that and I was like, "I don't want to call it Zinn PT. I don't want it to be about me." Maybe because of listening to the podcast and knowing Paul Gough’s podcasts, knowing that I wanted to bring people on and I didn't want it to be about me because maybe had a little foresight knowing that I would have to do the business stuff at some point and not always having people wanting to go to Zinn but to the PT practice.
What did you start doing initially to make it so that it was not Zinn? You ended up developing Druid Hills Physical Therapy, you were the initial physical therapist. How did you start the progress? This is an important part of the introduction of you. You did things a little bit differently and I'll highlight that as we go through the story.
First of all, I was still doing home health, which was a huge help because home health is super flexible and I was able to bring in some income while setting up the practice as a group. There was no other way to do it. I took out a loan. I could've taken out a loan three times the size and lived off of that for a while. That would have been a little overwhelming. Setting it up, I started getting things in order. I don't know if it was from the podcasts or not. I wanted to experience every part of the business at first to know what it was like so that I could start putting people in those places. When I started, I did everything. I was a PT but I was also running back and forth to the front desk to answer phones and schedule. Instead of a front desk person, I had an answering service, which was helpful and they would email and text anytime someone called. I had a doorbell. That was my front desk person. If someone came into the office, I knew someone was there and I could run back and forth to the front to greet them. I started getting things in place. Aside from the business things, I had to start getting patients.
I tried doing all that I thought would have been the normal way to do it, which was called doctors but that didn't work. It started with that. I was lucky that a third-party work comp insurance called me and they were like, "We want to give you a contract and send some people to you.” I was like, "I need people to send patients," which was also cool because work comp authorizes a certain amount of visits, they pay the rate, whatever it's going to be. You don't have to fight with the insurances. They're not going to like deny certain code, which was a great way to start. Because I got those patients, I knew those visitors were coming in and I knew they were going to pay whatever they paid. That was also a little bit of a hard part, to begin with, was the money part. How you charge people. All of it was hard. I didn't know how to do anything.
How long did you go like that before you took on your first hire and eventually before you got your next physical therapist?
I started at the end of 2017. We had our third kid in March of 2018. It was a great idea to start a business and have a kid the same year. Right after that is when I hired on the first PT. The business was growing slowly. Knowing that we were going to do this, I started looking back at the schedule and tracking what was happening. The schedule was pretty light. Looking back, I don't know how I was confident enough to even hire someone on.
That's the question I have for you. How many visits were you at per week before you hired that physical therapist because you went against the grain?
I don't know. At that point, I was doing three days a week at the office and still doing two days a week home health.
You brought on your PT at that point. This is why I wanted to bring you on is that you hired a physical therapist, what most people would consider is too soon. Based on my training experience and if you were to ask me, "When do I bring on my next physical therapist?" I'm going to tell you, you bring on the next physical therapist when you're meeting at least 90% of your slots that are scheduled out in a given week on average. That's the time when you know, I'm working hard or my other PTs are working hard. It's time to bring on someone else where these people are going to get overwhelmed. Maybe you even have a waitlist, but you went against the grain and you don't necessarily know why. You brought on a physical therapist because this is the thing, the typical entrepreneur story is we don't do anything until we get overwhelmed. Sometimes there's a crash and burn element to it. If you read to some of my previous shows and the successful entrepreneurs but you didn't get to that point, so you brought on the next physical therapist. You must've had some faith that things were going to go in the proper direction or maybe you had some real intent out there in the universe that things were going to grow?
It was a little bit of both, Nathan. I was thinking about starting a business, in general, is a huge risk and I've maybe realized that you have to take risks in order to have a business. That was the same move. I saw the trajectory and patients, it was growing slow but it was steady growth. It looked like things were going in that direction. It was time to hire someone on and keep it going.
During this time, were there some resources that you fell back on that might have stoke that faith or inspired you to bring on someone else so that it wasn't on you? Did you also maybe see that there were some aspects of the business that you needed to work on so the PT would take the treatment side of things off of you so you can focus on those things? Was there a combination of some of those?
Because of how busy things got, I realized that I had to do more of the business stuff. That was what it was. It was the beginning of 2019 or it must have been earlier when I started following your show. I remember in January of 2019 is when I started reading The E-Myth. I don't remember exactly when I found your show or how that happened exactly. Even before that, I realized that I had to be able to step away to do from treating, there were only so many hours in the day. I didn't want to be working all day long and then going home and working all night long. I realize that the only way to do it was to step back a little bit. It wasn't a lot, but it was by hiring another PT that I was able to step away and do a little bit more of the business side of things.You have to take risks in order to have a business. Click To Tweet
The common fear when someone makes that first step is to bring on another PT. The biggest fear is, how am I going to justify that salary? I'm going to be paying somebody $70,000, $80,000. What if they don't work out and they don't produce? Somehow you overcame that fear. How did you do that?
After that first job in California and when we came to Atlanta, I did a traveling PT job. When we went back to California, I started doing PRN. When I learned about what PRN meant, that is ultimately when I hired my first PT, I didn't hire her on full-time. I hired her on PRN and it just happened that I found someone who wanted to do it. She was in a different job and she wanted to switch it up a little bit. She started doing two days a week with me. That is why I was able to not be so overwhelmed because essentially instead of making it five days a week for me, since I was only doing three days a week in the office, I made it a five-day PT but split between two people. I was able to have the patients coming in on all day, every day and then still have two days a week where I wasn't treating and doing some of the business stuff.
You were still running the front desk and taking all the calls and some of that stuff?
I was still doing that stuff and the billing, the front desk. Shortly after that, I got someone two days a week at the front desk. Gradually we started getting more patients, so that part-time PT ultimately wanted to switch all for hours over to this place. It worked out well because I didn't need to look for another person. She was already there. We were organically growing and filling those hours on the schedule without having to hire on a new PT and then have to be scared that you're not filling up their schedule for three months because we did it gradually anyways when she first started by two days and then added on more days.
She started taking on more hours. You started treating less it sounds like and you're working on the business during this time.
I don't think I really started treating less because for the most part, I was still treating the same amount, but it had blocked off certain times from the beginning to do billing, networking, calling people and driving around.
That's a huge part right there and I don't want to overlook that. You blocked off time on your schedule. As I'm talking to PT owners that are treating full-time, that's probably one of the biggest hurdles is to get them to commit to blocking off chunks of time, whether it's four days or 4, 5-hour blocks to work on the business. That is to look over your financials. That is to put together a pro forma like you're talking about. Consider what the future might look like. Do some networking. Even start developing some policy and procedures and hiring the right people to fill the spots that you either have open or are going to have open in the very near future. What you started doing maybe someone told you to or maybe you inherently knew you needed to do was to keep that time sacred for admin work.
Around the beginning of 2019 is when I read The E-Myth. That was transformative. I've heard people say it on your show a million times, working on the business and not working in the business. I think he came up with that. It made so much sense and you can't do it any other way. There's only so much growth you can have if you're working in the business. When I read the part about what a lot of people do is they create a job for themselves. That part was like, “I’m not trying to create a job. I'm sure I didn't try to create a business." I did somehow realized that I needed to keep that time separate to work on the business. Once I read that, it was when I started realizing I need to do more of this and if I want to grow, I need to not just hire more people. It would actually start taking more time to work on the business because once you start getting busier with more and more things going on, you need to have more time to figure out all the things that you had mentioned, which I still have not done yet.
We have to give it proper credit. The book that we're alluding to and referencing is The E- Myth Revisited by Michael Gerber. He does layout a lot of this stuff. When we say you working on the business, what are some of those things that you're doing? I have even some owners say, "If I'm not treating and I'm not catching up on my notes and I'm not paying bills, what am I doing?" What do you do in those admin times?
First of all, I still do the billing. That's part of it.
That's going to change soon. What are you going to do when the billings off your plate?
We'll find out soon. You did mention about policies and procedures. That's what I started doing was creating systems, which is what The E-Myth is all about. I created an organizational chart, which is another thing that they talk about in the book. Even though every single job in the organizational chart was me, I still was breaking up what created the business, all the different parts and all the different jobs that make up the business. I started writing out what happens under those positions, what one does for that job. Basically, I use Google Drive and Google Docs and I have a nice organized folders system of docs for every one of those job positions. Every time something happened that day that I had to troubleshoot or figure it out, I would put it in that doc and then I would try to create a system to make sure it didn't happen again or t try to delegate some tasks to the front desk person or the PT so that they can do it so that we wouldn't have to keep on going through the same mistake every time. We would know what to do every time.
You wouldn't have to learn the same lesson twice.
Yes, we don't have to learn the same lesson twice. Also, we wouldn't have to be where someone had to knock on my door and asked me what to do for it.
This is why I love having you on. You're at a place in your ownership that I would say a majority of PT owners are not. I'm including the guys that have been out there for 10 to 20 years. They haven't taken the time to write up their policies and procedures. I can say I was in that boat 10, 12 years after opening up my first clinic. Didn't take the time to write down policy and procedures. I didn't have an organizational chart. It doesn't matter if you are in each position. At least know what the structure of your company is and what it should be and what it will look like when other people start filling those positions is huge. That comes as naturally to some people more so than others, but you're organized enough with your Google Docs to have everything written up underneath each job with a job description, the responsibilities and the tasks that are given to each position. That's huge and that is the reason why you are where you are is because you've done some of those things. How many therapists do you have?
We have three therapists besides me. They're all about 30 hours or so. Part-time but full schedules. One is actually reducing hours the same original one who wanted to take on more but also step out of her first position and try something different. She's going to try something different and reduce her hours, which is fine. Everyone wants to do different things. There's nothing wrong with it. We're about to hire another person and she's going to be my first full-time. We'll have one full-time, two pretty full-times, one part-time and then me.
Being less than a few years into your ownership. That would be unfathomable for some people. I'm talking to some owners who are one-man shows and they're overwhelmed and they're three years into it and they don't see a way out because they're treating 50 hours a week and not working on their business. Whereas you've set yourself up such that you have multiple providers and you're already experiencing some freedom that most PT owners don't have.
Nathan, you probably would agree with this, but for the people that are working crazy hours, I made sure I did this in the beginning, I worked at the office. I did some stuff at night, but for the most part, I was in the office 9:00 to 5:00, and that was it. I made it a point to stop at the end of the day. Of course, you do some stuff at night, you answer emails or you work on the website.
You had some intention behind putting an end to the day.
I think that's what it is. That has allowed me to keep going. It prevented me from burning out and I didn't get so overwhelmed because I was like, “This is the end of the day. We're going to stop, we'll pick it up the next day.” If I work an extra five hours, it's not going to be any different. You need to put a brake on it every once in a while.
There's some power to that. Number one, the time that you do have is limited. There's going to be an urgency to get things done. If you don't have that end stop, you're like, "I can work until 7:00 and I'll take my time getting things done.” Inevitably there’s something called Parkinson's Law that, "The amount of things to do will end up taking up the time that has allotted to do them." If you're available to work until 7:00, you'll have plenty of tasks to keep you busy. If you put that hard stop at 5:00, you've done two things. Number one, you've set a deadline, but also, you were concentrating your efforts on doing the admin work. You can get more done for the benefit of your company by focusing that time on your business than trying to get tasks done. Instead of trying to get payroll down or pay bills. I'm sure you were focusing on what some people call the MIT, the Most Important Thing of the day and that is developed policy and procedures. Get my organizational structure in place. You're doing the billing, but that's a separate chunk of time. The fact that you spent that time on the policy and procedures and the organization of the structure of the company means you've developed solid integrity around that and you've accelerated your growth as an owner and as a business to the point where you are.There's only so much you know how to do. You need to reach out and ask people for help. Click To Tweet
To be clear, I still have a lot more work to do on the policy procedures and all that stuff. That's ultimately what we're getting at with coaching and consulting. In March of 2019, I hired on the second PT and then that's when I drastically reduced treating time down to twenty hours a week of treating.
Was that a scary transition or something that you're, "I need to do this?"
It wasn't scary at all. It was, "I need to do this." Partially because at that point I had read enough of your blogs and also had probably read to The E-Myth again for the second time or maybe even third time that I realized that it doesn't even matter if it's scary. That's what you have to do. There's no other way around it.
You recognize the need of the company was to go in that direction, right?
Yes and it was my business. If I'm treating, who else is going to work on the business? I have to be working on the business. There's no other way.
You talked to me about doing some coaching and consulting. What led you to that point?
Where I've gotten myself have been a lot of working on the systems and policies, but at the same time, there's only so much I know. As the business grows and when we're getting more patients in one of the main things that I've noticed is there are cancellations and why are we having 30 new patients in a month. We had eighteen new patients in one week and that was awesome. That was the most we had. The following week the schedule was half empty and it was like, "How is that happening?" I started running analytics, WebPT. I called them up asking, "How do I find out how many times each patient is coming in?" I’m trying to see what their plan of care and how many visits per week? I find that a lot of patients are only coming once a week or they schedule two visits and then they're gone and no one was tracking that. I run this lost patient report from WebPT and then all of a sudden, I look and there are 50 to 100 people on this report of people that came in and we never got them back on the schedule. That was a huge thing.
You recognize that you need to start monitoring your metrics and if you haven't taken the time to do that, then the metrics will control you and sink you.
On the analytics and WebPT, they have their main KPIs. There are six KPIs on there and that was cool. I realized I don't know. I feel like I've done a lot to get myself here, but there are people who know a lot more to take those numbers to who've already gone through this, who can tell you how to use those KPIs, those metrics and what to do with them. How to affect them and also, one of the biggest things through all this realizing that I am not just the owner, but a CEO of the company. I need to learn how to do that. I need to know how to manage my employees, train them and set up different structures and have certain people responsible for different parts of the business. I realized that there's only so much I know how to do. That's when I was time to reach out and ask people to help me along that.
You realize that you are the final word. People are going to come to you because you need to have the answers for the company. I don't think a lot of physical therapy owners who are relatively new don't put on that hat per se. They think that the ownership somehow is not as separate from them. They know that they're the owner, but they don't act like the owner and that they should be monitoring all the metrics and the financials. They should have some idea of what to do when a statistic goes bad and how to look and investigate issues in the clinic. It sounds like you had that realization that you need to take on that hat.
Nathan, that part is hard. I went to PT school, I learned how to become a PT. I didn't go to business school. I don't even know if you learn how to do that in business school either. I don't know how to run a company.
We're all in the same boat.
To answer your question, that's what it was. I realized that I needed to be the CEO essentially and I needed to learn what that means and how to do it.
You reached out to me and we had a conversation. I actually gave Avi some recommendations of other coaches to also consider outside of me and he has decided on another consulting company and I'm excited because he's going to do amazingly well. You can see that he's already set up the foundation. I want to follow you along this journey. How will you know if you've been successful with a coach or consultant? How will you know that they've met your goals? Is there a statistic that you want to see? Maybe gross revenues and net profits or is it more freedom for you? Is it growth?
I'm starting to understand financials and understanding gross revenue. I'm at the point where I can look at a P&L and understand it and gross revenue, of course. Let's get that up.
You need a return on your investment to the coach. You expect a multiple of your investment on the coach.
Having the patient drop-off, go away or at least get better. Maximize the utilization, which is something you were saying. If there's so many hours that the PT is treating, they should be treating patients that whole time or at least let's say 85% of it and figuring out how we can make sure that happens. Training the front desk also is the best way to take part in the patient's experience. Also, making sure that they're following through with their plan of care when the PT comes and brings them up to schedule. Making sure that they schedule it and making sure that they understand what it means and the cancellations are detrimental not to their progress but to the whole business. Probably a million other things at the front desk can do but hopefully, they'll help me out with all of that.
Are there some particular goals that you have then over the course of the next year or two? I'm sure the coaches will help you along with this, but what are some of your goals that you have?
As far as freedom goes, I don't need to be not in the office 200 days a year, which is great. Maybe one day. I like being in the office. I like working, but I don't want to work all day, every day. First, producing the treatment hours, that was key. I've done that myself, which is talking to you and talking to other coaches. That's what ultimately is going to set me up for success quickly with these coaches is because I've already done what a lot of people have to do initially once they start with the coaches is to back out of the treating.
You're a step ahead already.
That ultimately is going to allow me to focus on some of the goals a lot quicker. In 2020 who knows? Maybe this will happen in two months. If we have twelve hours of the day in the office, 7:00 to 7:00 and we have five PTs, I want to be able to fill up that schedule, which is ultimately going to bring in more revenue.
You're going to have to expand.
Yes, hopefully. These could be long-term goals. I remember early on Paul Gough that he’s talking about how he owns some of his own real estate and some of the practices. That could be a cool goal. I don't know so much about that on the numbers side. I imagine at some point it's beneficial, but maybe it's not always. That could be five years from now. I want to grow this space location that I have to maximize it. If I have to work twenty hours a week still treating patients, that's fine. I like treating, but I also recognize that I have to do other things. If I need to not and I can get someone else to do it, great. Maybe later on, in a few years, I can start treating again. Wherever the business needs, that's what I'm going to do.
That your decision matrix has to be exactly that. Whatever the business needs. If you're not wanting to set aside time to work on the business and want to treat full-time, then go work for somebody and work full-time. Don't spend the stress and energy to own the business on top of it. If you're going to commit to owning a business, you need to put the business first. That comes first. What a lot of PT owners don't recognize is the clinic needs them to treat less, needs them out of treatment because it's a distraction to treat patients as an owner. You need to set aside times to work on the business and eventually what happens is they work themselves out of treatment because the needs of the business become greater because they were expanding and growing. I'm excited for you and what you're looking. From my perspective, looking at where you're at, you're looking to gain more knowledge so you can confidently and securely wear that CEO hat and become more efficient. You're recognizing that there is a lack of efficiency maybe in your company and you don't necessarily know how to affect it.
That's what I think when I pulled up that last patient report that one time and I realized, that's why our schedule is not full, even though we're getting all these new patients. We need to figure out how to make sure that doesn't happen.Work on the business and not work in the business. Click To Tweet
That's a dagger to the heart when you find stuff like that.
That was hard.
It goes through a couple of things. That is a whole few pages, maybe one or two pages full of lost revenue. More than that, if you're looking at from a higher level, these are patients that didn't get the full complement of care. These are the types of patients that go back and say, "Physical therapy didn't work for me. I've been to Druid Hills Physical Therapy and it didn't help." You don't want that. That can happen unless you're focused on getting them to complete their plan of care. I said this in an interview that I did. I found out about it a couple of years ago when I interviewed Heidi Jannenga of WebPT, and they did their annual survey that most small businesses lose on average $150,000 a year because patients like those on that lost patient report don't complete their full plans of care. That's a detriment to you as a business owner. It's a detriment to them as patients because they're not getting better and the chance of recidivism or the chance that they didn't even get better is significantly higher.
It is a detriment to the profession as well.
We'd become a commodity. They say, “Physical therapy didn't work for me.” They don't say, "I'm going to try a different physical therapist." Like anybody would maybe with a dentist, they say, "Physical therapy didn't work, so I'm going to try something else." It's unfortunate. I'm excited for you and I want to follow along with you and see what you learn along the way and so we can share with the audience essentially the benefits of coaching. I wanted to share your story number one, because it's amazing that you haven't gone through the typical cycle of an entrepreneur that's even spelled out in The E-Myth Revisited. It's not in the physical therapy space, but I think she was a baker of pies and she had that burn out and she's like, "I can't do this anymore. I'm not seeing my family and I hate my job." You never experienced that because you looked ahead and started planning and started acting forward in faith that things were going to continue to grow and it's worked out well for you. You're going to continue to grow that you develop that foundation.
I want to say one funny thing that happened. We're in the process of moving houses. We're going through a bunch of things and I find a box of all my notes from PT school and I open up a folder from my business admin class, the one day that we spent on and pull out the handouts. There was right on the top was The E-Myth Revisited. I don't remember the professor ever talking about that back in the day. If anything, they were doing a good job teaching about business because they talked about The E-Myth. I'm sure there are other ways to look at it, but following that way of setting up systems and organizing the business and working on the business. That is what has allowed me to get to where I am.
What's different about you Avi compared to a lot of entrepreneurs, whether it's physical therapy owners or not, you've had it on the one book and I'm sure you've read other books, but this one's been influential for you. There are people out there that have read the book and I've read hundreds of others and aren't in the position where you are. The differences that you've actually taken action on what you learned. I read The E-Myth Revisited 6, 7, 8 years ago, but I didn't implement it to the level that you did it either. I would submit that people who are reading the business books, if they read The E-Myth Revisited, don't read it as a nice, good story, but to actually implement what he recommends.
The only way to implement it is if you take time away from treating and work on the business.
You've actually put those principles into practice and that's what I separated you from somebody who is simply read the book. I'm excited to see your growth here as you get some greater insight and knowledge on how to improve your stats and become more efficient. We'll follow up with you and do another interview and see what you've learned and what's been influential for you. Maybe there are some pitfalls, maybe there are some things that happened along the way, who knows? You might experience for yourself what your initial outpatient company did in San Francisco. Maybe not everybody's aligned. That or everything is going to go in a great direction because you have your ducks in a row already. I'm excited to see what happens. Is there anything else that you want to share, Avi?
For anyone, if they are reading for the first time, reading your blog has been helpful also. I talked a lot about The E-Myth, especially because I've set aside some time to work on things. I'll read your blog whatever interview person you have on and then try to implement those things that day or that week. It's been also helpful to know other people's stories.
That makes me feel good. Not only a resource but an inspiration to you. Thank you for that. We will stay in touch and we'll come back around to the story that is Avi’s in Druid Hills PT.
I'm looking forward to it.
Dr. Avi Zinn, PT, DPT, OCS is the owner of Druid Hills Physical Therapy in Atlanta, Georgia. He opened his practice at the end of 2017 and has slowly built it up—transitioning from a staff of one (himself) to a team of administrative staff and treating therapists. He continues to grow the practice gradually. Avi’s main mission for Druid Hills PT is to provide high-quality, personalized care to each and every one of his patients.
Avi has his doctorate in physical therapy from Touro College, and is a Certified Orthopedic Clinical Specialist. He lives with his wife and three children in Atlanta.
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Although Mike Bills, PT had plenty of managerial experience for a large hospital network, it did not prepare him for owning his own PT clinic. He quickly learned that owning and managing are two different ball games. Mike reached out and got some consulting support five plus years ago, stepped out of treating full-time, and has networked with other PT owners for the past five years. Now, his one-person clinic has turned to a 6,000-sf facility with thirteen providers, and they're continuing to grow in spite of the POPTs and hospital networks that have sprung up around them. What are they doing differently to thrive and survive? Today, Mike shares the formula to ownership success as well as their successful actions of obtaining new patients through their internal referral programs and social media/internet efforts.
I've got a friend of mine. I've known Mike Bills for a few years. We're both clients at Measurable Solutions. He's the President of Measurable Solutions for those of you that have been through any of their programs. Knowing Mike and the successes that he's had at his clinic, I had the opportunity to have a phone conversation with him. He shared with me how much they're growing and how well they're doing. I thought, “I need to bring him on because there's one aspect in particular during our conversation that stood out.” One of his most successful marketing actions is a robust internal marketing program to the point where a great percentage of their patients come from internal referrals from current physical therapy patients. They're not dipping their foot in the water here. They've been doing this for a number of years.
It flabbergasted me when I was doing the interviews. They do 30 minutes of drilling, training, and roleplaying with all of their 30 to 40 team members every week on how to get referrals from current physical therapy patients, not just providers. The entire team is responsible for this to the point where it's affecting their referral sources significantly in terms of internal referrals. Another example is that they've focused on internet and social media referrals. That's where they get the majority of their patients at this point. We go through that. He shares the powers and the numbers. They simply get a minor percentage of their patients from physician referrals. I want to share that with you because it's powerful what you can do with internal referral programs and the usage of social media and online marketing to the extent that I have seen from other physicians or physical therapy owners during the course of my show. I'm excited to share this insight with you. Let's get to the episode.
I have Mike Bills, CEO and owner of Loudoun Sports Therapy from Sterling, Virginia. He is also the President of Measurable Solutions. For those of you that might've been through Measurable Solutions at one time or another over the past couple of decades, Mike is now the face of Measurable Solutions. Thank you for coming on, Mike. I appreciate you doing so.
Thank you for having me. I'm excited.
You've got a great expanding clinic in Virginia. In talking with you in the past, you've had some successful exit actions in terms of your marketing strategies and whatnot. I want to get to that, but I wanted to learn a little bit about you and your professional path. What got you to where you are now? Would you mind sharing it?
I started out as a physical therapist many years ago. I was a therapist for quite a long time, but I got started in therapy probably a lot as everybody else did. I wanted to help people. I had some injuries myself in high school and in college and it led me down that path. I was trying to decide between being an athletic trainer or a physical therapist. I had some physical therapy issues and I fell in love with it. I'll be honest, I never truly had any inspirations to be a business owner when I started out. I talked to a lot of guys and they come out of school knowing they want to own their own practice by the time they’ve been out for a couple of years. I never had that interest on my part. Physical therapy was a lot different then. I went to work for a company that I had been to the place where I had been a patient. I knew a couple of the therapists that were there. I had a good relationship with them. They helped me to grow skill-wise early on in my career. We got bought by a large hospital system, and I ended up somehow in management and not a hospital system. Maybe I got tricked into it.
I was the Outpatient Regional Head of about 37 different outpatient therapy centers up and down the different parts of the East Coast hospital system. I don't know how I get into that because it wasn't the direction I wanted to go. In the several years that I did that, I will honestly tell you that I never learned a single thing about running a business. I was responsible for all these places, who got hired and who worked when, but nobody ever taught me how to run a business. One day I said, “I am not happy with what I'm doing. I'm not happy working for this big conglomerate. I feel like I'm being told how to do everything.” I pretty much said, “The first opportunity that comes up, I want to get out.”
I mentioned that to my boss at the time. I said, “Anytime any one of these physical therapy centers in this area where I live here in Virginia is up for sale, let me know because I want to buy it.” Lo and behold, a few months later, Jane called me up. She said, “We're going to need to close a couple of places. Are you interested in any of them?” I said, “I sure am.” It fell into my lap so it's on my lap. I knew nothing about running a practice. There I was. All of a sudden I owned a practice. That was in 2005. A few days later, my wife and I bought a new house. A few months later, my daughter was born. A lot of things happened in a short period of time.
Here I am, I'm doing well. It was me at the time. I started to realize that I didn't want to be small. I wanted to help as many people as I could. I was in an area that was growing a lot. New doctors are coming in and things like that. I started to figure, “I got this. I can do this. I've run all these other places.” I started almost grasping at straws and pulling things out of the sky. Sometimes it worked and sometimes it didn't. Healthcare was a lot different back then. We got reimbursed a lot better and there weren't all of the authorization and restrictions that there are now. As those things started to creep in, I wasn't sure anymore what to do. I was starting to have some struggles. You mentioned Measurable Solutions. I was a client of them as well, that's where I found them. I started to learn how to run a business and that's what's become successful for me to the point where I've grown my business significantly.
What led you to reach out to Measurable Solutions in the first place or decide to get some help? What's intriguing is that you had all these years of management experience, yet you didn't learn how to run a business and you would assume that it'd be an easy transition for you to be successful in an outpatient clinic, which is a story itself. What led you? Was there a turning point where you're like, “I need to get on top of this. I need to find something else?” Is there a backstory behind that?People don't buy what you do, they buy why you do it because they perceive how dedicated you are to what you do. Click To Tweet
Definitely, there is. Around 2011 to 2012, at least in my area, it's where a lot of physicians were starting to open their own PT practices. There were a couple of big companies that came into the area at the time, HealthSouth Physiotherapy came into the area. They started to open or buy a lot of clinics. I've run these outpatient centers, but I ran them underneath the guys in the management of this hospital system that I was part of. Here I am, I'm on my own. I don't know how to compete against HealthSouth Physiotherapy or PTs that are opening their own practice. I felt like I needed some help to help me to survive that period of time. That's when I reached out. That's what's been the impetus for me growing and being successful over the course of the last several years. We've expanded over 600% in terms of size and volume. It started from 2011 to 2012, where I was scared of what might happen if I didn't have a better plan in place to compete against these big guys that were coming in.
I don't know if the environment is all that different nowadays for new practice owners. Whether it's physicians that are taking their therapy services in-house if they haven't already done so or hospital networks buying up or larger nationally-run private equity firms or publicly-traded physical therapy companies that are coming and buying some of the smaller clinics. It's happening all over the place. Even though it's a little bit different than your situation, I'm sure there is a similar environment now where there are owners who aren't sure what their future looks like, reimbursements are going to go down, authorizations are going to be a lot harder, all that kind of stuff. There are plenty of questions out there. That's my mantra. You’ve got to reach out and get some help. Reach out, step out, and network. You’ve got to reach out and find somebody to give you some of that business training.
That's why I love your show because it exposes people to many other opportunities. Many other people had been through the same things. I was at PPS, I was talking to a lot of new guys that are coming out. They've been out for a couple of years and they're experiencing the same things. Here in my area, I forget about the fact that there is not even a primary care physician in my area anymore that doesn't own his or her own PT practice. I forget about that because I've got assistance ingrained. It works so well. As I was talking to some guys, it's happening all over the place pretty much no matter where you are from Alaska to Florida. It's the same situation.
It was you as a physical therapist when you initially got started. Where are you at now? How many providers do you have on staff? How many locations do you have?
I always like to look back on that. It truly was just me. I didn't have any office staff. I didn't have a tech. I didn't have anything. It was me. I answered the phone. I collected payments. I sent the claims to the insurance company. I treated the patients. I cleaned the tables. I always like to look back on that. Here's where we're at now. We had our fourteenth clinician PT that started. In PT/PTA, we have five athletic trainers that work for us as well. I wouldn't be doing it fair if I gave you a number, but we have a large number of the front office staff that includes billing and things like that. We'd probably have 8 or 9 people. We have a total of 38 or 39 employees now. We're all in one location. I would say I have six clinics. They're all in one building.
Every time we've needed or wanted to expand, we've been able to take on additional space in the building that we're in. It’s one of the things that I learned when I moved to this building back in 2007. We're in this direct center of the county and you have to drive through us to get to anywhere you go in our area. Rather than opening another place over here and another one over there, it's always worked economies of scale for us to take on another 2,000 square feet and turn it into that. We took on 2,000 square feet. We haven't knocked down the wall yet. We don't need the space yet, but it puts us at over 16,000 square feet. That's why I say I have six clinics, but they're all in one. Every time we do so, we've got to hire new office staff, new clinical staff and that's how we've grown.
I've always been envious of that. It's nice to say that I've got 4, 6, 10, 12 locations, but I've always been envious of you because you've got one location and a bunch of providers knocking it out. It’s economies of scale. You got immediate visual oversight of what's going on in the clinic and everyone is in connection with each other. It's easy to develop your culture and a lot of that goes on well. Your story is awesome but I want to talk about what ramped up your numbers. What were some of the successful actions? There's one particular program that I want to delve in with you about. What do you think some of the successful actions had been for you in terms of expanding your numbers?
I would say there are two pieces. One is getting more new patients in the door. I would sum that up as saying like marketing and promoting. Both internal and external things and how we look at and how we address a patient from the time they start to the time they finish, getting them to what I would call a successful discharge. Those are the two pieces where every year we'd rather bring in more new patients. We've expanded that way and/or we've tightened down our systems and made a much better process. We improved the process to make sure that we're keeping patients all the way to a successful discharge. Those two things have been the biggest driving factors in our expansion, especially over the last several years.
I love what you said there that you added tightening up the processes because many times, I find that many clinics if they're going through some tough times don't necessarily need a lot of new patients. What you find is that they have holes in the bucket, holes in the ship, however you want to analogize that, but they don't have the structural integrity to maintain the patients to get them through their full plan of care to a successful discharge. If you can shore up those holes and maintain the integrity of your system so there are people getting through to discharge successfully. You don't meet a lot of new patients, but when you do start getting new patients, you start seeing tremendous growth. That's what you see that you shored up your systems. I do have to put a plugin here. Your wife has been on the show before, her name is Dee Bills. She owns Front Office GURU. I recommend you go back and read her episode and when she recognized that she spent more than a year in fortifying the front office systems in your clinic to do exactly what we're talking about.
I am glad you mentioned that. I was going to say that in the year 2014, we had five fewer new patients came in the door in 2014 but it’s when we implemented and instilled all of the processes that she now teaches people out in Front Office GURU. We grew 31% in the year of 2014 both in collections and patient visits because we shored up all those holes. That's a great point to the fact that you don't need more new patients all of the time, you need to be sometimes look at improving your systems. We had fewer new patients over the course of fourteen from the previous year thirteen. We grew considerably because we shored up and plugged all those holes with all of the things that she now goes off and teaches other people. I'm lucky enough to be able to have learned that along the way with her. We continue to put it into play now.
I can't imagine how much money, how well that hit your bottom line, your net profits in that regard because your expenses were probably about the same. I did a show with Heidi Jannenga and they do their annual WebPT State of Rehab Survey Report. They found that the average small clinic loses about $150,000 per year in gross revenue. They haven't shored up their systems in there and patients essentially aren't completing their plans of care successful.
Think about it, you need to get a patient that finishes two visits, finishes themselves, two visits before they should have. You multiply that by however many patients there are. That's a ton of visits. It's a ton of money that we're losing as business owners.
What I want to talk to you is you've focused on and all of us are out there, “I need to get physician relationships, visits and referrals.” Those are super important. It's important to have those relationships with the doctors in the community, but you've been successful with your internal referral programs. Do you mind sharing with the audience a little bit about that and what you do?
We have done a good job in my opinion. We've done a good job of building relationships with patients that are current and how we get them to refer patients. You can call it a patient referral program, but anybody can give out a card that says, “Refer a patient or I'll give you a gift card to target if you refer me a patient.” I live hard on this philosophy of people who don't buy what you do, they buy why you do it. They perceive how dedicated you are to what you do. You talked about the culture before. You're creating a culture where patients want to share that with their friends and their families. It goes a lot into educating the patient. In Virginia, we have some loose direct access laws, which do help us. I would tell you, I'm working with a client in Texas that has some restrictive direct access laws. This is working gangbusters for them.
If you educate your patients on when they can come to you, how they can refer their family, friends, and you teach your staff how to have the right conversations, that program comes into play. I'll give you an example. If I'm working with a patient and I am talking to him about, “What do you do for work?” “I work around the corner at Oracle.” “Tell me something about the guys that you work with.” “We all sit around in these cubicles all day. We're all on our computers all day.” Let's say this guy is here for his knee because he hurt it running, but I will start to ask questions like, “Anybody at work ever complaining about their arms hurting them, their elbows hurting them, their necks hurting them?”
He was like, “We were having this conversation. We've got to figure out some way because at the end of the day, on Friday, our necks are always stiff and sore.” There's a light bulb for me. I'm going to educate him on what he should be saying to those five guys that he sits in a cubicle with. Before you know it, 2 or 3 of them have become patients in a short period of time while that guy that I was treating is still here. It's a matter of how do I educate him to go back to the office and educate those people so that the internal referral is walking in the door before that guy has ever been discharged. He's replaced himself 2 or 3 times over. That cycle keeps ongoing.Train, drill, and practice. Click To Tweet
I love it because that takes it to another level. I love it because you're basing it upon your higher purpose. Whereas our internal referral program in the past, it was a little bit more like, “Who else do you know that's in pain?” Inevitably you might know somebody that has some issues with this, that or the other. It was surprising to me how many patients would sit there as we're working on their knees and they'd ask us, “Do you guys work with low back pain?” That's 75% of my patient load. Patients still don't know what we do essentially. We have to educate them on how we can provide value to them. For those patients who are coming with their knees, you ask them, “Are they having issues with their backs? Tell us about your family or whatnot.” You look for opportunities where you can instruct not only them but also instruct them on how they can help or guide their friends and family over to you by the value you provide.
I realized that it's a matter of I had to change my mindset that it was okay for me to tell them what type of patient to send me and when to send me that. If I'm having a conversation with a parent and they're like, “What'd you do this weekend?” “I was with my kids. My kid had this soccer tournament.” “Does anybody ever get hurt on the field?” “All the time.” “Here's what I want you to do.” I had to change my mindset. “The next time somebody gets hurt, I want you to give them this card. We're going to write your name on it because I want you to get credit for it. Once you give them this card, I want you to tell them about the experience that you're having in therapy. What do you like about therapy right now?” “I liked the fact that every time I come in, you guys remember my name and you remember what we did last time. You always want to know things. You're progressing me.” “I want you to share that with that child's parents.”
It helps that process of I'm educating that patient on what to do because they don't know that we treat backs because they're here for their knee. They don't know that somebody else can walk in off the street because they came to us from a referral from a physician. All of those points where we can educate them on, it might come into play when they're in therapy. It might come into play a few weeks from now, but we all are going to come in contact with somebody that's in some level of discomfort. I want them to be able to go, “I had a great experience. You should go see those guys.” For us, that was a big part of it.
That's a great example of how you're not handing over the card saying, “If you know anybody, you can get a free movie ticket if you pass them along to us.” I love how you give them the words, the verbiage to use when they're in that situation so that they do feel comfortable. Maybe they don't use the exact words, but they know the feeling that you're trying to portray it. Through them, they can express that feeling in those words to someone who needs physical therapy, honestly. What have been some of the benefits of that? Have you seen a significant amount of growth simply by pushing the internal referral program?
Yes, we've tracked a lot of different statistics. The ones that we track is how many of our new patients on a weekly basis are coming from what we call patient referrals, which would be that internal referral program. On an annual basis up through the end of the third quarter, after the end of September 2019, about 38% of our new patients had come from referrals from other people, which is only second to new patients coming to us off of the internet, social media. It's three times the amount of referrals that we get from physicians, we're getting patients referring family, friends. It's been successful. When you look at it if I used to get three new patients from that, let's say 27 is what we had. If I get 27 new patients from patient referrals, then let's think about how much that's going to help things to expand. It takes us back to the previous topic we were talking about.
If I referred you to someplace, you're going to go with you're already sold. I don't have to sell you on your plan of care. You're going to want to stay because your wife said it was a great place. You're going to do what I tell you because your wife said that. It helps that process much easier. I always tell my staff, “Wouldn't you rather treat the friends of the patients that you liked, then roll the dice on that guy that walks in off the street and you don't know anything about him? You already know that patient because they work with Joe at Oracle. You already know things about them. You already have things in common.” It's much easier to treat that patient. Put that energy into educating them on how to refer somebody.
You use the words well and I'm sure you established a great referral program. How do you get the other providers on your team to do the same thing, to have the same words, to use the same energy? It's one thing to do it as the owner because you own that program and process, but how do you get that to extrapolate into the rest of the team, even the front desk?
This is the message that when you ask me, what is the one thing that's been most successful for you across all aspects of your business? It would be what I call drilling or training. We drill and we train all the time. I'll use it as an analogy. The World Series is finished. Washington Nationals, I'm not a Nationals fan even though I live right here in Washington DC. Let's say I was, I'm a Yankees fan, but nonetheless those guys train year-round. They'll take a couple of weeks off, but even on a day where there's a game, they're in the batting cage before the game. Why? They're going to get 27 pitches or so over the course of the game, but yet they're still practicing that. I take the same philosophy with my clinicians, with my front office staff.
We need to practice. I have to recognize that I didn't get good at having a patient referral program in the first few years I was a clinician. I probably was horrible at it back then. As the business owner, I've perfected that skill, which is what helped me to be successful as a business owner. As to help my staff, all of them, you have to be as successful as that. It comes to training. We train, drill and practice. How would you ask me for a referral? I wouldn't say, “Do you know anybody I know?” I would train them, drill with them, and practice with them how to have that conversation so that it flows They want to get those referrals. They don't know how to go about the process. They'll be like, “Have this referral card and bring it.” They'll get back to whatever they were doing because the conversation doesn't flow naturally. It's practice.
To get into the weeds a little bit, are you doing this one on one? Are you doing it as a group? I mistakenly immediately went and said that you're training this with the providers, but you're dealing with your whole staff. The entire staff should be on board with this internal referral program because they know the value that Loudoun Sports Therapy provides to the community. You shouldn't be holding that back. How often are you doing these drilling or training sessions?
I'll try to break it down for you this way. If we're talking about the referral program, it starts on day one. If you are a new employee, you're training and drilling on the referral program every single day. Whether you work at the front desk, you’re a tech, you’re a PT. There's some semblance of drilling on that every single day, five days a week as part of from day one of starting. Even my people that had been here from 5 to 8 years, they're still drilling a minimum of one time a week for 30 minutes on that one aspect.
We do drills on a lot of different things, but that is the key thing that everybody does. No matter what you do, everybody's drilling on that a minimum of 30 minutes a week, at least one time a week. There may be other things that you're drilling on. Every staff member for us drills a minimum total of 60 minutes a week. That's the inside of their 40 hours a week. It's not an addition. If you're newer, more of your 40 hour week is going to be on drilling. If you're older, you've been here longer, it's still that minimum of an hour and 30 minutes of that hour is always on the referral program.
Do you do that over the course of a year? You guys have become experts then at getting referrals from patients.
Yes, it’s the same thing. Think about the baseball players. They're still in the batting cage all the time. It's funny, we're having this conversation. My youngest daughter who's sixteen, who still is in high school, she's the only one that we have left at home. She is interviewing for a job here. She's going through the same process. She's worked there since she was eight, but she's still interviewing for a job. It'd be a position at the front desk. She came home, she had the interview process. She's like, “I won't say their name, but I might want to drill with Sally a little bit more because she wasn't as good at talking about the referral program as I think she should be.” There's always been a joke. My daughter has always said that she's the Deputy CEO of Loudoun Sports Therapy. It was interesting to see how somebody who's grown-up seeing that and to be able to see. She’s somebody who's been here for a couple of weeks and that's a new employee that she was talking about. She’s somebody that flows well but still has room for improvement on that.
You guys will not only train on the internal referral programming. Essentially, the goal with the training then is to get the referrals from the patient or to pass along the card simply. What is the goal of each training session?
The goal of the training session would be that they have an increased level of confidence in being able to help the patients to have a realization of somebody that's out there that maybe we could help. We're not looking for them to give us their name and their phone number. That's not the process we're following. If that's what somebody is doing, that's perfectly fine. What we're looking for is for them to have the realization. I dragged my trashcan down to the street and I was talking to my neighbor. He's like, “My knee has been bothering me.” What I want is for that patient to realize that's somebody that they could refer to us.” It's drilling with the staff member to have that conversation, help the patient to have that realization, and come to the conclusion of, “I don't have to send them here, shouldn't I? Do you guys do these?” “Yes, we do.” “Do you have something I could give them?” “I have this card. You could give them the card” We have a card that says referral card on it. We'll write the patient's name on it so they get credit for it. We'll send them a thank you, but we don't do anything else.The goal of the training session is to have an increased level of confidence in being able to help the patients. Click To Tweet
You say you're getting 38% of your patients from this internal referral program. I'm assuming that with all the physicians on physical therapy clinics in your area, you don't get a lot of physician referrals. What's your percentage there?
It is 11%.
Where are you getting a majority of your patients from at this time?
If we look at beyond the patient referral program, what I would classify to be like social media, the internet. It's social media, internet, and the patient referral program tied together. We have an expectation that every patient who successfully completes therapy is going to give us a success story. Do an online review for us. We average about 13 to 14 online reviews a week between Facebook and Google. That's hard. It's an extension of that internal review or referral program. They give us that review.
The discharge patients give us that review so that somebody out in the community sees that, has that reality with it and reaches out. The majority of our patients, we've been successful in building the use of that direct access through that patient referral program. Patients come to us off the street, they'll see something that we put up on Facebook or an email that we send out or something that we mail out. It’s a whole own separate entity. That's the number one driving force. The number two driving force for new patients is the patient referral program.
Physician referrals have declined over the course of a number of years. The study, a couple of years ago, it declined 50% between 2010 and 2018. It's dependent on us to change our marketing strategy. Don't forsake your physician relationships, those are valuable. You always want to be able to the physicians that these patients are saying, but you’ve got to consider direct to consumer marketing is the way you need to go. If you're outside of the internal, the patients are already there. I'm assuming you've got emails or newsletters that are going out to past patients and you're constantly mining that group because that's an ever-expanding group. You've got the internal referral program that gets you some immediate patients based on the patients that are in the clinic. When it comes to social media, are you doing some Facebook ads? Are you simply having those patients post on social media?
We're doing both. For example, that patient that is discharged now, they'll do an online review for us. They'll put their success story up. We'll share that. We'll like that. They'll share that and like that with their friends with that piece. We are doing a whole semblance of things online. We do run ads on Facebook, Instagram, etc. Most of what we're doing is unpaid. Most of what we're doing is I would term to be organic. It's not following the organic definition of Facebook. We post five things a day on Facebook about different problems. It falls back to the notion of if I educate people that there is a problem, how the problem is affecting them, that there's a solution for it, they're going to be much more likely to take action because they understand what it will do for them to take action.
It goes back to that mantra of people don't buy what you're doing. They buy why you're doing it. I'm constantly putting out content that helps people to see that it's not normal at the age of 45 to have knee pain, despite where we might think in society. In society, we think, “It's okay because I'm getting older.” It shouldn't be that way. It doesn't have to be that way. “Here are some things you might be having problems with going up and downstairs, sitting to watch a movie. There's a solution to it.” After they see that a certain number of times, they will start to take action. We'll tie that success story into it. “Here's Joe who had knee problems. He came to us and here are his results.” That's part of that whole process.
The majority of what we're doing when it comes to getting new patients off of social media, internet, isn't down that paid avenue as much as it's down the continue to educate them and give them good content and information. They will make that decision to take action in a relatively short period of time. I hadn't changed my mindset. I used to think, “One post a week was enough.” Now, I said, “We do a minimum of five a day and a minimum of two emails a day.” That's a minimum. If we just hired a new clinician and we're trying to fill their schedule, then it's 7 to 8 things a day and 4 to 5 emails a day. I had to change my mindset, but following that same philosophy.
Who's creating all that content?
We have all of our clinical staff create all of that content. We do all of our own social media stuff in-house. It's a requirement. It's an expectation. If you're a clinician that works for us, you're going to produce one blog every three weeks and one vlog every five weeks. We're constantly creating that content internally. I have full-time promotions, people that work for us as part of our staff. They're employed here, but that's her job as she does social media stuff. She's taking those blogs that she's getting, she's turning them into content, throwing a picture with it, putting it up online, deciding what to do with it. It's getting that stuff out, but all our clinicians are producing all of that.
Do you find you're getting a lot of patients that say, “I found you guys on Facebook?” Are you getting some of that?
When we look at it if I were to turn around here. If I'm looking at my referrals that came from online, 63% of our new patients came to us of some form of online, internet, social media.
I haven't talked to a lot of successful PT owners that have had as much success as you have when it comes to the internet and social media work. Do you attribute that sheer volume on the consistency of your posting?
It comes down to three things. One is the volume. It is the quantity of things that we're putting out. Number two, it's the quality of what we're putting out. We're not putting out, “Come to Loudoun Sports Therapy.” We're putting out, “Here's a problem. Here's how therapy can help. By the way, at Loudoun Sports therapy, we treat that.” We're telling a story to the patients that they come to have a realization that there's a problem. There's a solution to it. The third thing that I'd say that helped us to drive that as that I've spent a lot of time. The benefit of me being able to truly be an owner and not have to worry about being a physical therapist is I've been able to dedicate my time and hire staff who have the same desire to learn a lot about that avenue of marketing and promoting and using social media.
I've become a pseudo expert in marketing and promotion. That's one of the things that I do with Measurable Solutions is helping to pass that information on to other practice owners so that they can have the same results. It is something that's been successful for us. I talked to a lot of practice owners who tried it but it didn't work. I'll say it's because they didn't put their full attention and energy on it. They were paying somebody that's also marketing for the restaurant down the street, writing a blog for them about something. It's always driven towards, “Come to Loudoun Sports Therapy.” That’s a no-no. “Go to physical therapy. By the way, Loudoun Sports Therapy does the things that we're talking about.”People need to see something an average of twelve or more times before they take action on it. Click To Tweet
That's one thing I know about myself is that I'm not the creative type, content creation is like nails on a chalkboard. Inevitably you probably have somebody on your team that would probably love to have that responsibility to do that. You have shown by the fact that your providers are doing content creation, have created a culture, and a group of people that are willing, wanting and anxious to provide that.
I'd say it's a lot later. Back to the drilling on teaching a patient how they can refer to others. A lot of times, we'd get very all worked up about a blog has to be this big fancy thing with a lot of stats and a lot of stuff. It's making it simple for that staff member, “If you were standing in line at the grocery store and the person in front of you kept rubbing their neck, what would you talk to that person about for 2.5 minutes? Go write that down. That's a blog. Making it something that's much simpler because that's the type of relationship we should have with our potential patients. Don't be all fancy and super-duper hyper stuff. Be simple and basic.”
They will have that realization if they see it enough. You've got to have stuff out there and enough content. The same thing with the patient on the patient referrals side, the internal referrals, you can't mention it one time. You've got to be like, “When you went back to work, did you talk to any of those guys that were complaining about their neck pain?” “No, I didn't.” You're like, “You have to keep coming back to that point.” It's the same thing. It's everything in quantity will give you what you're looking for later on.
I love how you brought that back around full circle to the internal referral program. The one-time conversation isn't sufficient. There need to be followups, there needs to be, “As you walked around, have you noticed other people with a similar condition? What are your friends and family like?
I might've been talking to you about the guys you sit at work with you had lunch with, but then you're telling me about the soccer game. You're talking about raking leaves with your neighbors. All of those things are opportunities where I keep ingraining in you. I keep having this relatively same conversation, but I keep ingraining in you how you can refer to other people. I don't just have it one time. It's like a shoulder that's frozen. I don't mobilize it one time and it's all better. I've got to mobilize it twelve times and it starts getting better. It's the same thing with getting somebody to refer, getting those referrals in. A lot of times we get wrapped into, “I tried that. We tried it three times over the course of three months.” You have that conversation twice with a patient on day five. On day fifteen, they didn't do what you needed him to do.
I read a study that said, “On this day and age of social media, we need to see something an average of twelve or more times before we'll take action on it.” It changed my mindset. If I'm putting out a blog a week, a couple of weeks from now, maybe somebody will go, “I should do that.” The reality is if they're only seeing it once a week, they forgot about it by the time they see it next week. The same is true for patients. If I had a conversation with you about referring your wife, but I don't ask the next time, “How's your wife doing?” You forgot that we had a conversation. I’ve got to have that conversation with you multiple times for you to go, “I'm going to have the conversation with her and get her off my back at a minimum.” You’ve got to hear and see something twelve times before you take action on it.
That changes my mindset hearing you say that. It's understandable because, in the past, my refrain growing up was that someone's got to hear it three times for it to sink in. If you consider the decreased attention span of people nowadays and how easily distracted they are. You tell me once and I'm going to forget that by the time I scroll up to the next thing on LinkedIn or Facebook. If I see it a number of times and especially, more than three times over the course of even a couple of days, then it starts sinking in. I can see where twelve is coming from.
If you watch football games, if you watch an NFL game in a span of 3.5 hours, how many times do you see the exact same commercial? Not the commercial for Bud Light or for Ford trucks. It's the exact same commercial. It's the same philosophy. You've got to see it many times before you're like, “I need that truck.” That's the society we live in.
Thanks for sharing so much about some of the successful actions that you're doing with your clinic. It's evident in the numbers that you have now and the growth that you guys have seen. If someone wanted to reach out to you to pick your brain, ask about Measurable Solutions, even get in touch with Dee, how would they get in touch with you?
That's the point I love about where I am in my career now is that I get a chance to help other practice owners. I am so much about helping the private practice owner to survive in this day and age of big corporations. Anybody that wants to reach out to me, I would love to sit down, chat and help in any way I can. The best way to get in touch with me is to send me a text, shoot me an email, or leave me a voicemail. I'll give you my cell phone number. It's (703) 470-5995. One of the great things about me, having built this business to my clinic is I've been able to give back to Measurable Solutions that was helpful for me.
They taught me a ton of the basics of these things that I've applied and talked about. I've been able to join their team. I'm the President of Measurable Solutions now. The best email to reach me at is my email for them. That would be Mike@FortisBusinessSolutions.com. Send me an email. I'm happy to figure out a time that we could talk or anything like that. I am always about being able to help people because I want private practices to survive. I do not want us to get eaten up by physicians and corporations. I'd love to help anybody that's out there that wants more information.
Thank you for your time. I appreciate it, Mike. It was great. There's a ton of value. Thank you.
You're welcome. Thank you.
Mike Bills is the Owner and CEO of Loudoun Sports Therapy Center in Sterling VA. He started his practice in 2005 and did everything: answered the phone, treated patients, billed the insurance, etc. Since that time he has grown his practice by over 10 times. He now has a staff of well over 20 people, including 14 clinicians and a facility size of over 10,000 square feet. It was always Mike’s goal to have the time and ability to manage his business and not work in it and he has fulfilled that goal as he is the true CEO and no longer treats patients. Another goal Mike had was to be able to help other PT’s have the Freedom they deserved from their practice.
Mike was a client of Measurable Solutions where he learned how to truly manage a private practice and where he learned how to truly be the CEO. This is where he learned the basis for all of the systems that he uses in his practice that have helped him to be so successful. Recently Mike was named the President of Measurable Solutions and is now able to fulfill that goal of helping other private practice PT’s have the same success as him. If it weren’t for the perseverance and drive over the years to build a successful business this never would have been a reality for him. Marketing is one of the most important pillars of a private practice and I have worked hard to develop systems that continuously help my practice to grow and thrive despite the time of year or whatever else is happening in my community. I am happy to be invited onto the podcast to share just a fraction of what has helped us be so successful.
There is nothing more comforting than knowing that you are financially secure for the future. Bringing in a trusted expert from Econologics Financial Advisors, Eric Miller gets into the mindset, attitude, and strategic plans you need in place to secure your wealth for the future and for your household. Eric and Econologics have been working as financial advisors to hundreds of private practice owners over the past decade. Thus, they know some of the pitfalls that we share when it comes to our finances and what it takes for owners to become financially free. Eric goes beyond the investments and portfolios and sets you up with the right mindset and financial purpose and goals that are in line with your retirement plans. Secure your household and make your clinic the vehicle by which you achieve your financial goals in this episode.
I get to talk about money, one of my favorite topics. One of the reasons why I got into business was to have more freedom and security for my future. I decided to bring on Eric Miller of Econologics. If you remember, we had Christopher Music of Econologics on. I've been working with them for a little over a year. I do have to have full disclosure that I have an interest in their performance. I've also been a happy client. The reason why I like Econologics is not only do I like their perspective on financial planning but also the amount of communication they provide. If you follow my episode with Frank Cawley, we talked about important financial indicators like KPIs, reports and developing a financial team. Those things are all important. What I get into with Eric is more the mindset, attitude and strategic plans that you need to have in place in order to secure your wealth for the future and for your household. Important items to consider, this is all about securing the household and making our clinics the vehicle by which we achieve our financial goals. Let's get to the episode.
I've got Eric Miller, Chief Financial Advisor of Econologics joining me to talk about one of my favorite topics, money. Thanks for coming on, Eric. I appreciate it.
My pleasure, Nate.
Can you share with us a little bit about your experience as a financial advisor and your practice or work with private practice owners? What's got you to this point?
Long story short, I am a financial advisor and I've been in the financial industry for about twenty years. I grew up in Toledo, Ohio. I moved to Columbus, Ohio in 1990. The funny thing is I get so jealous of practice owners because a lot of you knew what you were going to do when you're 8 to 10 years old. I was 29 years old before I knew what I wanted to do. I always had an interest in money. For some reason, it was an area that always attracted me. I didn't study the subject when I went to college. When I got out of college, I worked for a mutual fund company selling 401(k)s and managed accounts.
I started to get introduced to what financial advisors did. By and large, what I found out was although they were benevolent and they wanted to do a good job, it was mostly an accumulation of assets. That's what they did. They didn't focus on, “How do we change someone's financial condition?” It was, “How much money can we manage?” I met a friend that said, “I'm going to start a financial planning company down in Florida. Do you want to join me?” At that point, I had a house, a dog and a girlfriend. I knew that was my purpose at that point in time. Like many people, I was like, “If I'm going to do it, I better do it right now,” and I jumped. I drove down there and got rid of that life. This was in 2008. Do you remember what was happening in 2008?
Bad timing.Your practice is what drives your personal wealth. It is the main money artery that most private practice owners have. Click To Tweet
It was a global meltdown. The stock market was down 50% and banks overlent to everyone. It was chaos. It was the worst time you could think of to start a financial planning company. We were thinking to ourselves, “We have to do something differently. We can't rely upon all these financial institutions for people to get financially independent.” We had to come up with a system where the business owner himself could be put back into control of his financial destiny. That's what we worked on. We started working with private practice physical therapists. It was the first type of clientele that we worked with. We developed our system of showing a business owner how he can be in charge of his financial future as opposed to putting it in somebody else's hands. How does he do that? How does he use the business as the engine to do that? We focused a lot of our efforts on that. We started working with veterinarians and other private practitioners, but our core is working with private practice physical therapists.
It’s cool that you niched down like that. You've had so much experience over the past decade focused mainly on physical therapists, so you'll know some of the ins and outs of our dilemmas, issues and whatnot.
That's the fun part about it. Your practice is what drives your personal wealth, for most of you. You don't always want to be in that financial condition. That's where most of the money comes from. That's the main money artery that most private practice owners have. If you're advising someone, you better know something about their business that you're going to help them with their money. We do spend a lot of time on that.
You've been working for over twenty years. For the past decade of working specifically with physical therapists, what are some of the things that you would recommend they consider as they're trying to establish a better financial picture or financial condition? We have plenty of display vehicles out there whether that's the traditional 401(k)s, IRAs and stuff. What is your advice to some of the physical therapists out there?
The main thing that we try to get across is number one, you have to treat your household like a business. What I mean by that is that a lot of physical therapists get trapped in the practice. They're there to serve the practice as opposed to the practice being there to serve them. The first thing that we try to teach private practice owners is that you are not there to serve this practice. It's there to serve your household. When you start doing financial planning, it starts with the household. What are the goals and purposes of the household? How can the practice benefit that? What we do is to teach them your point of where you're controlling things. If you look like a company like Facebook. Facebook is the parent company. It owns 80 companies underneath it. Those companies are there to serve Facebook, not the other way around. Our households are no different. Your household, the Nathan Shields’ household, all your kids and your beautiful wife, that's the parent company. That's where everything flows to for the benefit of that.
It's a paradigm shift. Many owners need to make it because they get trapped inside of the company. I espouse that all the time. That's why I want people to reach out and step out of the business so they can work on the business. It's the same thing when you're talking about financials. It's a mindset shift instead of, “What do I need to do inside this business to keep it afloat?” No, you're saying step out and look at it from the household perspective and say, “What does my household need to survive, sustain and prepare for the future? What can the company do for me in order to achieve my household goals?”
When you have that mindset shift right there, it's amazing what happens. You start to put the correct systems in the business that allow you to extract out of it so you can operate from the household level as opposed to being stuck in the business. When you have a plan, you start to know your identity. When you're in the business, you have certain roles that you have to play. You have your owner role, executive role and practitioner role. Not a lot of people are wearing that owner role like they should. That's where we teach people how to do that.
They conflate executive or administrative work with ownership work. Those are two different things. They maybe can hire an office manager to take over some of those administrative/executive functions and responsibilities. That doesn't absolve you from still being an owner, setting up your company appropriately, strategizing and making sure that it funds the household. This is on top of funding itself, so it can sustain your household.
You hit it right on the head. You can pick two of those roles. You can be an owner/executive or you can be an owner/practitioner, but you're always going to be an owner. You have to make sure that you have that mindset of what an owner does. What does an owner do? They make sure that the practice is creating maximum value for themselves and the household. They're trying to build the practice to the highest value that it possibly can provide for the household. That's what a good owner does.
When you sit in the ownership seat, you also never lose the Chief Financial Officer seat at our size. You're still the CFO. You can't delegate that and you shouldn't. You need to be on top of your cashflow.
You absolutely do. The biggest mistake that I see a lot of practice owners do is they stop paying attention to their money. For whatever reason, that's the one thing that you can never do. Money loves attention. It's like a two-year-old at the mall. If you take your attention off a two-year-old at the mall, you have no idea where they're going to end up. Things get lost and your money is no different. When you take your attention off of your money lines, even for a split second, it's amazing how the money will disperse everywhere. Being a good CFO doesn't mean that you have to know how to do spreadsheets and all those technical things. It means that you have to be a good controller of money. It means that you have to be responsible with money. You have to know the basics of money. It isn't that complex at all. It takes some training that you didn't get in PT school.
I can say that my financial situation improved when I started holding my CPA responsible for teaching me what a P&L was about, what a balance sheet looks like, and cashflow reports. I said, “I need to meet with you monthly so you can show me all these things.” I got my own education about finances. On top of that, I started meeting regularly with my biller, which I didn't do before. I was reviewing some of the billing reports and asking them to tell me, “What does this mean? What does this say? What should I know about this, that or the other?” That's when my ship started tightening up or when I started plugging some holes in that bucket. I could see the difference in finances.When you have a plan, you start to know your identity. Click To Tweet
All you were doing is putting your attention in an area that maybe you didn't confront for a while. One of the things that happen to a lot of practice owners is there's a lot of financial terminology that people don't understand and I totally get that. It's an easy area to say, “I don't want to confront this.” You need to dig into it and have some key metrics. A big thing, especially from the household perspective, is making sure that you have measurements or statistics to track your overall financial condition. It's not that hard to do. That's an obstacle that I see as well. A lot of people don't have correct financial statistics that they use to measure the kind of progress that they're supposed to be making.
A lot of people like looking at account statements. You look at your 401(k) statement and see how your mutual funds are doing. “I see that my bank account is a little bit bigger than it was from the week before and that's okay.” These are some of the things that I've asked people, “What do you use to measure your financial progress?” It's crazy some of the answers that I get. You have to look at that and have a list of metrics that can gauge the condition of the household if you're going to run it like a business. If you’re going to do that, you’ve got to do it professionally.
As people are trying to walk that path towards financial freedom or simply improving their financial situation, what are some highlights or actions that they can take in order to do that?
One of the biggest things is that you have to have a target. The first thing would be like, “What's the financial target that I want to achieve?” I created this chart called the Seven Zones of Financial Freedom. I wanted to make sure that people realize, “What financial condition am I in? What does that mean from a statistical point of view? What financial condition am I trying to get to?” That's defined by how much income I’m making, what my overall net worth is, how much ratio of my good debt versus my bad debt, how many income streams does my household have? These are things that you can look at and you can measure. The first thing would be like, “What financial zone do I want to get into?”
Regardless of what it is, personally, for a practice owner that is in control of your financial destiny, that can create as much value as you want to in your marketplace. If you want to be in a condition where you don't have to have concerns about money, your overall financial target has to be at least $7 million to $10 million of total assets. That to me would be a fairly safe financial condition to get into. It doesn't mean you have to save $7 million. When you look at the value of your business, maybe your real estate or other endeavors that you get into, that's the target you should be shooting for. That's a big thing because we haven't been taught to have that point of view. It's been like, “Let's accumulate a couple of million dollars in a 401(k) plan and let's hope that we don't run out of money.” That's not financial freedom.
As we get started at a young age, we think that retirement goal is so far off that it's not feasible to consider that down the road. The more attention you pay to it, maybe you get a little accelerant and you can get closer to that goal faster than you think. It doesn’t have to be all in your clinic. It could be on other vehicles but there's no reason why you can't accumulate those kinds of assets.
The wealth accumulation is almost like a hockey stick graph or a grind. When you’re trying to create an owner independent practice, you're trying to put these things in and you're not seeing these huge results, then all of a sudden over a two or three-year period, you see these massive results. Wealth building is the same way. You're doing the same repetitive and boring things that you would do and you're like, “I don't know if I'm making a lot of progress.” It accelerates towards the end. The other thing would be the time frame to get into a financially independent state. It doesn't need to take 25 to 30 years to do that. You should be able to do that within 7 to 10 years if you're concentrating on your main money source, which is your practice and building that up.
Are there some things out there that you hear financial advisors recommend that you'd say, “That’s probably not the way you should go?”
To me, it's more of a mindset than the recommendations because I found that every investment vehicle has its place. It's the utilization of it and how you're applying it to your situation. There's not a bad investment, aside from someone trying to rip you off. There's some workability to retirement plans, managed accounts, life insurance or annuities. It would be like, “What's your strategy first?” That would be the first thing I would start with, “What’s your overall strategy?” I'll give you an example of what our strategy is for most of our clients. I have an acronym for it. I call it PREP. It stands for Produce income and be profitable in your business. That's the first target. Second, make sure that you are setting up an automatic and systematic way that you're retaining cashflow from the business to the household. Eradicate all bad waste like interest, cost and debt. Protect your assets from any kind of loss including taxes and lawsuits. PREP, that's a strategy right there. If you focus on those four things, you're going to have a mountain of success.
Anything else that falls below that would be tactics. “Do I buy this policy or that policy?” “Do I put money in this investment or that investment?” It's all part of an overall strategy. A lot of practice owners get caught up in tactics as opposed to strategy. This money market accounts yielding 0.5. Should I put my money on this one or should I put this one that's dealing 1.2? They put their attention on things that aren't going to move the needle on their financial condition. We spent a lot of time thinking about what's the strategy first and then tactics. It was Sun Tzu who had a great quote that he said, “Strategy without tactics is the slowest route to victory, but tactics without strategy is the noise before defeat.” I thought that was important. I know when someone's about ready to lose financially when all they want to do is talk about investment products and performance of something. They’re all about tactics, they're not about the overall strategy. It's interesting.
Do you see a typical pattern when it comes to physical therapy owners? Are they focused on tactics more so? Is there something about physical therapy owners that's unique and that you have to fix even if it's mindset or strategy?
For the most part, physical therapy owners are healthcare professionals. They love to help people. A lot of them are trying to push themselves out of the practitioner role in trying to be better executives and owners. I see that in more so in the physical therapy field than I do in veterinary or dentist. People that are veterinarians or dentists, they love being practitioners. Not that physical therapists don't like being practitioners, but they seem to have the business acumen. They can see what could happen if I get a lot of physical therapists here working under me and I grow this business and I scale it. I can create something that has a mountain of value to it. From a mindset standpoint, I still see a bit of scarcity and some of the decisions that practitioners make. Money is scarce and it’s either this or that. It's never both. A lot of what we're trying to do is trying to make sure that they look at it from that perspective, “I don't have to do this or that I can do both.” How much money does the practice need to produce in order to do that and making sure that I keep my profitability level at a certain amount so I can do that?Money loves attention like a two-year-old at the mall. If you take your attention off them, you have no idea where they're going to end up. Click To Tweet
That's true for most physical therapy owners. There's a scarcity mindset. There's a lot of fear involved in what we do. They also tend to be a significant amount of burnout from what I can tell, so that's why maybe there's that transition out of patient care more so. You don't see a lot of older physical therapists in the profession.
That's funny that you should say that because a lot of the burnout comes from an industry where you're relying upon insurance reimburses. A lot of the reimbursements are going down and the profit is being eroded away. The burnout comes from the fact that there's a lack of exchange there. You're putting all this work and you’re putting all this effort in. You're seeing 10% or 7% profit margins and that would tax me. You can go buy a Puerto Rican bond for 6% and not have the headache of employees and regulators coming in there and saying, “You overbuilt here.” “You didn't code this correctly.” I can see where it taxes and makes a practice owner burnout. Once you solve that profitability issue adding additional services that maybe you didn't before and you get that backup, that's where you see people live it up a little bit.
As you've worked with private practice owners and you've seen them in all kinds of different financial conditions, what are some of the successful actions that they're taking? We talked about the mindset and we talked about strategy. We talked a little bit about tactics. Anything else that you recognize what helps that struggling maybe not struggling? How do those physical therapists improve their financial condition on top of those things?
A lot of it starts with their own personal training. When I say personal training, personal financial education training. Know what some of the basics are of money. Let's not be scared about it. Profit and loss statement is not something that is difficult to understand. That's not even that important to know. You should know about it but knowing some of the basics of money. You need to seek advice from people that are qualified to give it. That's a basic of money. Staying out of bad debt and that would be another basic principle. Things that they probably inherently know but are having a tough time applying. To me, it always starts with making sure that you have your attention on your main money artery.
I call it the main money artery, which is your practice. There's this idea that you have to go out and create all these different income streams that are true for the most part. You definitely want to have multiple income streams flowing into your household. You want to make sure that you have one that's flowing like the Mississippi first. If you can get that one going and setup system, the money then flows to the household to create other income streams. That's probably the most successful action that I've seen. There are some of the most successful owners that I've seen have gotten their practice to a point where it's cashflowing. They set up the system where they take a portion of their business cashflow and automatically every single week set it aside in the household to help create other income streams in the household. That's been the most successful action that we've done with practice owners. If I can get someone to do that, it's game over. They start to feel like, “This practice is starting to serve me as opposed to the other way around.”
I had Christopher Music on and he talked about setting aside 10% of your revenue every month, maybe weekly, but at least monthly. That blew my mind. That's the first time I'd heard that concept and I thought, “If I had set aside 10% of my gross revenues every month for the past sixteen years or whatever I own my clinic, I'd be in a much different situation.” It was cool how he laid it out if you set aside that like it's an expense. Christopher mentions this, you guys mention it. I've read it in Profit First, a popular financial advisory book by Mike Michalowicz. You set aside the Profit First that becomes like an expense line. Inevitably your business grows to meet it.
You have to. We operate with the concept that I know that a business is going to try to spend every flipping dollar that it makes and then some. You know that going in and you see that when you look at practice owners over and over again. I see that pattern. I know business is going to try to spend every dollar that makes. I also know that it will make the exact amount of money it thinks it needs to make to survive. Know those two things, so when you incorporate that 10% as an actual expense and you put it in, you have to do it on a gradient though. If you try to do it too fast, it could cause some problems but if you do it on a gradient, it’s amazing what happens. Things change overnight because you've incorporated that expense. The business thinks it's an expense, but it's simply the accumulation of a reserve pool for the household. If I could tell your whole audience if they did that one thing, they would never regret that ever.
It will change their financials entirely, especially if you look down the road. It's going to be a completely different condition.
Most of the practice owners that are doing $1 million of revenue a year, they're like, “We’ll do the math on that 10%.” “$100,000 a year?” I’m like, “Yes.” When you look at that, that's your owner's compensation. If you're a good owner, that's your owner's compensation. You deserve it. I always tell owners, “If Medicare comes in to audit you, who are they going to audit? They're going to audit you. They're going to audit the practice and you own that.” If you have a lawsuit who gets served. Whose names are on all the notes of any of the practice acquisition loans? It's you. You took all the risks to put this thing there by God, you deserve to get that 10%. That's a reward for you.
Sometimes I have to convince people. It was the funniest thing when we first started, I thought that would be the easiest thing that I could possibly do. I'm like, “There's nobody that would say no to that.” It's the hardest thing to get a practice owner to decide. I knew we were onto something when we started that because I’ve got the most push back when I started saying, “We need to put this money away.” “We can’t do it.” There’s no way.” “There's no way the business is yet too many expenses.” “I can't do it.” We figured out a way that they could do it, so it doesn't cave them in. Once we got that in, everything clicked right after that event for the business owner. It was fascinating.
It's interesting how it also changes the mindset. It changes the energy around the person as you have them focus on their money lines, their lifeblood, their main artery, whatever you want to call it. Once they put their attention on that, the energy changes. They take on the control that they didn't seem to have before and they seem a little bit more focused.
When you do that, it enhances your financial awareness and then it gives you confidence. That's the most important thing in any industry, you have confidence. When you have confidence, you make better decisions. You slow things down a little bit. You control time like an athlete that you see that's competent and what they do, they have so much confidence. They can control time. Most physical therapists are good at doing that from a training standpoint, but on business and an ownership standpoint, they're not as good at that until they get trained to do it. It's establishing financial confidence that does increase your confidence by a high degree.When you have confidence, you make better decisions. Click To Tweet
As you bring on physical therapy owner as a client, is that something you work on them with? What was your typical work look like that might set you apart from other financial advisors?
The first thing that we do is we give them a detailed financial scene that we want them to get to. We define what your ideal financial condition would look like. I don't think that a lot of advisors do that. They'll say, “Let’s save enough for retirement.” They don't give them a clear definition of what their financial condition looks like. We've created a road map where we encompass all the different component parts of your financial life. That’s the thing that differentiates us as well. Your financial life, the body is made up of several different systems. You have the circulatory system, the respiratory system, the endocrine system and all these different systems.
There are nine financial systems that make up your household, from asset protection to estate planning to income planning to debt and credit to tax optimization. There are several different systems and our job as financial advisors is to make sure that all of those systems are operating at their optimum level for every one of our practice owners. Whereas a lot of financial advisors will focus on the investment side. That's 1/9 of your overall financial scene. We put people's awareness on that and say, “Maybe let’s not only look at your investments while they're important. Let's not put all the focus on that.”
I have to say that I work with Econologics and I have enjoyed my experience with them especially compared to other financial advisors that I’ve worked within the past. Simply by the fact that you guys are in communication with me which is typical of the financial advisors that I've had in the past. I wish I had started working with you earlier. To give voice to the first exercise you're talking about. My wife and I went through that, setting a target you talked about $7 million to $10 million. That might seem to be a lofty way out there for some people. You also had us break it down to, “What do I need to be making per month in order to get to those goals?” That gives you a little bit more concrete and current number that can work on. I have that number, and my wife and I have those numbers in our head, “We can have this kind of lifestyle if it makes this much per month, but we can have this much better lifestyle to make this much per month. Let's try to reach for that.” That guides us on a lot of the decisions we're making as much as it pertains to income, investments, and whatnot. That's valuable.
Thank you. When you break it down, I know sometimes we set big targets for practice owners. You will be sometimes a little bit like, “There's no way I'll be able to do that.” When you break it down to like, “We don't have to do all this now.” What can we start? Where can we start? We build upon that. Financial planning is a set of boring repetitive activities. As you continue to do them, you see little mini results. All of a sudden, it’s like, “Boom.” It's amazing how it works. Traditional financial planning is like, “If you put $10,000 away for the next 25 years then you'll have blank amount.” Real-life doesn't work that way. People change, business owners change. Their confidence and business changes. The production of their business changes the industry that you're in. There's so much money pouring in private physical therapy.
There are so many opportunities out there to create a practice that you want to that there's no reason that you should restrict yourself at all. To your point, set big targets and big goals. Let's work backward on what are the actions that are going to lead to get there. When you get the numbers down, it's not that much. It's not that hard. It's not that much and that's where a lot of people appreciate you. You need to have a written plan not only a proposal of, “Let's put X amount of dollars and this investment strategy and X amount of dollars and that and this investment strategy.” That's a proposal. A plan is like, “These are the sequence of actions that I need to take in order to accomplish this.” Most people are operating on financial proposals and not financial plans and that I've seen.
The plan goes back to your ideal financial scene. I want to invest in my children's education. I'm going to have this much at retirement so I can live the way I want. I want to invest in these kinds of vehicles. I want to live mortgage-free. Those are the things that you start from and work on.
That's where it starts. What are the financial goals of the household? Which a lot of people have done. It digs into, how are we going to measure that? That's where I've seen, in our industry there hasn't been a lot of good financial metrics that measure the condition of the households and how we integrate the business into that as well. We have seventeen different financial diagnostic statistics that we look at. We can show someone, “Here's a statistic that you need to look at and we want to improve.” It goes above looking at the performance of an account. It's something that will help someone change their overall condition.
Is there anything else you want to add to the financial stuff that we hardly get into it or what?
I don't even know. This is getting fun.
I know we’ll definitely have you on again, so we have to save a little bit.
For the most part, the keys I want to leave people with is, no matter what your financial condition is, good, bad or ugly or no matter where you're at in your life cycle, whether you're still growing your practice, whether you're mid-career or whether you're thinking about exiting out. You can always do something to change your trajectory. You can always do something to change your financial condition. The sooner that people can realize that their household is the parent company. Make sure that you're wearing that identity of a Chief Financial Officer assuming that beingness, there's a good book called Atomic Habits on if you ever read it before.No matter what your financial condition is, you can always do something to change your trajectory. Click To Tweet
I've heard a couple of people mention it. I need to read it.
The main point of that was, the actions aren't that hard. It's who you have to become if you want to be successful at something. You have to become the identity of that person. Your financial conditions are no different. You have to assume the identity of someone that's responsible with money, that knows how to acquire and control money, and that can expand money. That's an identity. That's the Chief Financial Officer identity. If you can assume that identity, understand that and wear that, the actions are easy. It's not that hard. It's don't spend more than what you make. Take 10% of what your practice does and set it aside, invest prudently. The basics are not that hard. You have to assume that identity of the person that is going to direct this whole thing.
I love that idea because you are exactly where you think you should be. There's an internal dialogue that's always going on. If you assume or if you take on the mantle of, “I am good with my money and my business makes money for me,” then that's what will happen. If you are careless with money and you think, “I spend more than I make. I need to do better with my money.” That's exactly where you will be.
It's 100%. I have created what's called a Chart of Money Attitudes. I don't know if you've seen it or not. Every single day I’ll say certain things to myself like, “I'm a creator of money. My financial decisions are naturally right. I'm fully responsible with money. I want enormous wealth and I want others to have wealth too.” All these affirmations, things that I'll say to myself every single day because I want to make sure that my attitude towards money, which if you want to look at it, this is where it starts. What's your attitude towards money? If you have the attitude of, “I can't have money. Money is scarce. I'm terrible with money. It always disperses,” you're going be bad with money. You need to give yourself a checkup from the neck up every once in a while. When it starts with your money, that’s a key thing. Make sure your attitude, in terms of money, is in good shape and get out of some of the fixed ideas that you have or get out of some of the following gurus and around. You don't need a guru. You need a guide. The attitude comes from other places too, from parents and the experiences that they’ve seen and all kinds of things. We can get deep on this one.
It brings us full circle. It's where we started. It all starts with your mindset and your attitude with money and recognizing that the business works for you instead of you working for the business.
You hit it right on the head.
If people wanted to reach out to you, Eric, how do they do that? What do you have coming up?
We have a three-day training academy for private practice owners. We built our system for private practice owners. We don't work with engineers or teachers or any other of those types of vocations. We work with private practice owners and we built our financial planning specifically for them. We also create a financial planning education system where we teach them the basics of how to increase the value of their business and then how to make sure that they turn those business profits into personal wealth. If they want to contact us you can definitely start by going to our website which is EconologicsFinancialAdvisors.com. You can email me directly at Eric@Econologics.com.
We created 100 question assessments that will give you a snapshot of where you stand in your personal finances. I would recommend that if anybody has any uncertainties, confusion, or I don't know in regard to their personal finances or curious. Everyone's curious about their credit score. What's my credit score? We've created an assessment that will give you a financial score. If people want to go to our website, it's called the Financial Prosperity Index. They could click on to that and it will take them right to that assessment. They can take the assessment. We will give you a free 30-minute strategy session where you can ask us anything you want in the subject of money and personal finances anything at all. As long as you take that assessment, then I'll assure you that you'll get that free 30 minutes or longer depending on how long it takes.
Thanks for coming on. We'll have to have you on again because I know you've got more to share for private practice owners.
We'll keep it on topic next time. We’ve got a lot of different places right there.
It was good. I love it and like I said, I love talking money.
It's all good.
Thanks for your time. Thanks, Nathan.
Eric Miller Has been in the financial planning industry for over 20 years. He’s a co-owner of Econologics Financial Advisors – awarded an Inc. 5000 honoree for 2019.
As the Chief Financial Advisor for the firm, Eric has had the good fortune to have over 10,000 financial conversations with private practice owners in various healthcare industry and helped guide them into a more optimum financial condition using a proven system.
It's an age-old question for PT owners - should I have my own billing department or outsource it? It's a dilemma that each PT will go through at some point. Let's get the answers from billing veteran Amy Sparks. Amy has 20+ years of medical and PT-specific billing experience and has a firm grasp of what it takes for an in-house billing department to run smoothly. IF you have the right people and IF you can monitor and manage them regularly (weekly and monthly meetings), then in-house billing may be right for you. But IF you outsource your billing, you still need to monitor, manage, and demand regular reporting. Make your decision to go in-house or outsource but never abdicate your responsibility to stay on top of your cash flow.
I get to talk with Amy Sparks. She is the Billing Account Manager out of Star Physical Therapy clinics in New Orleans. We're discussing whether or not to bring your billing in-house or to outsource your billing. After my discussion with Amy and based on my personal experience, I personally believe that in-house billing is the best way to go, but only if you have a couple of things in place, only if you have these two things. Number one, you've got to have the right person with the right personality type. The best billers that I've had seen billing and collections as a reflection of them personally. They take it personally if people don't pay, whether it's $5 or $500, they're in the pursuit of that money. They're willing to confront anybody that's not willing to pay, whether it's insurance companies or patients. They've got to be able to hold those conversations and demand payment when it's appropriate. The second thing is you've got to be able to have the time and the bandwidth to monitor and review and check up on the reports of the billing department that they provide you.
You've got to step out of treatment. Take the time on a weekly and a monthly basis to review billing reports with the billing supervisor, whether that's in house or outsourced to track your money. Whatever time you take away from patient care to review billing will come back in spades both immediately and in the future. That's your money, that's your cashflow, that's the lifeblood of your clinic and you've got to stay on top of it or else it will leak out. We talked about some of the reports, some of the KPIs that you'll want to review on a weekly, a monthly basis. Ultimately, the billing department did what's best for me when I demanded the most out of it. When I found the right person, I would talk to them about my expectations for the KPIs and they went along with it. I also talked about the reports that I wanted to see and they went along with it and created those reports and even added some statistics on top of it to show their performance and help them track the performance of people that they managed.
When you work in synergy like that and demand more out of the billing and collections, your billing and collections will improve. Your cashflow will improve. Those clinics that are growing have a heavy, solid, strong billing department. Those companies that are floundering typically also have a floundering billing department. We talk a lot about the ins and outs and the pros and cons of in-house versus outsource billing, some of the questions that you should ask if you are going to bring your collections in-house and some of the expectations you should have if you are going to outsource your billing. Let's get to that interview.
I've got Amy Sparks. She is the Billing and Account Manager out of Star PT Clinics based out of New Orleans. They have eight locations. I came upon Amy because she wrote an article in Impact Magazine regarding in-house billing versus outsource the billing, what you should do and how to determine what if you should do either one. I'm excited to do this because it's a common question for all PT practice owners. First of all, Amy, thank you for coming on to the podcast. I appreciate it.
No problem. Thank you for having me.
Tell us a little bit about you, the experience that you have with physical therapy and billing in particular. How did you get to the point where you are now?
I was raised in New Orleans. I actually got involved in billing by accident about many years ago and I can't believe it's been that long. I started in billing for outpatient dialysis. From there, I ended up working at health insurance. I got to take those phone calls all day. I got involved as the biller for an OB-GYN doctor. About a few years ago, I got a job at an outpatient physical therapy clinic. That was my first experience in billing for physical therapy. I've been here at Star for two years.
Did you notice this significant difference in the billing between those other medical professionals and physical therapy?If you billed for any sort of health care facility before, you can bill for physical therapy. Click To Tweet
Other than the coding, no. The codes are different, but pretty much the rules in the game are exactly the same.
I asked that because a lot of PT owners might be looking for that billing person. I never knew, is it important that they have physical therapy-specific experience? Any healthcare experience is beneficial and there's not much difference, but you're telling us it’s not that different.
The CPT codes vary, but the rules of the game stayed the same. If you billed for any healthcare facility before you can build physical therapy.
I liked how you talked about the typical storyline that physical therapy owners go through in the article. You talked about a story that I'm very familiar with and a lot of other physical therapy owners are familiar with. Did you start with maybe a dedicated staff member or someone like that who is a rockstar? Maybe they want to do things on their own or maybe they start with an outsource billing company. What's the path that you typically see that you mentioned in the article?
Typically, what I usually see is when someone with a physical therapy clinic is starting out, they will hire somebody they think is a rockstar or even a family member or something, thinking, “Our patient load isn't that crazy right now. This person can handle this.” What ends up happening is they end up growing. Once they grow, they realize either they’re not so much of a rock star or this person was great when we were seeing twenty patients a week, but now that we're seeing 100 patients a week, it's too much for them. They'll end up either outsourcing to a billing company or trying to hire someone they think is better equipped for the job.
That usually goes a long way and based on your experience, I can share my experience as well, but outsourcing to a billing company, what are some of the pitfalls with that?
Some of the pitfalls with that is if it's a larger billing company, I don't think they can devote as much time as they should basically to your AR and your claims and stuff like that. If I have 200 other customers, they don't devote that amount of time and they're trying to get to that basic level, "We said we would get you 80%. That's where you're at." We're not going to go for the extra, even though it would be easy to. This is the same thing for in-house. You're at the mercy of who you hire in a way. People can look great on paper. They can interview like a rock star. When you get them actually to put their money where their mouth is, so to speak, they don't know half of what you thought they did.
You see that no matter whether you're doing it in-house or outsourcing your billing, you're never quite sure who you're playing with. When it's in-house, you do have some control there or more control at least because you can hire according to your values and hire someone that's aligned with you. You also can hone in on the customer service aspect of it that you don't have a lot of control over when you're outsourcing. One of the issues we had with outsourcing was that we had someone who was a jerk on the phone to these people and they were like, “That's not us. That's not our values. We could control that a little bit more when it was in-house.
I was going to say too because the person's right there, you can see how they spend their day. If you wanted to check in on them, you can hear how they talk to your customers, how they talk to insurance companies. That way you have more control of, “Is this what kind of person we want doing this for us? Are they giving us a bad reputation and we don't even know about it?”
Unfortunately, that can be the last impression that they have of your clinic. They're no longer being seen in physical therapy and you don't have any contact with them. If they're doing something 3, 4, 6 months later that could be negative, that impacts you in a bad way.
Absolutely, it does. I always say the clinician and the billing department are basically in a relationship of a good cop, bad cop. The clinicians are the good cop, the people in billing are the bad cops always. We're good with that. We're fine with that. We're the ones who are going to take the bullets from your patients and stuff like that as far as getting of claims paid and such. We got that going on, but at the same time you have to keep a level of professionalism. You have to be mindful of what the owners want and what their values are. You can't overstep that and can go rogue with that as far as dealing with patients because you get problems with that. With in-house, you have more control over that because you get to see that more on a day to day plus you're right there. Your patients are right there. If they had a bad experience, trust me, the clinicians are going to be the first one to know about it.
It's also important to note that as you're managing the billing department from an owner's perspective, it's so important to manage the reports. When you have someone in-house, you can generate those reports and create them in a way that you want to see those important numbers, the KPIs and whatnot, getting them from an outsource billing company. Sometimes I've had a difficult time getting those reports. I have a hard time meeting up with them to talk to them about the reports or individual cases.
We're leading down the road towards the benefits of an in-house billing department. Some of the cons for an outsource billing department and we'll get to that because there are some benefits to an outsource billing department and not everyone's ready for an in-house billing department. As you manage your cashflow and as you manage your money when it is in-house, you have greater control. You can manage it appropriately. You can dig down on individual cases very readily. You can set up meeting times at appropriate times for both parties to work it out well. There is a huge benefit to that. That is difficult when you're outsourcing.
You don't have the freedom of meeting convenient times for you. You're at their mercy. If you have questions, you might be waiting a minute to get your answers because you don't have the person right there readily available to answer the questions for you. It depends. If you're starting out and you want to focus on growing your business and if you have the patient traffic coming through your doors already then maybe you do want it in-house because you want to focus on this. There are pros and cons to both. It depends on really where you're at. Honestly, the patient flow has a lot to do with it as well. If you have the patient numbers and where you're at in your business and what you're looking for. It depends.
It's almost like a seesaw. I like how you explained the cycle that some clinics go through, they'll outsource and they're not happy with the collections rate or how they're being representative of patients so they bring it in-house thinking they have a solid person who can do that and "save them money." Maybe the billing isn't as good as it should be because they don't have the experience and the knowhow. Maybe they have to consider, “We need to find another EMR as better billing software.” It's the seesaw battle. What I liked about how you broke it down is how to determine if you're ready for in house billing to ask the questions. If it's truly right for me at this time to have an in-house billing department, these are the questions I need to ask and answer. Let's go over those a little bit.
If you're considering doing in-house billing, we definitely want to have dedicated staff members who have a good work ethic, who know how billing works, who understand coding, who basically looks at your denials and say, "I need to fix this.” Also, they have the ability to find the right people to staff your billing department as well because that is a huge area. Hire somebody and you might think they're great and might take you 3 to 6 months to realize that this person's not great at all. The good thing about the billing is probably the only job that will always tell on you.
The numbers don't lie.
The numbers don't lie and you can't hide that you don't know what you're doing or you're not doing your job in billing. You might be able to pull it off for a month or so, but eventually it's going to tell on you.People can look great on paper. They can interview like a rockstar. When you get them to put their money where their mouth is, they don't know half of what you thought they did. Click To Tweet
You're saying you have to have someone who's not only educated but dedicated to billing. Maybe they're not full-time if your numbers don't match up. They need to have separated segregated time to do billing, only billing, focus on that and then also be capable of being a manager. As you grow, that billing department is also going to grow. That person is going to move from being the biller to the billing manager and maybe not touching everything but having to oversee somebody else.
As you grow, as a building manager, you have to know how to delegate. If you don't delegate, you will live swamped, constantly feeling like you can't your head above water. You have to find people around you that you can trust. That you can tell to do something. They're going to do it how you want it done and let you know when it's done, that you can rely on. To me a very strong work ethic is as important as the knowledge you bring.
It's a certain personality type that succeeds in billing. I'm sure you've seen this and what I've seen is the people that are successful, they are going to get every penny and it's almost a personal assault. They take it personally when people don't pay. They have to be able to confront. If you're very passive and laid back and trying to be a nice guy, you're not going to do well in the billing department. You have to find someone who is able to confront these patients who have a balance and talk about money because it can be a sensitive subject.
I've always told clinicians even though it's one patient, we are dealing with two completely different personalities because you're getting the nice, "Help me please," and very friendly. I'm getting a different person because I'm trying to get money out of them. He might be the sweetest person in the world in clinic, we'll get him over here and they'll start yelling. It's the nature of the beast. You definitely have to have a person who is thick-skinned, someone who doesn't take things personally. We need somebody who has a great attention to detail. A lot of times you'll find things are denied because one digit is off. I need you to find that or somebody has to have a very strong attention to detail. When you're talking to a rep on the phone and insurance rep particularly when they try to tell your reason for denial, I'd say a good 50% of the time, that's not what it is. You're looking at it like, "No, that's how it is." "What you're telling me is wrong, I see that I've done that part." “I see this down here is not right.” If I could look at that and say, "Look at coding," and say, "This needs to be modified or this code needs to be changed." things like that. They have to have very good attention to detail, definitely.
Tell us a little bit about the reports system, the ability to meet, review reports and where your clinic is in that regard. How important that is to determine if you can do in-house billing?
For example, I meet with the owner once a week and then we meet again at the end of the month after we close out that month. What he will do for example, is he'll do an analysis. He'll randomly pull ten patients and check to make sure that the follow-up on them is done according to our procedures. That pretty much everything he pulls randomly has been touched. It goes to figure if he's pulling ten patients and I see that three of them have not been touched in several months, then it's safe to say that you probably have a pattern there going throughout your clinic. We'll meet on that. We make sure everything balances out, paychecks, denials, adjustments and refunds. We go over all these reports at the end of the month to verify that nothing was written off.
It shouldn't have been that insurance reversed the payment, but it was a legitimate reversal. It wasn't, "We want to take our money back on this," things like that. It's like the check and balances system. Meanwhile, throughout the month I'll randomly pull an AR report, go through it and spot check it basically to see. I’ll make sure everything looks good, the girls are following up working denials and things like that as they should be. He spot-checks me. It's a system of checks and balances that we have in place. We will meet once a week. We email, "Can you meet at this time?" We set up a time. It's very convenient because like I said, I'm here in-house.
Especially if you're going to do the in-house billing, then it's necessary to recognize that you need to set aside the time to meet weekly and monthly to review weekly and monthly reports. You know what you're looking at as the owner. There are certain statistics that I'm sure he's going to review or certain categories that he wants to check out. Also, take the time to do some spot checking and follow up on it themselves. I think that's a great word of advice, but tell us a little bit about some of the key statistics that you're looking at maybe that you and your owner are looking at as you review some of the weekly or monthly reports. What are some of the top 3 or 4 statistics that you guys are reviewing?
One thing we look at is called the Accounts Receivable Conversion ratio. It’s called an ARC ratio. It's basically our total AR divided by the number of average number that we have built out per month. We'll take an average of the last three months, not including things like auto, attorney or people who are in collections obviously. We basically divide the AR by the average bill. We'd like that number to be less than 1.3. Basically saying that it takes us 1.3 months or less than 1.3 months to collect. That's basically what that tells us. We are much less than that actually. That's always a good thing as long as we stay below that number.
It's great because we all know that the longer you let that money sit out there, the less likely you're going to receive it. You get pennies on the dollar the longer it stays out there. To keep that average within or 45 days is huge.
It also helps you as far as if there's a problem somewhere. For example, we monitor it every single month. If that number were to skyrocket from one month, the next we'd be like, "We have a problem here somewhere." Either an insurance began processing our claims wrong or we're not receiving payments somewhere or something's not right. It's also great with a monitor that everything should be steadily going down with that number. It's a good way to monitor and make sure I catch it early if there are any issues happening that maybe you're not aware of.
That's a monthly statistic that you follow and that's huge. What are some of the others that you follow?
Another one we follow, we call it the 90-plus. Basically what we do with that is we will take the AR 90-plus.
The AR aging report and whatever's in the 90 plus day range and above.
We'll divide that by the total AR and that gives this a percentage of basically AR that is over 90 days old. You want that to be less than 10% of your total AR.
When you come into a clinic that's bad or a clinic that’s in a bad situation, when it comes to collections, you'll see that statistic specifically be bad. To take it from there to under 10%, in my experience can take anywhere probably about six months at least to get down to a good range. That's where you're going to find some extra cash, but you're also going to lose a lot of money as that number gets larger. We used to actually bonus our biller based on her ability to keep that under 10%. Once she did that, then she essentially got a raise to continue to keep that under 10%.
Once you get it down there, it should be very easy to maintain, but I'm glad you brought that up because I think a lot of clinic owners, whether it be in PT or other areas of healthcare don't realize that if your AR looks bad, it's not going to get fixed overnight. It is going to take time for it to come down because it takes an insurance 30 days to process a claim and that's if it looks good. You have to keep in mind that it's not going to be an overnight thing. It will take a couple of months to get it down. Six months is probably very good timeline think about. If you're not seeing anything drastically improving in a month, don't freak out. It will be a slow and steady drop it took and you didn't get this bad AR overnight it's going to take at a time to come down. It's going to be a lot of fighting with the insurance because that is definitely something that has changed since I've started back in the day. It used to be a lot easier. You file a claim, the member ID is right and the birthday is right, they’ll get paid. Now, no.
Not so much.The clinician and the billing department is a relationship of a good cop, bad cop. The clinicians are the good cops and the people in billing are the bad cops. Click To Tweet
There are two players I'm thinking of in particular that are good at the game. You've probably seen this yourself. For example, therapeutic activities. You build therapeutic activities with any other therapy exercises. There are two payers in particular that they will automatically always deny therapeutic activities even though it was built correctly. They'll deny it and that they want you to send in all this documentation and medical records. If they find your documentation is sufficient, then they'll pay it things like that, which is very time-consuming. You're left with this $50, $60 balance on your claim. They'll sit there for a few months because they will take their time with that. The frustrating part is that there was never anything wrong with it. We could have paid it from the get-go. It ends up on your AR longer than it should.
They know that if they simply deny it, then they'll save money. Most people won't take the time to appeal it. Especially in some of those cases where the outsource billing won't go after the extra $50.
They'll say, “We're going to write this off,” and it can be a problem like that because those charges do add up. They don't want to devote the time. I can tell you from our standpoint, we've gotten to the point with that where we've had to basically create a letter of medical necessity template. We tailor that for each patient and it seems to be working. Prior to that, you'd go through sending in flow sheets, sending in medical records and waiting for those to tell you, "No, that's not enough." That is a team effort because we have to get the clinicians on-board like, “I need you to tell me exactly what you did every single minute.”
That can be difficult.
They're not crazy about it either obviously, because they know what they're doing.
What are some of the things people should look for if they are considering a billing company? What guidelines do you recommend?
If you are looking for a billing company, you should look first at all your costs. I would say you should not pay any more than 6% to 9% of your collections. Also they should provide you with consistent reports to show you their performance like, "Here, look what we've done." They should also provide you with their policies regarding their workflow because like you said earlier, their policies, their way of doing things might not match up with your values. You need to have a clear idea of what their policies are regarding their workflow, how they handle things.
They should also be very transparent regarding how much time do I actually put into a claim as you ask. If I have one code that denies from $50, are you even going to try and fight for it? Are you going to suggest that we write it off and move on? That will give you an idea of how much time they're going to put into chasing, not just that claim but all of your claims. The insurance is hoping that you're going to give up. They think that if they hold you out for six months, you’ll be like, “I'm tired of this. Let's go. I'm going to write it off.”
One thing that also always brings up the red flag for me when it comes to dealing not just with billing companies but with any vendors is their willingness and ability to communicate. If I have to constantly search and ask for reports or feedback, that's a lot of wasted time and energy. I would like for them to take the initiative to provide those reports on a monthly basis. I've had to do that with billing companies in the past. I said, "At the beginning of each month, I want to see these reports come to me without me asking for them. Can you do that for me? If you're going to ever write off a balance, that needs to be cleared through me first.”
I don't even write off balances without getting the owner's approval first. I do think this is true for anybody, your support staff starts at the very front, your receptionist. I know a lot of people think that, "She just answers phones, schedules and appointments, whatever." She needs to have a great attention to detail because she's doing the data entry of this patient's information usually and not to mention she's your first point of contact for your patients. She's basically the face of your company when they walk in the door. It's important to understand that one wrong digit on a birthday or a member ID number will delay your claims payment for at least another 30 days. You have to have a strong person at the front. At least double-check what she put in, make sure the numbers are right. You need to have somebody very strong upfront as well. It's a whole group effort between the receptionist, the billing department and the clinicians.
One thing also to figure out with when you're considering outsourcing is how closely are they going to work with you on improving collection or billing performance. One benefit of having in-house billing is to say, "We're constantly getting denied for such and such code," like you're talking about, "We're constantly getting denied for therapeutic activities. Should we consider modifying our documentation so it’s built under therapeutic exercise and we don't have to go through all of this?" Of course you don't want to tell them how to treat, but you need to raise the awareness like, "We're spending a lot of time and effort on a code that's getting denied." If you have someone in-house, you can have that conversation. If you're going to outsource this, you need to make sure that you're having those same conversations and you need to make sure you're setting up time and the awareness that's expected.
I agree and something you had mentioned was saying how you've had to chase down some of them out when you outsource to get your reports and stuff. An important thing to remember is not to sell yourself short with that because if that was happening in-house, you wouldn't tolerate that. You wouldn't tolerate having to chase down an employee to get a report. You would expect them to bring it to you. It’s the same thing with the outsourcing. You have what you expect and you shouldn't settle. If you're not getting what you need from this outsource billing company, I would say definitely you need to make a change, but you really shouldn't have to chase people down because you're paying them. They're not paying you. They work for you, so they're like any other employee.
If I have a question, I need you to answer it in a timely manner and you need to expect constant communication. There are many times that they need information from you or they're expecting information from you and you need either back to them. Because of that, sometimes I think we feel like we're working for them instead of the other way around. You need to remember that you're the owner, you can always change this person out. You can always fire your outsource billing companies. If they're not doing what you need them to do in terms of reports, meetings, communications, customer service on your behalf, you can always fire them and you need to find someone better.
There are too many companies out there. There are too many people out there with billing experience. There are companies that do outdoors that you shouldn't have to settle, if you're not getting what you want.
To give some of the owners a heads up, what is your experience when you do switch out of an outsource billing company to in-house? If you're moving from an in-house biller to another in-house biller because one got let go or whatnot. I'd say that to preface this is to say that when I've seen billers change whether going from outsourced to in-house, there can be a real blow to cashflow for about six months or so before you get back on your feet again. I think PT owners need to understand that they expect the transition like that might be good, but you're not going to see the benefits of it for 6 to 12 months and they have to be patient and stay on top of the metrics in the meantime.
I know it's human nature. You want it now, but you have to keep in mind that the fact that your reason you're changing is that if it wasn't working the way it was going. More or less, you've gotten yourself or billing company has gotten you into a hole, if you will. You're not replacing them because they were doing a great job when your AR is low. You're replacing because they weren't doing what you needed or your AR, your cashflow is going down. It's a mess. Like any mess, it’s going to take time to clean up. As I said, you didn't get in this hole overnight. This took months to happen. It's going to take months to fix it. I know it's very frustrating for owners because they expect to see an improvement within the following month. It doesn't happen that way because keep in mind that insurances on average take 30 days to process a claim in itself. When they're going through cleaning up your AR, they're refiling all these claims, correcting them, refund insurance.
At best, you're looking at 30 days and that's not going to be for everything because at least half of that you're probably going to end up fighting for because the insurance doesn't want to pay. The worker's comp company doesn't want to pay it. They'll deny it for crazy things. Probably one is not timely, even when you send in proof of timely file. For example, you know how it prints on a HIPAA? If today's date would be 10, 18, and 19. I've had a particular insurance company deny saying that date of service was prior to the patient's date of birth. I realized that the patient was born in 54, they are reading the date of service as 1918 or 1919, not 2019. I'm like, "Are you kidding me? My health insurance is in 1919. My health insurance’s dead. What are you talking about?" I couldn't believe it. It blew my mind. This is hands down the worst denial I've ever seen in my life.
I want to talk to you a couple more questions simply because you are a billing manager now. You are working with billing people who work underneath and you oversee them. What are some of the recommendations that you can give the PT owners as they're working with a billing department, not a single person? If they're large enough to where they have two, maybe three people doing billing for them, what are some of the things you are looking for as a billing manager in your management of others? The separate duties, how do you organize your staff?
I separate my staff. We have a person who bills out claims every day so she'll bill those up. She's also the person I have that works my insurance AR because she knows how to code. She's billing the claims out. She knows what to look for. She's very strong in that. Also, I call her my pit bull because she does not have any issue getting on the phone and fighting. I swear she fights like it is her own money and that's what I look for. That's what I love in a billing person. It's like, "I'm sorry I got mad." "No, don't be sorry, you got mad. I appreciate the fact that you act like that is coming out of your personal pocket, like this is your money."
I love that. I look for that. I look for a good work ethic. You don't want somebody that's constantly calling out because this, that or the other. Somebody who doesn't mind being on the phone, doesn't mind getting into the trenches as far as that goes to the insurance company and sitting there on the phone with them for 30 minutes fighting. Also on the flip side, I have another person, she does all of my patient payments, my attorney's cases and my patient AR. I have her do the patient payments because she's the one calling the patients to about bills. That's how I break it down. As I said, I oversee them, I spot check them and that's my checks and balances for them.As you grow your business, you’re going to have a billing manager. You have to know how to delegate. If you don't delegate, you will live swamped 24/7. Click To Tweet
I have somebody who does the same thing for me. You need to have systems in place with reports. Checks and balances is a great thing. I do it to them and somebody does it to me. That's how we make sure that we're running officially, policies are being followed, procedures are being followed, everything's being done, how it should be. We have a system in place as far as patient collecting, “You do this and this,” and then you send them to collections if you've got nowhere. We made sure all the steps are being followed and things like that. It works. Prior, I've seen it done other ways. I didn't like it.
I've seen where they would say, "This person is going to handle these five insurances and then this person is going to handle these five insurances." Basically everybody’s got their hands in everything. I prefer to keep it separate. It flows better that way. You only have the same two people accountable for patients. You have the same two people accountable for insurance and that will never cross so there can never be, “He said, she said,” kind of a thing. All communication between the billing department and the receptionist needs to be via email because we have a paper trail that way again, “I told her this." “No one ever told me that.” It cuts out all the, “He said, she said.”
That's a great policy to have because the insurance or the billing department is all about paper documentation of everything they do. You might as well keep that as it pertains to communication with the front desk as well.
Also we have over 100 employees here, otherwise a lot of people are always emailing billing, which is fine. I prefer email because like I said, you have a paper trail and also you're not constantly getting that distraction on the phone. You take this phone call and by the time you're done with that, "What was I doing?" That kind of a thing. This way it's all in writing. You're not getting constantly distracted twenty times an hour or pulled away from what you're doing twenty times an hour to answer phone calls about, what about this? What about that?
We talked a little bit about when you consider an outsource billing company, their charges are typically somewhere between 6% to 9% of your revenues. What is your company's expectation as far as what the cost of your billing department is to the revenues of your company?
We'd like to keep it between 3% to 5% maybe and it's toward the 3% honestly.
It gets like that when you're a larger company. For a guy that's smaller, if they're thinking that, “Maybe I can save some money, if I bring it in-house, they'd probably need to expect it's going to be closer to the 5%.” Maybe a little bit more and recognize maybe some of the benefits that go with it if it's running well. If it's not running well, then that billing department's going to cost you more. When a billing department is running well, you can expect it to be in a smaller clinic somewhere between 5% to 7% compared to the 6% to 9% that you would pay otherwise. You'd have to consider the benefits and the pros and cons of both.
We've had Star open eighteen years. We've had quite a significant amount of time to grow and expand and work out all the kinks. We're about 3%, but as I said, we're larger though. We've been around for a while, so I could definitely see where to expect that number to go up whether you're smaller or a newer clinic even.
You guys have been around a long time. You've got a ton of experience. If people wanted to reach out to you and maybe ask you questions or get your advice, are you open to that?
Absolutely, we actually love to mentor and advise new PTs, new clinic owners. I actually spoke to someone. I didn't know her but it was through the article and she was a clinician and she was just asking me questions about different things we thought she should do. One of the things I definitely want to preface to her was that as the clinician, you don't want to be involved as far as try to collect patient balances. You're the good guy. You're the helper. You need somebody to keep it that way. You need somebody to bigger fall guy basically and that's what we are. As I said, we're good with that but you definitely don't want to be both because you're on their side.
You don't want to taint that in any way by bringing money into it basically. You definitely want to keep those two separate. As a clinician, you want to stay as far away from that as possible. You definitely need people for that. I was going to say that while you're starting out and it's new and you don't think you need this, that or the other because "We're new, we're starting out." That is one thing you would definitely need as a new clinician. You need somebody to handle that for you. Whether it be outsourced or whether it be in-house as a clinician, no matter how small you are you don't want to be that person.
If people had questions like that, how would they get in touch with you?
They can email me. My email is Amy@StarPTClinics.com. Our owner for example, he's been practicing since ‘93 and he's a member of the editorial APTA board member. He loves to talk to other PTs and business owners like that. He loves to advise them. He loves to help them with any questions they may have or anything they might possibly need. He likes to help other PT clinicians grow and expand their business. That's what he's really trying to get into now. As part of that, something we would also like to do is possibly start billing for other PT clinics. You could go with an outsource you might not know too well or you have solid companies you can go for. You can go for that as my reputation and word of mouth.
You guys obviously have the systems in place, you know how to get things done. You've got a ton of experience behind you. It's one thing to go with an outsource billing company that might do a billing for all kinds of medical professions. Whereas you guys are PT-focused, PT-specific, you've got a couple of decades in the business based on your owner and the experience that you bring with it. You guys can bring a lot of value to those PT clinics that are looking to get things started to maybe outsource until they're ready to bring it in-house.
We have all the systems in place, the reports, policies, checks and balances, you name it. Obviously it's been successful because Star itself has been open for eighteen years but we're still growing. We opened up our eight clinic and we still have plans to open more. It’s obviously successful. Our owner's been practicing PT since 1993. He loves helping, marketing and helping people grow and expand, showing new owners what to do. He's been through the trenches, he's been through the trial and errors of it all. He has seen it all because he's basically was his own test patient more or less.
What was his name?
His name is Matt Slimming.
We'll have to remember him.
If anybody wants to reach him, you can email me and we'll both be in touch with you.
Thanks again for your time, Amy. I really appreciate you sharing your wisdom.
No problem. If you need anything, give me an email.
Thank you very much.
Amy B. Sparks is the Billing Manager for Star Physical Therapy, the largest independent Physical Therapy group in the greater New Orleans area, with eight clinics and growing. Amy was born and raised in New Orleans. She began working in health insurance billing twenty years ago.
She has experience billing for several different types of healthcare providers and has also worked for Aetna Health Insurance, giving her experience on both sides of the industry.
Freedom comes from making a healthy profit. Thus, on this episode, host Nathan Shields and guest Frank Cawley, PT discuss what it takes to establish a solid financial structure and improve profits in business. They tackle the important KPIs you need to track, the financial team you should have in place, the pros/cons of owning your office space, and the reports you need to review regularly. We're all in the PT ownership business in order to do things the way we want to do them and to make as much money as we want to make without depending on others. If we lose sight of our financials, then we're bound to lose our business altogether (or endure a lot of stress in the meantime). Take the time to monitor your finances regularly and your business will reward you with more money and freedom.
I'm talking about one of my favorite subjects and that is anything to do with money. I've got Frank Cawley, a physical therapist out of Pennsylvania on with me. We'd taken the opportunity to break down some basic financial fundamentals in regards to your physical therapy practice. If you feel like you've got a handle on things, maybe this is a good episode to compare what you're doing with Frank's recommendations as well as my experience. If you're new or feeling green in regards to your financials, maybe this is a good episode for you to take notes because we talk about KPIs, Key Performance Indicators and the statistics that you need to follow in your practice. We talked about the importance of renting versus owning the space that you're in. Also, the importance of developing your financial team as it were.
We go into a number of different things and it's great to talk about it. You might be able to tell that I get a little bit excited in this episode because I love talking about numbers. That's who I am. Vitally important, we have to make a profit in order to sustain ourselves in what we're trying to develop and obtain the dreams that we have either for our clinics, for our families or our individual selves. It all comes down to making a profit. Although we like to think we're a little bit more altruistic, we got to make money.
I’ve got Frank Cawley, the CEO of Cawley Physical Therapy and Rehabilitation out of Northeast Pennsylvania. He’s successful. He’s got six locations going. He’s also the Cofounder of Next Level PT and Director of their AR and real estate acquisitions. I’m excited to bring him on because we’re going to talk about money. Frank, thank you for coming on.
Nathan, thank you for having me. I’m excited to be here. It’s a big honor.
Thank you for taking the time. If you don't mind sharing with the audience, what got you to six locations and where you're at? You've had a long history. If you don't mind sharing a professional snapshot of what got you to where you are at?
My wife and I started the PT business. She is not a physical therapist, but she was helping out with the business side of things. It was her and I. I graduated from Hahnemann University in 1999 and want to take on the world, treat everybody and get everybody better. I thought that's what was going to happen. I got out into the field and started treating people and enjoyed it. I started to understand a little bit more of the business aspect of things. Quite frankly, I never thought this was something that I'd be even possibly talking about, but my wife somehow someway convinced me, "You could do it yourself. I think that you'd be great at it." Lo and behold, as with most things, she was correct. We opened our first clinic in April of 2003 with the grand total of zero patients on the schedule for the first week. Thankfully through perseverance, hard work and support from my wife, family, friends and our communities, we started to evolve. We started with one clinic at that time and opened our last clinic in April of 2019.
We're very excited about that. That was our sixth clinic. We're seeing upwards of about 650 patients a week which we're very happy about. We'd like to say 650 satisfied and successful clients. We continue to look for ways to evolve and grow. We have a ten-year vision and mission of twenty clinics with hopeful of 2,000 patient visits per week and roughly 130 to 150 new patients per week, which is pretty amazing because we sit around a number of 130 to 150 new patients a month. Thinking of those numbers seems so unfathomable, but with time and with growth. I love to know what things would be looking like in ten years from now when I’m able to have a conversation with myself and see where we're at. We're anxious, excited and hopeful that we can meet those expectations.
I'm sure you will, just the fact that you have those goals, you've put that out there in the universe. I'm sure you're heading in the right direction because you've worked yourself to a point, I'm assuming where you're the leader of that ship. You're looking ahead at that goal and people have followed in line with you and you've got the right people in place to do that. You've established a great foundation if you have six clinics.
I would be the first guy to say this. Back in the day when it was my wife, I and somebody helping us getting started, a PT technician or a PT aid, my goal was to see as many patients as I possibly can and attend to twelve-hour span on a daily basis. I thought that meetings were foolish. I thought it was a waste of time and that there was nothing productive that came out of meetings because you're not seeing patients and not being profitable. Little did I know that fast forward to the present day, I do more meetings. Each of those meetings has such significance and consequence to make sure that you have proper systems in place, proper structure. The best and most appropriate people for each position doing what they do in what they're good at and ways to oversee those and have the proper metrics to track those things. Most importantly, I believe we're developing a brand and a culture with what we're doing, which is what excites me and makes me love getting up every day and come to work.
That gets exciting when you get to that point. I'm sure you've recognized that you are the leader, you are the CEO, you have the vision and you're also the executive in terms of managing metrics and establishing systems and policies. In those meetings that you're having with people, you're also a coach. You're there to essentially serve your team members and you're coaching them and training them on what you've learned along the way.
I like to believe that I'm coaching them, but I learned a long time ago from somebody much smarter than me is that you don't have to be the smartest person in the room. If you surround yourself with smart people, that is definitely going to carry a lot of weight and carry over. I believe in many instances, I have a lot of the answers that people are looking for or that we are looking for. I've also learned that now going from two people in a business, being my wife and I to 25 plus, that the most important thing you can have is a voice from every one of your team members and let them know that their voice is heard. It's important that everything that they have to say could mean the difference between making a positive versus a catastrophic decision and I think that it's of critical significance. I learned a long time ago that twenty heads are better than one for sure.
It's so nice when you have a team that has strengths that complement to you. People can do things better than you do and sometimes they've got more energy than you do towards certain goals. It's nice when you can have that complement of teammates.
I'm a big fan of the SWOT analysis. When you find someone's strengths, we all want to feed off that strength and enhance our weaknesses with someone else's strengths. When we're strong, share that opportunity for them to improve and for them to strengthen whatever weak points they have as well.
You are the AR guy, the real estate acquisitions guy of Next Level Physical Therapy and you wouldn't get to the point of six locations and managing that well if you didn't have a solid foundation of financial understanding. That's what we want to get into a little bit more and your thoughts on how to establish and achieve the financial goals that you have as a PT owner. We have these altruistic ideas that we want to become the premier physical therapy clinics in our location. We want to serve the community, but that doesn't happen unless we are able to profit, if we're not able to be sustainable financially. Talk to me a little bit about your thoughts regarding that, how to establish and achieve financial goals.
You hit one of the keywords, Nathan, right off the bat is profit. In Next Level PT, when we are talking with other owners or private practice owners, many times people will be saying, "I made $1 million. I made $2 million. I made $500,000 but I still don't have a lot of money. I don't know where it all goes.” How many times have you heard that? I'm making a lot of money but I'm spending a lot of money. We all know that it outlines everything. Profit is the key term the way I look at it. In particular net profit, but profitability and a percentage of profitability that you have in your clinic is what is the key. You can make $1 million in a year, but if you spend $900,000, you're 10% profitable. However, if you can make $1 million and you made $200,000, you're a 20% profitable company. That obviously not only helps you, it helps your staff with those people that you might be relying on bonuses and extra payments.
It helps you with expansion purposes and grow that helps you buy equipment that might be necessary. For a guy like me who loves real estate as a passion and as a secondary thing to what I do with my physical therapy. Physical therapy has afforded me the opportunity to also get significantly involved in real estate acquisitions, both from a commercial and a residential standpoint. As a secondary means of not only income but as investments and building equity. For me, it's like a future retirement thing.
To go back a little bit, we talked about profits. What are you saying based on your experience or maybe what do you hear within the PT industry that is either a minimum level of net profit that we should expect out of our PT clinics or maybe if you have an idea of the industry average, what do you know about that?
From research and from talking with a lot of the other cofounders with Next Level PT and interviewing a lot of physical therapy practices and about their profits. It seems like the numbers are magic numbers that you're hearing is that, "If you could be 10% to 15% profitable, you're doing okay. You're doing pretty well." You could be 15%, 20% profitable. You're probably in the top 20% to 10%. If you could be in above 20%, 25% or more in terms of profitability, you're probably in the 3% to 1% for profitability in terms of overall looking at physical therapy as a whole.
I think we're on the same page because I'm assuming that the average net profits are somewhere around the 15% range, maybe a little bit less. If you're doing anything less than 10% net profits, that's tough to justify being an owner of a company that has less than 10% net profit margin. Those guys that are doing over 20% are killing it. A lot of that can depend on location and the reimbursement rates that you're getting in your clinics. That sounds about right.
Nathan, you hit some key components in there as well. A lot of that can be contingent upon the certain metrics that you look at, whether it's reimbursement, whether it's the caseload that you carry. There might be somebody with 50% Medicare versus somebody who has 50% worker's compensation. Where we're at, the worker's compensation is a much higher payer for what we see comparatively speaking to some other insurances. We'll have the insurance companies that might reimburse you only at $60 a pop or $55 a pop, but then you have some of the higher reimbursing ones depending on your charges, which is a hugely key component that we educate our staff on and talk about regularly is proper billing and charging. I don't know how you feel about this, Nathan, but notoriously as physical therapists, we undercharge and underbid, “We're afraid to charge that." Why? You did the service. What are you afraid of? You documented, you have proof, there's nothing to argue about there. Those things and having those metrics in place can set the foundation and tracking those metrics to make sure that you're being as profitable and maximizing your revenues as best as you possibly can. It’s a key.
I want to get to those exact metrics that you recommend that people follow. PTs in general, I like to call us compassionate billers. There's so much fear in our industry already. We fear that we're going to overbill or we want to be generous or we think somehow we will be looked upon more favorably if we don't charge everything that we did. I don't understand it. If it's unethical to overbill, I think it's also unethical to under bill because we should be getting paid for what we provided. It's up to us to document and justify it. You know it and I rail on it a lot. Nonetheless, what are some of those key financial metrics that you might recommend every PT on or be following?Make sure you have proper systems in place and the most appropriate people for each position doing what they do and what they're good at. Click To Tweet
There's a couple of that. For each person, it might be a little different. For me and for a lot of the founders in Next Level, we clearly look at patient visits as a big one. You could look at that, but if you're getting $60 a patient visit versus the $80 a patient visit, there's a huge difference. The next thing is charges per visit is what we touched upon. How much are you charging per visit? More importantly, based on those charges that you're doing per visit, how many of them through the EMR that we like to utilize? There's a direct versus indirect units. Being direct is getting better reimbursement. That might be your therapeutic exercise, your neuro reeducation, your therapeutic activity and your manual codes. It’s much more handsomely than an ultrasound or a cold pack. That's a key component that you want to look for. In addition to that, we look at our initial evals. Is that an important one to track? How many units are being charged on an initial eval? Nathan, why do you think that's super important?
Because you can charge on top of that initial eval and you should be if you're doing any work outside of the assessment itself.
You're absolutely right. What does the eval do for every visit they're to follow? It sets the foundation. If somebody is coming in, why do 90% of people come to physical therapy or more?
They're in pain.
If you're coming in and I'm having this range of motion, this manual muscle test and these special tests and you're like, "You're hurting me," and then I do nothing and you leave after that, there's a great likelihood that person might not come back. They’ll think we're masochists and we're not really there to help them. It's critically important to get the proper treatment and charge capture on that first visit to set the tone in the foundation for what people are doing there. That's a key component. Schedule efficiency and clinical efficiency. These are a couple of other ones that you want to definitely look at. You should know in your practice how many times per week your patients are being scheduled. We like to look at a 2.3 average across the board. That means if you have 100 patients on a plan of care, you should be at about 230 visits for the week at 2.3. Sometimes people look at these numbers and all of a sudden they're like, "I only have 165 visits scheduled." That means your schedule efficiency is at 1.65. "No, we know our patients two to three times a week." I understand what you're telling your patients, but your front desk or someone else is not doing that or the patients are not adhering to that.
That’s a big issue because right there, I made some adjustments to how I was billing. We discussed about how we under bill a lot of times. Also, I'm sure you're familiar with redundant coding. If you charge a Medicare patient, for example, three therapeutics exercises over 45 minutes span, the second and third units are going to be reduced in terms of the amount of reimbursement compared to the first. If those units could be more wisely utilized or built accordingly for a therapeutic activity or a neuro reeducation task, you are automatically generating $4 to $5 to $10 to $15 more on that session for those little tweaks and changes, which I think is immensely important.
It's huge if you consider maybe if an average reimbursement per visit was $100. For some people, that's pie in the sky. If the average reimbursement was $100 and you were able to increase your per visit charge by $10, it's $10, but then at the end of the year, that's a 10% increase.
To the readers, I would assume that anyone of us would take a 10% raise as quickly as possible. I think that's tremendously important.
To comment on some of your other key performance indicators that you're addressing, knowing that reimbursement per visit is huge simply because some of those contracts are $50 per visit, $60 per visit especially as these third party administrators come on board. We need to know exactly where we are at on the reimbursement per visit side so that we can appropriately say yes and no to some of these contracts. It's in our nature to simply take all comers but we don't necessarily look at how that affects us financially.
I couldn't agree more. We typically do not participate with tertiary insurance parties. We have had numerous ones in our area giving examples. For workers' compensation, there are several that will pay $90 to $100 on the eval and some will pay $70 and some will pay $85 on the subsequent visits. For some people reading this, they might be like, "That's great." They might only make, and I say only because that's maybe designated for their area, $65 to $70 a visit. They might say, "That's crazy not to take that." When you consider not doing that and they can still be referred to you, we can easily make on some of those insurance carriers $125 to $150. That's night and day differences in terms of that reimbursement. That's a huge key component. Knowing another metric is knowing your percentage of patient caseload. For people out there who may take a medical assistant space plans, maybe traditional Blue Cross versus Medicare versus workers’ comp and automobile insurance. If you ever practice that 70% of workers’ comp like in my case versus a practice, same case that's 70% medical assistance, you're talking $65 a visit versus possibly $130. You doubled your reimbursement times 70%. I'm sure you can see the difference that can tremendously make.
Knowing that payer mix can be huge because number one, knowing what it is and then number two, knowing if that's what you actually want to see can really affect at that point of marketing strategies. We need to steer away from some of the more medical assisted plans, whether that's Medicare and the workers' compensation field more. You can start establishing some goals and some metrics to see that payer mix change and get some of those higher payers coming into your clinic.
One of my colleagues, we often say when we have discussions is no metrics, no conversation. If you can give me the metrics on what your patient population is or you give me the old, "It might be about 30% to 55% Blue Cross. My units per visitor are between 3.7 and 4.6.” I could say 4.5 to 4.6, but anything more than that, we really need to get down and dirty knowing the metrics, knowing your numbers. Statistically, you could make a proper educated decision financially on what's in your best interest on the decisions to make. Let's face it, this is how people can expand clinics, how they can grow things. For people like myself who have six clinics, it's important to diversify how each clinic separately is doing. The Next Level PT, we do a clinical analysis form for each of the clinics to see how profitable they're being, what type of volume they're seeing, when is it ready for growth? When do we need to let somebody go? You can tell when a clinic is growing or static, you can tell when it's hemorrhaging and knowing those numbers is of immense importance.
You have a separate QuickBooks account for each clinic and you're also tracking metrics separately per clinic?
The metrics I do on my own. One of my best friends at my clinic is my accountant who does the QuickBooks for me. Your accountant could be your friend or your foe and I mean that wholeheartedly. It's like anything else. If you added a therapist that was doing 80 visits a week and just crushing it every day and yet another therapist is doing 40 visits or 45, you'd be like, "What's going on here?" Somebody who's clearly subpar and maybe not doing what they could do. It’s the same thing with your accountant. Your accountant is one of the utmost importance on your financial team to help you and educate you in making proper decisions about the health and viability of your business. For me, my accountant keeps track of my QuickBooks and then shares that with me whenever I want. We make it a point that we meet every month without question or sooner if I want to go over the various details of how things are going. In between those, every week I have metrics that I'm tracking and looking at through my in-house billing and looking at from those perspectives, many of the metrics that we talked about to see that we are on point of doing the things that we should do.The most important thing you can have is a voice from every one of your team members and letting them know that their voice is heard. Click To Tweet
I recognized in my experience and I love that you're meeting with your CPA monthly and I recommend the same thing to everybody. I noticed a difference in my financials once I did that. My CPA would simply check in once in a while, maybe once a quarter, every six months or something like that. Finally, I told him, "I need to meet with you monthly. I need you to show me what a profit and loss statement looks like and what it says and how to read it myself without talking to you. I also need to know what a balance sheet looks like." It's when I started gaining control over that information that I had a little bit more power and I saw a difference. I started seeing a change in my company because I was looking at financials on a regular basis.
Looking at your cashflow statement, your balance sheet, your profit and loss, those three, if you're reading this and you are unfamiliar with those terms, you want to definitely be reviewing those on a minimum quarterly, preferably more frequent than that. These are things I recover with my account on a monthly basis to make sure of the health and validity of our business that it is sustainable. That we are growing and we're not going backward in addition to what we do on a weekly basis to track these things.
You have to do this with six separate clinics, but if you had one clinic, you need to know your breakeven number. It’s like, “How much money do I need to make in order to make a profit?” Do some reverse mathematics to figure out how many visits that is. If you don't know that number and you're in a cashflow crunch, you're in a hard time so you need to know your numbers and what it takes to get to that profit margin that you want.
Everybody always likes a good story and my story was years ago, we decided to go into the electronic instead of paper. We are glad we did that. I'm very happy with what we're doing with that. When we made that transition and switched up the billing companies that we were utilizing for that to do the interlink between our EMR and then the billing that goes out. There was an issue with that transition, and believe it or not, my practice was 38%, almost Medicare based and for over 4 to 4.5 months, we had zero reimbursements for Medicare.
Imagine operating your business at 62%. Nothing changes except your revenue. The good thing is I knew I was going to get that money. The bad thing is I had to wait four and a half months. That's why we talk a lot about in our own business as well as Next Level. At a minimum, you want to try to strive for a minimum of two, hopefully, three times cash reserves of what your monthly expenses are to cover something like that. In other instances, most people would probably potentially go under or try to find other means to support them to get through that.
You can't do that unless you're free like you are to look at the metrics and look ahead. I could say that having gone through a couple of EMRs that if you're going to switch EMRs, you give some sage advice in that. You want to have a nice cash reserve set aside because it's not smooth sailing no matter what the EMR companies tell you. There are going to be some hiccups. How long did it take for things to really clear up for you guys? Is it about six months or more?
It was about this time years ago when we did the switch. It went all of October, all of November, all of December, all of January into the first two weeks of February when we finally started getting reimbursed. Thankfully we were getting larger lump sums coming back that was catching us in arrears and getting us caught up. Thank God that we did have 3.5-ish to 4 months’ worth of reserves to carry us through that. I was ready to crack open my piggy bank when it got to that point after so long.
It’s good information to share. Yours is a real-life example. Switching EMRs is not an easy thing and it can take a lot of toll on the clinicians. It can be a big toll on your cashflow if you're not properly prepared for it like you're about and try to smooth things out as much as possible on the front end. You’ve got to expect about a six-month time frame.
Three might be adequate, but I think you nailed it, six months is probably safe.
I love talking about the statistics that you brought up, especially the charges per visit and the average patient visits per week. The number of time a patient comes in per week on average. It goes back to number one, if you can improve those stats, it improves your financials. Also, if you improve the average number of visits a patient comes in per week, your results are going to be better because your patients are going to get better. We don't typically measure that and it's not easy for a lot of our EMRs to track that. I don't know about you but I think most people I have come up against, have to do it manually and that's okay.
The other key component that I failed to mention too, that goes right along with the patient visits and a frequency is the length of stay is tremendous. You may look at it and some people might say, "I have a length of stay of nine, so I get people better in nine visits.” That's fantastic. Some of those people though that aren't fully better, even though they met their goals, can you reestablish goals? Can you reestablish new expectations for that person to push them further? It's like a professional athlete. They throw 95 miles an hour pitch, they want to throw 98. Can you get them to that three miles an hour? For some people, three miles an hour, three extra visits on somebody who sees 1,000 new patients a year at ten visits, you'd take that and you go, a length of stay of thirteen, you can't imagine what that small. Do you know how they talk about the power of compounding interest? The power of compounding length of stay for patients is absolutely tremendous. I'm not sure what the literature that you've seen, but historically what I've seen on average of people who have some of the best outcomes and best results come somewhere between seventeen and eighteen or more sessions for physical therapy depending on the diagnosis or the specifics.
The industry average is around eleven, maybe twelve per new patient. I don't know what you've seen, but that's what I saw a number of years ago. We were thought we were doing pretty good with thirteen, but I can see where patients will maybe stop coming if simply their pain has improved. I don't have so much pain anymore. As physical therapists, we know there's more to it than that. There are these people who are going to regress and revert back to where they were before if we don't increase range of motion and strength and that can take a few more visits. That's not only a benefit to them, but it's also a benefit to you, your reputation and your service to the community. It improves your bottom line because many times your expenses are staying the same. If you can tick up and appropriately charge what you should be charging per visit. If you're getting them to come in the number of the frequency that they're supposed to come in, that all hits the bottom line and increases your net profit margin.
If you can ethically, morally and consciously be able to give the patient what they need and perhaps we can extra half a unit out and a visit or two more out of necessity to make that patient reach those goals or exceed those goals that originally established and obtain new goals. Not only is it number one, advantageous and beneficial to the patient because you're going above and beyond exceeding that patient's needs or original expectations, which who wouldn't love that. Secondly, for your bottom line, it has a tremendous impact on that.
Not to divert the conversation too much, there's constantly a conversation about whether you should own your space versus lease your space and the benefits of both. Give us a little bit of that as we're getting to the end of our show.Twenty heads are better than one. Click To Tweet
I love physical therapy. It's a passion for sure. I have come to love real estate as much probably at this point in time in my life as like with many things. I'm sure you have physical therapy, the people who mentored you for that and possibly steered you into this field. It’s the same thing with real estate. I had some people locally and meeting a lot of different people who deal with real estate and some names that people would really recognize and some that would never recognize. It steered me towards the value and benefit of real estate. I have a lot of owners ask me, including founders in NLPT, as well as other owners that we have in the group the benefits, the pros and cons to owning versus leasing. Some are very obvious. If you lease, you'd turn the lights on when you come in and you shut the lights off when you go home. If the toilet is leaking, if the lights burn out, if there's some leak, if something’s not working, an electrical outlet, you call the landlord and say, "Get down here and fix these things. They're not working," which is fine and he has to fix those. Depending on the lease and the setup you have, which is very key. I have many owners that will connect with me questions about their lease, about their rental set up and about the terms of the lease.
I'm not a lawyer and I tell them that, but I've seen enough leases and I've gotten enough leases working with my financial and real estate team to know maybe some of the key components to look for. As opposed to owning, for me, it's been a Godsend with owning. I own four out of the six clinics that I have. Probably there will be one more. That'll be a fifth by 2020, five out of six. I'm always looking to do that. Owner operator, for me, has been advantageous in all of the commercial real estates that I do have because I also have some residential. I am an owner-operator, but I also have tenants. The ultimate goal with being a landlord for myself as well as for other people is trying to develop ways and strategies to utilize real estate to help out in my physical therapy business and vice versa. I look at real estate as a long-term investment. Some people can get someplace and flip it. You heard a flipping, they’ll flip it and make a quick $5,000, $10,000, $100,000, you never know. For me, I look at it as long-term investments and the advantages for me of owning exceed definitely the advantages of leasing.
I think you can see because you're developing this portfolio of real estate that you're setting yourself well for retirement and the passive income that comes with owning the real estate after you're done with physical therapy and it sets you up to be in a position of wealth. You can have equity in something, you can have that passive income and you also get certain tax advantages that you don't get if you're leasing.
That's most people's least favorite word, tax. For me, I'm not too crazy about it either, but the tax advantages with real estate, like in leasing, you can also write off the lease payments. I'm sure that's something that you discuss with your accountants. For me, it's imperative to have an accountant, to have a financial advisor, to have a wealth expert and to have a lawyer familiar with real estate type of stuff or business lawyer, for your physical therapy practice. Those components are super key to have on your team, especially if you're involved with real estate or even physical therapy in general.
You need to have people that you can count on to know every aspect of the financial and legal world because you don't have that knowledge.
Absolutely not. I'm a physical therapist. I'm not a real estate guy per se but I'm learning the tricks. I'm learning the trades. I've owned real estate for about eight years and I've learned about something called cost segregation. Have you ever heard that term before?
Yes, I've heard it but I couldn't define it for you.
You know how with some properties you have depreciation and amortization. Let's say you have a $390,000 building, you could take that and depreciate that over 39 years traditionally, which would be $10,000 a year. There's something called cost segregation where you can pay this company. I deal with the one in particular out of Florida, but you pay this company and they do a cost segregation study on your property. What they do is they can expedite or speed up the way you can depreciate some of that property. They amateurize it into 5, 7, 15 and 39-year properties. Even though you look at a building, the whole building might be 39 years appreciable, but certain components of that can actually be depreciated much quicker. That's a great way for people that are looking for advantages on tax savings and ways to decrease potential your tax burden through real estate cost segregation. It has been a lifesaver for us utilizing that component of real estate to help. Just that one single advantage has been tremendous.
If you didn't have that input from a professional, you could lose out on tens if not hundreds of thousands of dollars in tax savings.
That takes us back to my accountant that I discussed with cost segregation for tax savings. My original guy said, "We don't get involved with that. We don't do that." That's like saying to your patient, "We're a back pain clinic. We don't do much of rotator cuffs, even though I was trained in school to do that." It doesn't mean you can't help me with it, you're choosing not to. That was one of the reasons that I decided to make a switch and go with a different accountant that was better able to suit my needs and suit my wants of what I was looking to do. For me, it was clearly a blessing in disguise in making that transition. I can't reiterate the importance enough of that financial team and your biller, depending on who's on your billing team for physical therapists is an extreme key component to that. The biller that I have here, I wouldn't trade her for $10 million for sure.
Once I found that right biller in our company, that was a saving grace and it was the rock of our company. Everything else could fall to crap, but we knew that our biller was going to be awesome and we loved her. Katie was amazing and she still is amazing. Having the right biller is huge.
That goes back to some of the key metrics that we're talking about as well is that's the right person. They have the key things in place that they see certain things that are coming through. They don't put the charts in because that's their job. They see the changes that are happening. They are someone who's going to reach out to insurance companies every six months or once a year and be like, "Is there a possibility we could renegotiate and possibly up our reimbursement $1 or $0.50?” That goes a long way with hundreds and thousands of visits.
The thing I loved about Katie is, we met with her so often, at least by the month, but she was providing us reports weekly. She would give us red flags as to what might be happening at the front desk. "We're noticing that a lot of these things aren't getting authorized or we're noticing that we're getting incorrect information on the insurance verifications and whatnot." They can give you a heads up if you have the proper communication channels in place about what's going on the backend of your clinic.
That's why meetings with all the different departments, we like to look at things from an organizational chart or organizational board perspective. If that works from the top down, but when you look at an org board it branches out like branches on a tree. Everything has to be connected to that trunk concentrically so that everyone knows that everyone is on the same page. If one person might be missing something, we have some other way to check and balance that off to cover that and make sure that we're covering all of our bases.When we're strong, share that opportunity for others to improve and for them to strengthen whatever weak points they have as well. Click To Tweet
Frank, can I ask you what EMR you guys are using?
You guys have been pretty happy?
I have been, yes. I don't know if you recall this one from way back when, but we use PTOS.
I never used that one.
Physical Therapy Operating System and that was something that we utilize way back when. It served us very well, but that got absorbed and WebPT was one of the ones that came to the front of the line for us and we looked into several different options. For us and for our staff, it was a nice learning curve and a good transition for us that worked out well. It makes the billing process pretty streamlined, which is great.
It's good to know what you're using because we talked about a lot of key metrics that you have to track and follow. You want your EMR to provide as much of that as possible without having to do the manual labor. You've been relatively happy then with the reports they provide.
We do utilize as well as a form. We've created several forms internally in Next Level PT that we utilize almost pretty much daily or weekly and monthly. To WebPT, I love utilizing their analytics that I can pop up and see metrically where we stand with some of these statistics to be certain that we're doing all the right things that we should be. How we can be strong and where we're strong, how we can improve?
Are you able to get off of WebPT the frequency of patient visits per week or is that something you have to track manually?
We have an active patient tracker that we utilize for that. That is one of the products of Next Level PT that one of the other founders Chuck Schulte had worked on. That is something that all of us are utilizing. It's like a godsend because you can track how many times a week they're scheduled? How many times a week they should be scheduled? How many times they actually came in? We all know that there's a lot of variation in that.
That's my challenge to all the EMR companies out there is that should be a key component of the metrics that they provide. Maybe they need to talk to Schulte and you guys might have a play to get bought out there. Frank, anything else you want to share with us here?
Nathan, I want to thank you for having me here and sharing some information. I hope that if anything, whether somebody could take one thing out of this or ten and someone finds it advantageous. If anyone needs to get ahold of me, they can feel free to reach out to me anytime at CawleyPTFrank@Gmail.com, or feel free to check out my website CawleyPT.net. You can reach us through Next Level PT on Facebook or you can reach me at Frank.Cawley@NLPTBaseCamp.com.
If anyone out there hasn't been on their Facebook group page, I highly recommend that. You guys have some great information to share at the Next Level PT BaseCamp.
Thank you, Nathan. We have a great team. There are nine founders. All of us have our strengths and all of us have our weaknesses, but that's the beauty part of that. Where I might be sitting here by myself trying to figure out a solution to something, I send out a text message to eight other guys at least probably two to three are like, "I do that. I got you. Here you go," which is great.
It's the beauty and it's the evidence of the power of networking.
There is no doubt.
Frank, I appreciate your time. Thank you for coming on.
Nathan, thank you so much for having me. You have a great thing going on. I love your show.
Thank you, Frank.
Frank Cawley was born and raised in Pittston, PA just 2 hours north of Philly and 2 hrs south of NYC! Fun fact...In the 1970’s Pittston PA was home to the 3rd leading Mafia city in the country! Frank is the youngest of 3 children (Katie and Colleen) older sisters. Frank’s dad was in law enforcement his entire career and his mom was an administrative assistant. Frank and his sisters were the 1st generations of Cawley’s to go to college. (Thx mom and dad for guiding us and never letting us settle for average or mediocrity)!
Frank was denied entry into PT school his 1st two times he applied. On his third go-round, he got waitlisted and was accepted 2 days prior to classes starting and was informed there were no more dorm rooms left so he would need to find a place to live over the next 48hrs!
Frank opened his PT clinic (only through the support and guidance of his wife of 16+ years Courtney). The day we opened (April 3, 2003) we had a grand total of Zero Zip Nada 0 patients on the books! Fast forward to 2018, we currently have 6 locations seeing over 600+ visits per week and are working on opening more offices (and a gym by 10/2019)!
In this episode, host Nathan Shield talks about the people within your company with the CEO of Pure Physical Therapy and Founder of Next Level Physical Therapy, Frank Garza, PT. Frank started seeing growth in his PT clinic once he started weeding out the "bad apples" in his organization and focused on hiring and firing those people who weren't in alignment. How did he do it? He, along with his wife, established the purpose and values of the company and hired and fired accordingly. Now, the people on his team are rowing in the same direction and growth has accelerated. Plus, the energy in his clinic is fresh and exciting, and the culture is drastically changed. Want to establish a culture like Frank? Set the standards, establish purpose and values, and get your team on the same page. Your growth and an exciting culture will immediately follow!
I have Frank Garza out of Texas, a successful physical therapy owner who recognized that once he had established his purpose and values, he was able to weed out those employees that weren't on the team and we're limiting him. By removing those people, he has been able to achieve significant growth. Based on the book, Tribal Leadership, Frank recognized that there were certain stages of people and certain stages of a team that contribute to your success. As you weed out those people that are in stages one and two, and as you move your team into stages four and five, that's when you make significant growth. That's when you make significant progress and start to achieve the purpose that you set out to achieve. This is great that we can have a personal experience establishing the purpose and vision, hiring accordingly, getting the right people on the team, and then seeing the success that comes from it.
I've got Frank Garza, a physical therapist out of McAllen, Texas. He is the CEO of Pure Physical Therapy and Pilates and also a Founder of Next Level Physical Therapy mastermind and consulting group. I've interviewed a number of original founders and members of Next Level Physical Therapy. Frank is on to talk about an important topic. Thanks for being with us, Frank. I appreciate it.
Thank you for having me, Nathan. I appreciate it as an NLPT being able to come aboard and talk about all the stuff that us private practice owners wish we knew when we were starting.
Tell us a little bit about you. Where did you start? Tell us about your physical therapy path and especially your ownership and entrepreneurship path and what's led to where you are.
I graduated and I played sports. I think like most physical therapists, they get into it because they got hurt and got exposed to the field and connected with their physical therapy team at the time. That's how I got intrigued about it. I ended up graduating and I coached and taught for a little bit. I liked that, but I knew that I wanted to be my own boss. I knew that I wanted to do something that I could control and that I could lead. In football, that's the position that I held. I liked it and embraced it. Going into physical therapy, I knew that I could have my own business. That's why I got into it too. I went through it and got out. I worked for a private practice clinic for a year. Right after that, I felt I knew enough to go out on my own and do things on my own and get my feet wet. I say sometimes that I rushed it and I say that might have been a mistake, but at the same time it probably could have been the best thing I did because people were there trying to help.
There was a time when there was a lot of work. Private home health companies were picking up PT companies to do their home health visits on the side and paying them a good rate. That's how we got started. We said, “This is an opportunity to go on our own and do something that we can fill our schedules and get other people to work under us.” We did that model for two to three years and then it went south bad. Luckily, we had already planned to do our outpatient clinic and that's how our outpatient clinic got started.
You started doing home health first before you went into it.
We started doing home health first. The reason for that was the people that we were working for said, "There's enough work out there. We'll help you get started.” You build your company name, you get a contract, you start bidding home health agencies for work. There was so much work that you could fill your schedule fairly quickly. It's also something easy to manage. You didn't have all the red tape about credentialing and audits and all that stuff with paperwork because they controlled everything. You were just a contract payer. It was a good way to get that taste of freedom, flexibility and ownership of your own business. At the same time, it was one of those models that you were chasing the profits all the time. You weren't making that much money and you were seeing a lot of patients, you had people that were underneath you seeing a lot of patients and you have to pay them. If they didn't pay you on time, then you couldn't pay them on time. We started learning that it wasn't a great model to grow, to scale and to make the money that we wanted to make. We started saying, "Our ultimate dream was to have an outpatient clinic." We had enough capital to invest in that.
It’s a good thing we did because the home health went south shortly after that. There were a lot of people getting busted for fraud. That model went to hell. We've entered into outpatient and we did what we did and we got started with what we knew. The experience of running the home health, but it was a totally different monster. There were so much things that we had to do before we even saw our first client, our billing and all this other stuff. It was an adventure, to say the least. We knew right away that we needed to hire people to help us. We hired staff. We chugged along for a year, two and three. Have you ever been on a roller coaster ride and sometimes the whole cart shakes on one of the stable tracks? That's how the first three years felt like.You almost have to fail at everything HR before you understand it. Click To Tweet
Not everybody was a good fit for your team, I'm sure.
That's exactly what I was going to get to. We started realizing quickly that who we hired was like, "It's not going to work out. Who are we going to hire? We don't have anybody to hire." I think our mentality at the time was, “We need people to work for us. Let's pick up whoever is available.”
“If they're breathing and can follow some instructions, then bring them on.”
If it was somebody that somebody referred, that helped. That's even better. There were people that we knew in the home health field and they were like, "I have a cousin, a friend that was looking for a job." We quickly assemble the staff. We also quickly found out that we were in for some trouble if we didn't fix it because it wasn't the ideal staff. We didn't know what the ideal staff was. We learned a lot.
In my situation, I was like, "I don't necessarily have any job descriptions written out, but I'm going to put you in this position. I expect you to do what you're supposed to do." I was so naive to think that I could put him in a position and expect immediate productivity, an immediate buy-in. I found out later on that it was probably good to hire people who have bought into your vision, who share the same values. They're aligned. Maybe it's even better if I actually develop a job description and tell them what productivity looks like and how I'm going to measure them. It all comes over time, but you wish you would learn that sooner rather than later because things change when you start hiring based on that model.
I learned a ton. I learned that if we had concentrated on that department itself early on, on the human resource department for sure, that maybe we have not struggled as much as we did because it was a struggle. I look at my position and I'm learning that it's still a continuous work in progress. There's never HR and building your culture and your team like that. That doesn't stop because it's always evolving, things happen within your team and you’ve got to replace them. There are some things you can't control, but it's a work in progress. I also learned that you almost have to fail at everything HR before you understand it. We're not taught any of this in school. We don't know where to grab all these concepts, stuff and resources early on. It sometimes takes you telling the story of failure to another friend and they're like, "You had to do this and you’ve got to read this. You should go take this class." You learn a lot from failure, but who doesn't? One of the other things that I learned is that you cannot swipe someone else's HR material and expect for you to understand it and then much less for your staff to understand it. It doesn’t happen.
You think that there's a one-size-fits-all HR employee handbook. That's not true. Much of your culture and so much of you is simply how you do things. That's what I consider culture to be. This is the way we do things around blankety-blank physical therapy. That eventually develops your culture and it goes even back to your HR material. This is how we treat patients. This is how we expect you to show up to work. This is how we handle disciplinary actions. All that stuff needs to be broken down and individualized for your own clinic.
The number one thing that I learned early on is that we did not have that company culture that we wanted for the first three years and we have to fix it quick. It started with us, which is exactly what you were saying. We have to make a transformation mentally of what we wanted to instill in our company, what the vision was, what the mission was, how were we going to do it and make sure that everybody understood that, everybody was clear on that message. That was the number one thing that I think if people are out there wondering, "How do I do that? How do I avoid making the same mistakes?" Travis already did a show about this. It starts with us and our vision and our mission. It’s making sure that our staff clearly understands that and making sure that everything they do is working towards that common team goal that you're trying to accomplish. It's something that we realize we didn't have early and we started to change it quick.
It's probably you and your wife that came up with the vision and the mission. Maybe you created values between yourselves and your team. When you finally implemented that after three years, was that rough to implement it and get everybody's buy-in? Did you end up getting rid of a lot of people after establishing and planting the flag like “This is who we are?” Was it an easy transition for you or was that something that got smoothly brought into your company?
The transition is never easy when you're trying to get rid of bad culture and create a totally new culture. For us, we identified that we had people already in our organization that we're not going to work out based on the meeting that we had about our mission and vision, all that stuff about what kind of individuals we wanted, what kind of characteristics they needed to have per each individual position? That's key too because you want them in the right position. All of that starts with us. We need to identify the vision and mission and how you are going to do it? It’s on your core values. If you know that you're hiring for the front desk, you're going to go look for certain characteristics for that front desk. That's your expectation. You got to give them an expectation for every position. I looked back and I said, "What did I do in some of my coaching career with my team to get buy-in and culture? What did other coaches do with me when I was playing?” There was one coach that brought out a binder like it’s the beginning of the football season and everything that we were going to live by that season was in that binder.
Our hyped-up a chant before the game is spelled out, everything is written. That was his way of instilling that culture. It was a new coach coming in. He was changing everything. Even before school started, we were reading stuff through that binder and getting to know what his philosophy was, how we were going to do things, and how he expected us to do things. If we didn't abide by-in or if we're doing something different, then there was a consequence to it. The same thing applies to your business. You got to set that standard as a CEO and as a leader. You make sure that they follow it.
That's the important thing to note. A lot of times when you set the mission, vision and values in midstream that you've been practicing for a few years, you decide, "Let's establish a foundation and get down to some fundamentals and talk about vision, mission, and values." Inevitably there are going to be some people who don't like the implementation of that structure and that don't have buy-in. You're more than likely going to lose some people. You have to understand that up front and you've got to be okay with that because the people that you lose are the people that haven't bought into your clinic. Once you shed yourself from those people and you can attest to this, Frank, you will then experience some accelerated growth. Especially as you start replacing those people with people who actually do buy-in to your mission, vision and values. As long as you're establishing that over and over again, you don't stop talking about the mission, vision and values after the initial introduction. Once you plug it in and then start hiring according to those, then you start getting some people who buy-in and the growth then accelerates.
It’s happened to us on two different occasions. One of the things to educate our audience on is how do I identify the bad ones and the good ones? What are some characteristics of some bad culture in your company? I was brought onto this book called Tribal Leadership. It goes through five different cultural stages. After reading that, I started evaluating my staff and listening and observing their body language. You'll find out right away who's on board and who's not. I'll go through those cultural stages to help people identify them for those that are wondering what are they and how do I identify them. Stage one is characteristics and qualities. This is the type of mindset that creates street gangs. We don't want any of this in our company. Their thing is that life sucks. They're despairingly hostile, they band together to get ahead in a violent world. The great example is The Shawshank Redemption. We don't want to hire stage ones, but sometimes you'll get people in your meetings that have that bad body language and in everything you say they’re like, "No, yeah, whatever." There's always something negative to everything you say. There's always a problem to every solution.
Stage two is a little bit different. Instead of, “Life sucks,” they're a little bit more personal, “My life sucks.” They're a little bit more passively antagonistic. They may not say something verbally, but in a meeting, they'll go cross their hands in judgment and not be totally bought in but not be totally against you either. They never get interested enough to spark any passion. These are the ones that sometimes you come in from a mastermind or conference, you've got all these ideas to share with the group and they're like, "I’m not interested." They're not too excited. By the same token, if you say a funny joke to them, the laughter is a sarcastic resigned thing. They’re the whatever type. The talk is that they've seen it all before and watched it all fail.
A person at this stage two will often try to protect his or her people from the intrusion of management. The mood here is that their life sucks. It’s a cluster of apathetic victims is how they characterize that. Stage one and twos are exactly what you don't want to have. If you're looking and coming into meetings and you're seeing these types of behaviors, you want to know that they're not the ones that you want and then they start changing a little bit. They start getting a little bit more positive. Stage three, the theme is, "I am great and you're not.” Knowledge is power so people hoard it. They're the people at this stage they have to win and winning is personal. They're your big competitor people. They will outwork and outthink their competition on an individual basis. The results from this as a collection of lone warriors. These are your hardworking individuals, but not so much team players. They're often seeking help and support, continually disappointed that others don't have their ambition or skills.
If somebody is not trying as hard as they are, they’ll be disappointed. Their complaint is that they do not have enough time or competent support. They’re like, “I’ve got to do this by myself.” It's a bunch of self-described star players. You can't have too many star players. They can't play together as a team. That's basically the theme there. You’ve got your stage four and five. These are the ones that you want all the time. Instead of going from, "I'm great," the stage four theme is "We're great." This is where I think most of your positive company culture is, your great, thriving, growing companies. When they have great culture, they have a great team. They have a lot of stage four characteristics and qualities because it's all about team. Everyone is excited about seeing each other at work. They take the tribe away from the person's sense of self. These are the people that if they take the team away, they feel like, "Where am I?" They feel lost because they feel the team is their second family. At this stage, the culture is effortless. Nobody's trying too hard. Everybody's doing what they’ve got to do and working for each other as opposed to for themselves.
The only one that has influence is the tribal leader. Here in stage four, whoever's at the very top is the only one that actually has influence over this culture because other than that, there are no lone warriors. Everybody's working together as a team. You have your last one, which is, "Life is great." The language revolves around infinite potential and how the group is going to make history. They want to make a global impact. This is where they make an example of Apple where they say that the innovators from Apple and Steve Jobs were at stage five because they did things that made a global impact and they wanted to make life great. The mood is an innocent wonderment. A very small percentage of companies have this type of characteristic. Most have stage four, but you definitely don't want the ones and twos. That's important to understand, to identify what you have.
That's great because you can put this assessment up against each individual within your team very easily. I think it's easy by what you laid out to say, "Who are my stage one players? Who are my stage two players? Who are my stage threes?" What have you learned? Can any of these people change from two to three or three to four? Do you simply hire slowly or fire fast? Do you simply get rid of them?The transition is never easy when you're trying to get rid of bad culture and create a totally new culture. Click To Tweet
The ones and twos, there's no change there. The threes can get into fours and that's definitely what you want.
Just cut your losses.
Especially if you have a big organization and you have this person in a position where they have a lot of people under them. If they're a stage one and two, imagine what they're telling all those people under them. Imagine the mindset and the stuff that they're feeding them. That's what those people think of everybody else on top. That's not necessarily true.
When you have those people in your company, they can be a real poison. It's almost like if they're allowed to linger long enough, everyone that they touch in their immediate circle becomes poisonous as well. We've had that experience before in one of our clinics where one person in particular was poisoned and unfortunately, they were the leader. After that person left, it took at least a year before we got everybody out who they had an influence on before that clinic started turning around. Looking back on it, my partner and I both believe that we should have closed down the clinic, fired everybody that had a connection to that poisonous leader and started from scratch and got some new people. It can be that devastating and that pervasive when that one person has that much influence.
I'll tell you a personal story of my own too. Sometimes you think it was so bad and then you’ve got a new staff and it got better. You're meeting some goals that you'd never met before and you're like, "This is great." It plateaued for me. I was like, "What's going on?" We've got a new hire. This new hire, it was the first time we have put them through a rigorous hiring process and had this funnel built out and had all these triggers that they had to do before they even came into an interview. I was like, "This guy has got it." We hired him and sure enough, he came in and in six months outworked everybody in the front desk so much that we redid all our internal processes at the front desk. That's when I knew, I was like, "We may have another problem." That wasn't his job. He was going to come in and do reception. He ended up coming in with all these things and changes and made things better. The problem was those other two people that were there before him didn't I go through that interview process that you went through. We didn't weed out as much as we thought early on.
Since then, we've hired another one and we ended up tweaking his process more to make it more specific and refined to make sure that we got another person just like him. The other two people are not there anymore and the other two that we hired are now all cross-trained the way he did everything at the front desk. When we brought them on board, we made the onboarding process and the interview process very detailed to everything that he had created and changed up there with my direction. Even when you think you've got it, you probably have to do another thing. That's what happened to me. We went through and we hit some numbers that we had never hit the first time around. We plateaued and we weren't hitting our goals that had after that. He came on and totally changed it. We brought these two other girls on.
As soon as the new staff came on board without the old staff here, because there was a little bit of overlap, they have put in their two weeks. There were several part-timers in training. The very first week when all the old staff was gone and it was just a new staff with the person that we trained up there, we hit our 200 visits a week goal that we haven't hit in a while. It always happens for the better, but I feel it only happens for the better if you put in that work, your blood, your sweat and your tears into making it better. We refined our process, we identified the leaks, we identify leaks again. We tweaked and refined the process and we got a better product out of it. You got to keep tweaking and refine. That's the main thing.
That's the perfect example of the theorem that the people that got you here are not the same people that will get you there. Some people will be good at getting you to a certain point. What's cool about this also is it exemplifies how you were so intentional about the person that you want to hire. In your own words, it was a rigorous process. For someone at the front desk, if you can breathe and say hello, usually that's good enough for us to sit at the front desk, but you took it a step further. What do we exactly want out of this person? How are they going to be the most productive and how are they going to be the face of my clinic? Immediately, as soon as you did that and got rid of the other people, your numbers grew again. That’s a great example.
Our main focus was we want to create overwhelm for these candidates. That's what I told the guy, Bruce, he helps some of my marketing and all my funnels and stuff. I said, "I want to create overwhelm." He goes, "What do you mean by that?" I said, "I want you to give them everything and all descriptions and tasks that they will be having to handle." Even if they only have to do it once, even if it's not their main task. I said, "I want them to feel overwhelmed." I was like, "Why?" It's because if somebody can come in knowing that they're a little overwhelmed and stick the interview, then they're going to be good because there's a lot of overwhelm at the front desk. Wouldn't you agree? He’s like, “Yes.” That’s what our mentality was when we did that.
Congratulations that you experienced that because that front desk is such an important part. Correct me if I'm wrong, are you paying these newer guys a little bit more than you were previously?
They're still in the probationary period. It’s equal to what it was for the others but going forward, they're both doing verifications. I already prepped them and have their one-month meeting and say, "This is where I want to be able to get you at, but I want to make sure that you're completely independent with all of these things." They're not quite there yet, but they're helping so much more than the other two were as far as what they're going above and beyond doing.
That's awesome because you're incentivizing them and you're telling them, "If you're going to make more, this is how you're going to do it." That's always awesome that you can incentivize them. There was also a change in the quality of the candidate once we decided to increase our per hour rate that we were willing to pay that front desk person. If we were stuck in the $8 to $10 an hour range, we’ve got $8 to $10 an hour type of people. Once we bumped that up to closer to $12 or $15, then we got $12 to $15 an hour people. I'm not saying that you need to share your numbers, but I'm leaving that as an example that sometimes you should be paying a little bit more for someone who is super productive at the front desk because that person drives so much of the success of your clinic.
I had a conversation with my wife about this. We were going to try to increase base pay across the board for techs and front office going forward, but with these expectations, our next tech coming in is not going to start there. He's going, "You're going to start here and you could get to here once you get to a year-and-a-half experience and you're doing this." Our techs had been with us for about a year and a half, two years. They’re in a little bit more responsibility. One of them is responsible for the cleanliness of all the gym and the other one is responsible for all the equipment. We have to order stuff. He knows my online account where we go order. He just gets it approved. They're a big part of what we do here and they're making more, but if somebody that comes in and starts to do tech work, they’re not going to start there. They're going to have the expectation of, "If you can do this like Alex is doing at some point, this is where you could be.” I do bonus them. Everybody got a bonus. We do a little a profit share at the end of the quarter. Even though their base rate is a little lower, when they get incentivized and bonus, it turns out to good hourly grade. I do feel you on that trying to get those candidates.
We're talking about front desk and tax, but this is correlated with physical therapists and PTAs as well, even the clinic directors. They can have such an influence on your team if they're in stage one and stage twos. You want to have more of the stage fours, people that are bought into the culture. We're talking about your hiring process. Are there other things that you do to cultivate that culture and move those people into stage four types of employees where they're bought into the team and it's all about effortless culture or the things you do to maintain that?
I've been working on that a lot. That's something that we've been changing around here because before, we were tied up with life. We're trying to get their business to where it needed to be. Get the kids in the home life to where it needed to be. It wasn't at the top of my focus at the time, nor did I know it needed to be. I started seeing all the positive effects of that. I read a line by Peter Drucker somewhere in his book, he said, "Culture eats strategy for breakfast. It never stops. It's a 24/7 thing." I said that to my wife and I said, "I'm going to take on this hat and know that I'm going to be coming up with some ideas to hang out as a team. We're going to be celebrating any and all little wins, things that nobody else is looking at." We’re trying to create our identity. That's what I told her. As a team, we’ve been hanging out a lot.
Every quarter, we set some goals and when we hit them, we celebrate them. When we celebrate, we go out. I rented a house on the beach and everybody came out and I barbecued all day. They went to the beach and we're in the pool and hung out and had a place to stay and drink. We’re hanging out with each other. We try to create an atmosphere of family and trust just like you do at home. It's hard because it’s like, “They're not your real kids, Frank.” I was like, "I know they're not my real kids, but if we take care of them, it's going to turn around two folds, ten folds for you as a company.” It takes a lot of work.
You're talking about regarding culture, we've talked it about a number of times on the show. When your team members treat their work team as if they were family, that's next-level stuff. You get so excited when they'd not only bought into the company culture, they've bought into each other and they wanted to see each other succeed. They're trying to help and they're trying to promote each other and help each other out. That's the stuff that you hope for as a business owner. In order to cultivate that, it takes celebrating wins, creating goals together. I think quarterly meetings are a huge success. You can push a lot of great cultural values and unity in those cultural events if you're intentional about it and if you plan those out properly. It can gain a lot of traction. It's nice to not only implement the mission, vision and values, but then follow that up with intentional culture-building activities that show the mission, vision and values. We talk about it during those times. That's when you start seeing a culture change.
We try to do that, even when we get together casually, we'll play little games, “Who can recite all our core values the fastest?” We throw stuff out there and always relate stuff to the clinic, even joke about some things that happened in the clinic and create that atmosphere. At the end of the day, we're CEOs and that means we have to lead. We want to lead them to do great things. I used to be a coach too. We can lead them to be good, but when they overachieve and we lead them to overachieve, that makes us feel great. They want to make you feel great. They want you to be proud of them. They don't want you to pat them on the shoulder and say, "Great job." In some cases, you may not know this or they may not tell everybody, but they may have a hard life at home and work is their happy place. It says a lot about how you do that. You can lead by a lot of ways. You can lead by service. You can lead by love. I like to motivate my team. Every Monday, we do a Monday update and we do a little motivational Monday video clip. I'm big into motivating.Knowledge is power so people hoard it. Click To Tweet
The other thing I've learned that I think helps them respect you and learn a little bit about you as a boss is to not be afraid to feel embarrassed in front of them for something you did. Being in a business where I own it with my wife, I have some experiences sometimes since we work together and we live together. Sometimes you're at work and I may say something that maybe I don't realize that other people are in front and it's rude. When I realize that, I immediately will stop, apologize and make it public like, "I messed up." The faces and the looks that I get from them sometimes it's cool because they're like, "He's normal." They're not afraid of me because they know I'm just human as they are and we all make mistakes. The example is man up about your mistake and make it right or make sure that you expect them to do the same when they messed up. You're going to move on. It's okay.
Show a little bit of humility. Show them that it's okay, that we can make mistakes and we can overcome them and next time I'm going to do better.
At the end of the day, I tell my kids, “As long as you give it 110%, that's all that matters. Give it your all.”
Is there anything else you want to share, Frank?
This is one thing that I read and I thought I want to share with my staff. I read this and I'm going to share it with them at the next meeting. It says, "If your presence doesn't make an impact, your absence won't make a difference." That goes for all of us. As a CEO, you want to make an impact on your business. You have to come in here full of positive energy, leading your team, motivating your team, loving your team, setting the mission, the vision. Make sure everybody's clear on it so that everybody can focus and go forward. As an employee, you need to do your job and make an impact in your post. When you're not there, it's not going to make a difference.
How do you want to make an impact?
When you're not there, they're going to be like, "Where's Frank?” because you made an impact.
As a leader, you want to be able to say, “I made this impact.” As a leader, especially in a physical therapy clinic, personally I didn't want my impact to be that I saw 60 patients that week. That's not the impact you want as a leader. The impact that you want as leaders is, “I've affected these people's lives whether it's patients and or employees. This is how I lead and this is how I've created a culture that inspires people.” That provides much more power than it does simply treating patients all day.
It's who you are, what are you there to do and how you're going to do it?
Frank, thanks for taking the time. I appreciate you sharing your wisdom. If people wanted to reach out to you and ask you questions, what's your contact information?
I'm going to give you two ways that you can opt in for any information. It's a text message. You can text MM to 844-444-1481. If people want to get onto our app and get some of the free stuff that we have on there for mastermind stuff, they can text app APP to the same number.
That's for the Next Level PT mastermind and coaching that you are doing?
It's always awesome talking about culture. I get excited about what we can do to filter out people who aren't bought in and find those people who are bought in because the sailing is so much smoother when you got those people in the right seats in the bus.
We're still tweaking and refining because that's the process we have for the front desk, but we still got to create one for the clinic and for PT and everything else. It's a work in progress.
Thanks for your time, Frank. I appreciate it.
No problem, Nathan. Thank you.
Dr. Frank Garza has been a physical therapist since 2006. After working as an employee for one year in private practice, he decided to venture into an independent private practice setting, with his wife, where he is now the CEO.
In doing so they began to see patients in their own home for about 2 to 3 years before expanding into their current outpatient physical therapy facility, Pure PT & Pilates (PPTP), which he owns and operates along with his wife, Dr. Amy Garza.
Together, they have been managing and running the practice for seven years, soon to be eight. Frank is also a founder of Next Level Physical Therapy (NLPT), a consulting group that helps other physical therapy CEOs create the time, choice and financial freedom they deserve.
In the last 2-3 years, he has been really focused on developing and refining his practice’s Human Resources Department. Frank is currently a resident of Mcallen, Texas, a small city located in South Texas, with his twins, Frankie and Tessa, as well as his beautiful wife Amy!
Transitioning from one profession to another takes a lot of courage, preparation, and experience. Kevin Kostka, DPT, PES is a great example of someone who has excelled in the different aspects of professional growth and successfully transitioning to the next phase - from a high-achieving student (four college degrees) to specialized physical therapist (co-wrote a book) to successful PT owner (five clinics and counting). Each transition requires learning new skills, but becoming a successful business owner can be especially difficult for PTs since they typically have no prior business training. Therefore, as Kevin shows, it's imperative to invest time, money, and energy into developing a business owner's mindset, learning what tools are necessary to be successful, and what actions are most. Like many of us, Kevin also learned a little bit through the school of hard knocks, but hopefully you won't have to if you intentionally transition into your ownership role.
I'm excited to bring on Kevin Kostka out of Chattanooga, Tennessee. Kevin is the owner of multiple clinics out in Tennessee, but I'm excited to bring him on because he's an example of someone who maximizes his potential in the different arenas of his professional career. What I mean by that is here's a guy who's gone to college and attained four university degrees, maximized his initial foray into physical therapy’s clinician to the point where he co-wrote a book and did a few studies. When it came to starting his own practice, here's something that was new to him. Like the rest of us, he spent years studying and then went to physical therapy school and spent all his time and money on physical therapy and becoming a clinician. Now he's up against something where he didn't have any education, nor any background as a business owner.
Unbeknownst to him, he used the formula that is he reached out, he stepped out and he networked. He got some coach in consulting. He got out of practicing every day so he could work on his business and he networked with other physical therapists and business owners. His story, although not unique, is impressive because he spent a lot of effort and energy to teach himself while also following the formula. It's our responsibility as business owners to teach ourselves, to invest in ourselves. To spend the time, money and energy that it takes to actually become the leaders of our companies. I'm excited to bring Kevin to you as a great example of what to do in order to become effective executives. Let's get into the interview.
I’ve got Dr. Kevin Kostka out of Chattanooga, Tennessee. He is the owner of Summit Physical Therapy and the VPO of Next Level Physical Therapy. I'm excited to bring him on. He's a partner with Travis Robbins who I had on in Next Level Physical Therapy. I'm excited to bring him on because I think we got an important topic. First of all, thanks for coming on, Kevin. I appreciate it.
Thank you for taking the time to talk to me. Hopefully, we can help some other private practice owners out there.
I know it's going to be great. I'm sure you've got a ton of great information to share. Knowing your story and knowing how successful you are at this time, do you mind backtracking and sharing a little bit about where you started, where you came from on a professional path?
It was probably back in high school when I decided that I wanted to be a physical therapist. I always thought I wanted to own my own physical therapy company. As I was going through my high school career, I was going to different orthopedic clinics. I was going to hospital-based clinics, neuro clinics, these clinics trying to find if that was actually something that I wanted to do. Of course in high school, you got a lot of people out there that try to tell you that it's too hard to get into physical therapy school and that's something that you can’t do.When you have read leadership books and the mindset, everything snowballs to success. Click To Tweet
That pushed me even more to want to pursue physical therapy. I honed in and along my journey in college, I was able to get four degrees along that way. I was able to get a lot of my college credits in high school. I was good enough that my high school allowed me to get quite a few credits. I did one year on a scholarship and then the very next year I got to apply for PT school and they let twenty of us in out of 400 or 500 people. I began that particular journey going through PT school. We moved to Knoxville, Tennessee, which is northeastern Tennessee. My wife had a harder time finding a job than I did. That's where her family's from. We moved up there and I had a great learning opportunity. I worked with an orthopedic clinic up there. I got to work alongside fellowship trained MDs.
One of them actually took me under his wing and he was a shoulder and elbow specialist. That was something that I was interested in because nobody was interested in the shoulder at that point in the game. I was like, “I'll take those patients.” He took me in and I'd wait after work for them and we'd work out together, we'd chat and then developed a relationship from there. Since I was inside that type of environment, he would ask me to come over and he'd show me what particular X-rays looked like. He taught me to read radiographs, showed me some MRs and taught me to read MRs. We started getting closer and closer.
We wrote a book together and then started writing a couple of papers together. I was a new grad, but still one of the highest producers there. I went to the director at that time. I was like, “I'm killing it here.” This was back in the early 2000s. I made peanuts as an undergrad. I was like, “I feel like I'm producing the most here. I’ve got a lot of value. I feel like I'm doing some good things with the doctors here.” I’m looking for a raise and trying to present it. Of course you're young, you're naive and you think you know it all. He was like, “It's like you're going to have to start your own practice to make money like you're talking about.” I'm like, “I’m going to turn him a four-week notice.” I turned in my four-week notice then came back to Chattanooga.
Can I go back a little bit simply because I think there might be a little bit of a question there? One of the things I tell people to do is to network. You took advantage of a relationship there with a physician and that was beyond your typical marketing approach. Was there something specific that you did to create that relationship with a doctor that he would take you under his wing like that? What feedback or what insight could you give us maybe recommendations for physical therapists to develop those types of relationships with their local physicians?
I was eager to learn. I wanted to learn more than anything. When I would try to write notes to him on my progress notes or my evals, of course because he’s right across the hallway there. I'd walk the patients there and that was the benefit of working in a physician-owned clinic at the time. I tried to coach patients on what to say when they would go back to the doctor as well. I would always ask the doctor after work or if I did see him, I'd always ask him, “What did you think about Mrs. Jones? What'd you think about Sally? Is there anything else I can do differently?” That's how it came about. I was getting results with his patients, so I'd ask him about particular techniques and ask him about particular tests and how to do some special tests. From a professional standpoint, that's how it started. It was more about a personal relationship that I would build with them talking about his kids or ask him what it was that he liked and that he was interested in. That’s the direction that I would go with my conversations.
I think there's some carryover there, a couple of those aspects. Not everyone works in a physician-owned physical therapy clinic where they can have that easy access to a physician. However you hear about some physical therapists who take the time to go with their patients to the follow-up appointment or maybe take the time to ask the physician about a patient if it's not at the appointment or some other time. I shadowed physicians. I loved shadowing my orthopedic physicians especially to see how they do things. Their evals are so quick and easy because they have to be. I’m like, “I wish my evals were like that.” Take advantage of the opportunity to be curious. Simply ask questions, be a part of it. What can I do better? What can I do differently? What do you like? Make it not all about, “This is what we provide,” rather, “What can I do to help? What can I do to improve? What would you like to see?” Coming at it from a different perspective is something that we can learn from your experience.
You show that humility and you're selfless in that aspect. When you know that your purpose is to help people and you have a genuine interest in that and doing what you can to be able to improve yourself every day, then you'll take any approach. It came naturally to me. If I had an hour that somebody didn't show up, then I was walking next door and doing what you did, trying to shadow. I would block off the schedule for two or three hours if I could, “Do you mind if I come and shadow you during the clinic?” As crazy as it sounds, but a lot of orthopedic surgeons, they don't like the clinic. They like surgery. That's where I wanted to be too. They're in a good mood because they're in surgery. When I was there in surgery with him, he was like, “You need to go see this guy.” He would communicate back to, “This tissue wasn't that great. We need to go slow with them external rotation. Let's only take them 30 degrees,” or “Can you see on screen when I'm arranging this shoulder right here? It was only going to flexion to 90 degrees. Now you can see the stress that's going right here.” It was a great communication tool.
When I was in the clinic, he would pick up the phone, call me and say, “You're going to see Sally on Tuesday and this is what I want for the first two weeks until she sees me for that ten to fourteen-day follow up.” Having that open line of communication and that's what I brought back to Chattanooga. I found those orthopods that had similar interests that I did and try to develop those relationships based on those interests and getting into surgery with them, giving them my contact information and telling them what I had experienced in the past. Those are hopefully some takeaways.
You eventually opened up your own clinic and it was smooth sailing from then on out.
The silly thing that we did is in 2007 is when I quit. In 2007 when the housing bubble had burst, that's when I decided to open up my own practice. I didn't know. We have this perfect opportunity inside a fitness club. It's not like a gym or anything like that. It's a fitness club, a high-end facility and we're like, “We want to do this on the side of the space right here.” We went to the owner. At that point, the money that they wanted, it was well out of reach for us. I'm going to go to a bank in 2007 and ask for some money. They're like, “I'm not going to loan you any money.” Me and my business partner, we had to come up with a creative idea to start stacking some cash so that we could open a brick and mortar.
Our creative idea was to do house calls. I utilized the mindset when I was in Knoxville of getting to know the doctors and buddying up with them. I was lucky enough to come in contact with an orthopedic surgeon that had done a fellowship and a rotation and knew the doctor that I had worked with specifically. We became buddies and talked to each other since he worked with him in his clinic a little bit, shadowing them and I got to see a lot of his patients. It was like a concierge for other business owners or people that own other franchises. Those were the people that I got that didn't necessarily have time to go into a clinic. I actually would go to them.
I started from there. My business partner was in the home health line and so we started getting into assisted living facilities and offering our services there. We were delivering a good product, a better product and that was being delivered to those facilities at the time and getting good results and staying in constant communication with the MDs and the directors of nursing inside those facilities. Within a year, we had an LLC and we filed all the legal paperwork. We started in 2007, but legally it was 2008 under the Summit name and we got it protected somehow.
Now you're up to five clinics in the area.Talking about life and interests to physicians is a great way to build personal and professional relationships. Click To Tweet
As of September 2019, we have five orthopedic clinics. We're working on one more clinic that should be open on December 2019. We still have that home health product line that we're able to offer. We still offer house calls for certain people that can't make it into the clinic.
You've made the transition. You were well-regarded as a physical therapist. I'm sure you were awesome. You transitioned over into becoming a real business owner. I'm sure it was a gradual transition. You take on patients full-time, you're running the business on the weekends and at nights and that kind of stuff. What helped you make that switch? We'll go into a little bit more about what it takes to become effective as a leader, but what did you do to make that transition from a full-time physical therapist to the owner, leader and manager a smoother transition?
As we started to grow in 2007, 2008, we're starting to hire more people. Our head is down and we're treating patients, we're trying to figure out payroll. We're trying to figure out getting people's time off covered. We're trying to figure out all kinds of things. All the arrows are coming right at us. As all those arrows are pointing at us, you're getting overwhelmed. You're out here working seven days a week. You're working from 6:00 in the morning until 8:00 or 9:00 at night and it becomes very overwhelming. It was hard to cope with that.
We decided to hire a practice manager. We're like, “That's our answer.” We can go in, we can treat all these people, we'll have somebody else doing it. Of course, we didn't know what we were doing. We thought this person knew what they were doing. We kept our head down. “How are things going?” “Things are going great. We're doing awesome.” We didn't keep statistics at the time. We didn't know. They don't teach you that stuff in PT. You treat one person an hour and you do this and it’s going to be great. You're going to change healthcare. It didn't work that way. The only thing that we could figure out is we had to start keeping numbers. We had to start keeping metrics to figure out exactly what was going on. That practice manager didn't necessarily work out. We figured out that we had to start pulling out of practice to be able to start working on the business instead of inside the business.
I think a lot of people in your situation, you think you bring on a practice manager and you're thinking that you're delegating, but what you're doing is abdicating any responsibility. There's the fallacy that, “I'll give it to this person and they'll manage it as I would.” What needs to happen is they need to come underneath you to run the practice. You need to manage them now even more closely because they don't care about it as much as you do, honestly. It's tough because we have to go through hard times like that. I’ve talked to other practice owners that go through one, two, or three practice managers before they finally figured out, “My job is to oversee the practice manager, actually, not for them to run the clinic. I'm still the owner.” You never get rid of that responsibility.
Dan and myself, we figured that out very slowly as money was leaking left and right and we weren't collecting and so that was that person's responsibility, but we didn't have any systems in place. We started pulling out slowly and our responsibilities were to get better organized, to create systems, to create policies and to create procedures as we started to grow because we were delivering a product and a lot of people liked the product. They were getting better and they were happy. They wanted to refer to friends and family and they wanted to come back and see us again. As our visit started to climb, we were hiring more people, but we didn't have those processes in place. We were leaking money and leaking things everywhere. We created those policies and those systems. We created those procedures and then we started to better organize our business. As we started to organize it into different divisions and different departments, the arrows started to go away from us as opposed to all the arrows coming at us.
Were there certain tools or resources that you used, whether it was certain books that you followed or consultants or coaches that you used to help you along the way?
We definitely hired consultants. We read a lot. For about a year and a half we studied and had coaches and consultants try to help us from a business standpoint. The next year and a half, we started studying marketing because that's something else you don't learn in school, in the physical therapy world at least. To me, I think those are two key aspects that you have to have a good grip on before you start your own practice.
Were there any books that stood out to you that started changing your mindset or giving you some direction?
I probably read 50 books and I try to read as much as I can. Can I say that there's one? No. You start with a Dale Carnegie or something like that and you start reading How to Win Friends & Influence People. That one will snowball into another book and then that one will snowball into something else. You go from this personal development world and then you go into this next little stage of, “There are some business books out there. Now there are these mindset books. Now that you've got all this mindset, you've got these leadership books.” It all continues to snowball. I would hate to leave one book out and not be able to tell the context behind why I started that. When somebody starts reading that book from there and they're like, “What? That doesn't make any sense. How does that apply to me?”
It's obvious what you did. You're a smart guy and not unlike other physical therapists who are a high achiever. We haven't spent the time and money on our business education. We spent plenty of time and money on becoming a great physical therapist, but comparatively we have no business knowledge whatsoever. It's imperative that we take the time and spend the money and invest in our business education. That's what my business partner and I considered. Some of the learning that we had ended up costing us tens of thousands, maybe hundreds of thousands of dollars if you look at it over the years. Because we lost money, those were hard lessons to learn and that's not the way you should get an education about business.
When you invest in a coach, when you spend the time to study the books, when you get consultants, you name it, that's part of my mantra. Reach out, step out, network, step out of treating full-time, invest in your business education. Reach out to someone to get some help and guide you along the way because you need that education to become a business owner. I'm excited to talk to you a little bit about this because not only you become a business owner, but you have to become an executive. You have to know what you're doing. Correct me if I'm wrong, but I'm getting a sense that maybe it's hard for physical therapists to transition over to becoming an executive into that administrative role because maybe they don't know what that even looks like. We've been physical therapists for so many years. What am I going to do with my day? How am I going to be “productive” if I'm not seeing patients all day?
That was a mindset shift that I had to go through because I felt like I had to be inside the clinic to be able to help people. What I realized and what other people helped me realize is that I can only see so many people in a day. If I'm able to implement, get better organized and start to implement these procedures, then I can actually help more people. Because now I can have therapist A and therapist B inside the clinic. I can only see ten, fifteen people a day, whatever it may be. If I'm able to set up good systems and be able to deliver good products, now I can have two therapists in there that can see ten to fifteen people a day. Now I’ve helped more and then I can open up another, duplicate that same facility here and duplicate it over on another side of town and then duplicate it on another side of town. You have to have those systems in place to be able to do that. That's the mind shift that you have to go through. It's a team. You had to start to develop that culture and you have to have that leadership to be able to do that.You have to start to develop the culture and have the leadership to be able to have a system that works. Click To Tweet
What are the first couple of steps you recommend for someone who is pulling out of treating full-time? Honestly, they say, “I finally have a full day, or maybe I have two half days. I’ve got two five-hour segments where I can do some executive work, some admin work.” What would you recommend to them to be most effective at that time?
This is something I helped Travis Robbins do. As you start to gradiently work yourself out, start with two hours, work to get to four hours. As you start to do that, a lot of the owners at that time are like, “Now what do I do?” They start twiddling their thumbs. It's about becoming better organized. Start trying to create these different divisions within your organization. What happens when that patient first walks in the door? Create a system based on that so you can take that system and do it at clinic B and do that at clinic C. What we tried to do is hone in on that. My business partner, as we started to create these divisions, he actually took the first three divisions, the next three divisions that we came up with. I started handling the operations, quality control, continuing education and external marketing. He took over the finance, the personnel and the statistics piece of it. He handled that. I handled the other piece and then we started honing in on the different pieces of that particular division.
It reminds me, I had Jerry Durham on. I like what you said about starting with where the patient comes in the door. Maybe going through the patient life cycle, it would be easy to start if someone's considering, “What do I do?” It's funny because if you were like me when I first had those initial hours, I would start catching up on my notes or paying bills. I could pay bills and track down new contracts for different vendors all day long. It's a waste of time and it's not getting you where you need to go. What Jerry Durham explained so well is going through the patient life cycle. What are they seeing, what are they doing, what are they hearing as soon as they walk in the door, or even before that? I should back up, what did the initial phone call sound like? Write it all out.
Now you're starting to develop a culture and the culture is how we do things at the clinic. As you start, you want your patients to be treated a certain way. You want them to see certain things. You want them to hear certain things. Starting from the first phone call when they're saying, “Do you take my insurance?” Is your front desk person saying, “We’re not sure,” and they hang up the phone? You don't want that. Let's start developing a script and how that looks through the plan of care. After the fact, what does the billing and collections look like? How are you going to reengage them three or six months after discharge? That goes into marketing.
I think the benefit behind looking at the different divisions like you're talking about is the patient goes through those different divisions. They're going to come across the personnel. For lack of a better term, they're going to become a statistic, but they're going to get care. They're going to be marketed to after the fact and it becomes a full circle. There's a benefit to sitting down to break down the different divisions that are responsible for different parts of the company running well and see what does the patient get to see at each point? How are we going to put them through that cycle to make it a successful encounter with each patient?
There are two things that I want to dovetail off of that. When you said you would do your finances or you'd catch up on notes, it dovetails back to one of the books that I read a long time ago, The One Thing. You get them back to the one thing and what's the one thing that I can do right now that's going to make the rest of my day that much easier? It brings you back to that mindset. You create your checklist and you go through that checklist. “I got that one thing done. I needed to create this system for when I need to create the verbiage for what we do when we answer the telephone. I want to create this whole cycle that starts here.” It goes to this point and this is the algorithm that it goes through. If she answers yes, if she answers no, this is how it goes. My ultimate goal is to get them on the schedule. You’ve got to take it to get those arrows pointing away from you and part of the executive or part of the director, part of the VP, whatever level you're at. It's all about implementing that particular system. It’s making sure that person then becomes accountable and responsible.
They know what that end product, it's to get that patient on the schedule. You're exactly right, that's where the metric comes from. The metrics don't necessarily have to come from patient care. It can come from my office coordinator at the front desk, how many phone calls she's handled that day and how many people actually converted to patients based off of that. It’s making sure that they're accountable and responsible for that and they have a statistic to measure their final product there.
How long do you think it took you guys to do your initial setup, systems and processes? It takes some time. I want to say it was Paul Keller that wrote that or something like that. Anyways, it’s a great book. If you can knock out that one thing, the first part of your day, it doesn't matter what you do for the rest of the day. You've already been successful. Knock out the one thing as soon as possible. How long did it take you to feel like you had a decent system in place?
It took us two and a half, three years to go through all of this. For our organizing board, it probably took us about a year, a year and a half to create it, get it up on the wall, people look at it and be like, “What in the world are these guys doing?” I would even look at it during lunchtime and be like, “How in the world were you going to get this accomplished?” You take it day by day. You take it one day at a time, hour by hour, as we would do with patient care. I would never look at the end of the day. I would just look at it hour by hour and roll with the punches. I was going to be there until 5:00 or 6:00 anyway. When I look at the organizing board, I knew that as I would take it day by day and try to break it down as slow as I could and gradiently implement things so that people didn't think I was crazy. I do it as slow and as possible as I could so that people could get a good handle on what exactly it was.
It wasn't until we started having meetings where we separate everybody out. We had different meetings for the marketing team, for the rehab team, for our office coordinators and we had people above them so we can finally debug some of these systems that we created. Once you start debugging and then you start changing them, that's whenever the magic starts happening. People take ownership over them because they are their ideas, they're no longer my ideas. Our ideas don't fly too well. They have to be somebody else's ideas. It's all about the executive or the owner or whatever role you're playing within your organization. It's all about your ability to be able to communicate that to your juniors in a sense where they want to do it. You've promoted it enough to so that it makes sense to them and they can see the greater good of it. It's a win-win for everybody.
The thing I like about your story is you recognized the issue you had with the initial manager that you brought on, the practice manager. The first thing that came to mind is, “I need to know my statistics.” One part of what you need to do on a regular basis as an effective executive is to look at your statistics. Nothing should come as a surprise eventually as you start nailing this down. Start figuring out systems, processes, and procedures and writing them down. That's a lot of grind for me, especially creating content. I hate it, but that's where the rubber meets the road. The benefit can come when if by chance you have any rock star talent on your team, is to have them write down their processes and procedures.
That might be hard for them, but it’s telling them, “Just take fifteen minutes and give me an idea of how you answer the phone,” If they're good at converting patients onto the schedule book or, “You're good at getting behind the doctor's front desk and talking to the physicians. Can you write down what you do?” The onus isn't so much on you all the time, but you can take what they've got, massage it, manage it, and then once it's written down, then you can implement it into the next person. Because there's going to be staff turnover, you can implement that and train on the next person. You essentially start working your way out of a job.
I had a wife of a very busy PT call me and she's like, “I don't see my husband anymore. He's a great physical therapist, but he is busy all the time and we can't get on top of our business.” A lot of us as physical therapists take it for granted that we treat patients well. I think there's a lot of responsibility for us to write down what we do to be successful physical therapists and get patients to come back and get high retention, completed plan cares, lower cancellation rates and that stuff. A big onus is on us to write down what we're successful at as physical therapists so that we can turn that over to someone else and put the time into the executive stuff.Always try to improve yourself on a personal and professional level, reading and applying them to the situations you're in. Click To Tweet
I love hearing you duplicate all this stuff because that's exactly what we did. We would ask our office coordinator, “You do that well. Can you write down how you answered that phone and how you handle that objection? Can you write this down for our PTs?” We would do the same thing. It's constantly living and breathing your organization. It's constantly changing. As you know and a lot of the readers probably know as well, change is inevitable. You have to embrace it and make sure that you're okay with change. If something isn't working, then change it. That's where those statistics come in. All we're doing with those statistics is making sure that what we are doing is working or if it isn't working and we're going downtrend, then we need to make sure we change something up. It's all about communication and having that conversation about what everything looks like from the metrics because those are your answers.
I’ve got a ton of stuff going through my head, but I want to ask, did you have a lot of fallout as you started implementing the structure? Did you have a lot of kickback from the employees?
Of course, because we didn't know how to lead. We didn't know how to do any of that stuff initially. We started reading about culture and we started trying to develop a culture within our organization based off of values that we felt were important. Of course, we didn't come up with the values. We had the other people within our organization come up with the values. You can check out our website and check out our values. We have all the different definitions and different quotes behind what we feel like from a communication standpoint to a willingness standpoint, integrity, all that type of stuff. That's how you start to develop that culture. When you're in your grassroots company and you're homegrown within your city, then those values can start to seep out into the community and you can start doing community projects. That's when the team starts pulling together. When you close all five clinics down and you have 30 people show up to the soup kitchen and we’re all dispersed into different teams and are helping to make lunches for the homeless or trying to go in and fix up one of the rooms that they stay in. That's when the team starts coming together and it's all about letting the other people come up with it.
What I think you're a great example of as you started figuring out, “We need to become executives.” It’s statistics, systems and values. I'm sure a lot is going on behind the scenes. You're hiring the right people, you're running through some people who are resistant to structure and they’re like, “Don't tell me what to do.” You start gaining some traction to a point where now there's still some stuff that comes up, but I don't have to spend as much time pushing all the buttons anymore. Now I'm developing a leadership team that is bought into the culture and I can trust to do the work. You're still managing by statistics. You're still watching the stats on a weekly basis and people that have to be held accountable to them, but now you're pulling yourself up the organization board to the point where your growth is almost dependent upon the team. You guys have some leadership and you're going to have a vision. I didn't say anything about it, but everyone should have a vision. You have an ideal scene. Now, the team is pushing towards that. You're all rowing in the right direction. It's not surprising now to hear that you had your fifth clinic open. You've got another one open. Growth is inevitable at that point.
It's a matter of me and Dan getting out of the way. I think that the more we get in there and start tinkering and messing with stuff, the more things will start to slow down. Now that we have our executive team in place, we have our executive meetings every month, then those meetings trickle down and we have that culture. We have the executive team making a lot of those decisions on policy and changing the policy. We don't have to necessarily do a lot except for look for new opportunities that are out there through the networking, which you mentioned, through the network that you are doing at this point in the game. That's what happened to us.
Our Chamber of Commerce here voted us the small business of the year for a medium-sized business. That's when things started exploding, “Will you put a clinic beside me?” You get phone calls all the time. From an executive standpoint, we got to put systems in place to, “What does that new clinic look like?” We've got a checklist for that. What are we doing with the contractor? What are we doing with the PT equipment? We have checklists for all that. Where do we want to put it? When is a good time to do this? You’ve got to learn the hard way sometimes too and not grow too fast because then you get in trouble with available capital.
Now you're developing processes and procedures on a higher level. I'm sure you're looking at demographics. When you're looking to open up a clinic, you have a general idea how much cash and on hand to not only open the clinic but sustain you for a period of time and then it all becomes systematized. At that point, you really can't hold back the growth. It's impressive.
The only thing that's going to slow you down is money.
What has been your most successful action in developing leaders underneath you? I want to get your two cents. You didn't jump from all of a sudden starting to run your clinic a couple of days a week to all of a sudden not seeing patients five days a week. What were some specific tips that you provide people to grow their leadership team?
To me, it's a mindset. It's always trying to improve yourself on a personal level as well as on a professional level. Always trying to read and trying to apply what you are reading to the situations and the scenarios that you're in. Once you start getting these ideas, it's all about executing on these ideas. In order to be able to do that, it's about communication. You’ve got to figure out a good communication method to persuade and presuade the way that you word these ideas so that becomes their idea, more so than it is your idea. There are certain questions that we go through to try to figure and try to lead those people in that direction, facing the facts. If we don't do this now, then what will happen or what could happen? There's a whole process that we actually teach in our mastermind on how to do that from an executive standpoint to implement a new program or to implement a new policy.
I had Travis on and you guys are starting another mastermind group with Next Level Physical Therapy. I'm sure people can go to that website if they want to learn more about the mastermind like you're talking about and some of the principles that we discussed. Thanks for sharing. I appreciate it, Kevin. It was great to talk to you and hear about your story. Are there any words of advice, anything you want to share?
I'm a personal growth guy, so I'm always looking to try to do better than I did the day before. As physical therapists and as private practice owners, the best way that we can help other people is actually making other people in our organizations responsible and accountable for their particular position and working together as that team. Another quote from another great book, “If you can get everybody going in the right direction, then you're unstoppable.” Being great leaders and learning how to do that is something that I love to see our profession continue to evolve with.
You're a great example of someone who has taken the time and effort to develop as an executive. Maybe that wasn't your idea when you wanted to open up your own clinic back in the day, but you got to understand if you're going to own a clinic, you've got to put in the time, the education, and spend the money in your education to become a successful owner. When you do so, then you can become a greater influence in your community than as a solo practitioner.
You can't be a know-it-all. There are people that have been out there. Before we got on here, I was asking you questions and you're giving me ideas. It's all about helping one another so that you can continue to grow as a person and grow as a professional.
You're doing great work. I appreciate your time with me, Kevin. Thank you for coming on.
Kevin has an extensive educational background receiving four degrees from The University of Tennessee at Chattanooga. Foremost, he received a Bachelor’s Degree in Psychology in 2000 and Exercise Rehabilitative Science in 2001. He went on to assume his Master’s Degree in Physical Therapy in 2003 and achieved his Doctorate of Physical Therapy in 2004.
Kevin began his professional career working with the Knoxville Orthopaedic clinic, where he had the privilege to work beside fellowshipped trained medical doctors for whom he acquired valuable experience with differential diagnosis and diagnostic testing in a one on one environment with the fellowship-trained specialist.
Kevin achieved his Performance Enhancement Specialist (PES) Certification from the National Academy of Sports Medicine in 2006. He researched and assisted in the writing of a journal article with a fellowshipped trained shoulder and elbow specialist as well as a hand specialist for distal bicep tendon repairs from 2007-2008, while also working on his first publication with Edwin Spencer, MD, Post Operative Rehabilitation of Shoulder Pathologies. Kevin was a Member of the American Society of Shoulder and Elbow Therapists. He was on the board for the University of Tennessee Chattanooga Physical Therapy Department along with adjunct, associate professor and special guest lectures in the physical therapy department.
Kevin has been in private practice since the inception of Summit Physical Therapy in 2008 with his business partner Dan Dotson. They have grown their business in their hometown of Chattanooga and now partner with other local businesses to help promote local healing. Summit Physical Therapy was awarded the Small Business of the Year Award in 2015 for the category of 21-49 employees and voted on through the Chamber of Commerce Board Members. And has been voted into the Best of the Best for physical therapy in 2017 and 2018. Summit Physical Therapy currently has 5 outpatient clinics and home health product line.
Kevin is also a founding member of Next Level Physical Therapy where he helps other practice owners to improve their practices so they can help more people in their communities.
This is Steve Rapposelli. I'm a fellow PT owner and I have hijacked Nathan's show because we have turned the tables on Nathan. Nathan needs to have the tables turned on him, so he does not know what I'm about to ask him, but here's a little bit of background. Nathan was nice enough to interview me for his show. You may or may not have read it. That's not important, but as I was talking with Nathan and as he was interviewing me in a very inquisitive, friendly way, I found out that he would not be the guy to say that to you directly. I'm taking it on myself to be the interviewer and to ask Nathan a little bit about his story because quite frankly, it's fascinating. It is a story that you are going to want to hear as a fellow PT owner. This is why I think it's important.
If you're a PT owner like myself, whether you have one clinic or five clinics or 100 clinics, you probably have the same questions in your mind that he did and that I do and that is where are we going here with all of it? What is the next step for me as an owner? Nathan has already walked that path and the story that we're about to reveal is going to be one that you're going to find entertaining, learn a lot from and help you on your journey. You may likely take a different journey than Nathan's and that's okay. Nathan has his own path, but it will help guide us as a way of comparing and contrasting where you may need to be. Without further ado, I'd like to introduce Mr. Nathan Shields. Nathan, are you there?
Thanks for having me, Steve. I appreciate you having me come on my own show.
We are glad to have you on your own show and I want to get right down into the end of the nitty-gritty. I know that your story is searchable in the wonderful digital land of Google, but we need to have it lying in your own show archives because it's very interesting and it's very instructive to your audience. With that said, you're a guy who got his training Northern Arizona and upon graduating back in the late ‘90s, you opened up a practice in the Phoenix area. Tell me about the path that you took when you first opened your office in Phoenix.
I opened up my clinic in 2002 and that was in Chandler, Arizona. My whole goal was to get to two physical therapists, 150 visits a week and afford a TiVo. I thought if I could get two PTs, 150 visits a week and get a TiVo, then I know I've made it and that would be all. Lo and behold, I worked hard for a number of years and I opened up a satellite office in Florence. I got a friend to manage that for me. That ended up being my business partner, Will Humphreys. He managed that. He eventually bought that clinic from me. Together, we opened up another clinic in Maricopa, Arizona. We ran like that for a number of years. Each having our own success, we had his and our situation, but we shared common consultants. We knew that we needed help. We shared a similar networking group, a small business networking group. We found out, like most of us do that, “I don't know what I'm doing business-wise. I can treat patients all day long and they're happy, they get results, but I hate doing the business stuff.”
You said, “We needed help.” How did you know that you needed help?
If you read my interview with Will, he knew he needed help because he had a breakdown. He had a stack of charts that he was going home with every night. He was driving in the middle of the summer in Arizona at 115 degrees in a little truck that didn't have AC. He was sweating through his clothes. For me, I was the guy that was staying up all night doing charts. I had employees that were upset with me and upset with the company, who didn't know who to talk to. I was upset with them and frustrated that they weren't simply doing what they were supposed to do, even though I didn't tell them what they were supposed to do. There were a lot of frustrations and I knew there's got to be something better. I also knew that if I continued down this path of working 60 hours a week and then trying to run the business on top of that, there was going to be a burnout. I couldn't keep doing that. It was at that point that we figured we needed some help.
What help does a PT owner seek out when they reach that a-ha moment?
They can do a number of different things. You can start reading books. You can start googling and looking up webinars and YouTube channels of other PTs that have been successful. You can reach out to a podcast. Nowadays, there are many more resources available to us at our fingertips as PT owners than there was back then I believe. Even the APTA has provided some good materials through PPS to help someone get started in a clinic, but there are many more consultants. There are many more companies. The internet is much more available so you don't have to feel as alone as I did back then in the early 2000s, starting at the clinic. There are many more resources now.
My mantra is to reach out, step out and network. That's the common formula for success that I've found in not only in my experience, but also the people that I'm interviewing. You got to stop treating full-time. If you're going to be a business owner, you've got to put it on your business owner hat a couple of days a week and act as the leader of your company and that you own a business. Forget that you're a physical therapist almost anymore because more than a physical therapist or an owner, you've got to get some support, some outside perspective. You've got to network.Reach out, step out and network is a common formula for success. Click To Tweet
Did you seek out a PT-specific coach consultant?
We had a personal/business coach, someone who helped us at different times as a parenting coach. When I say us, that's Will and myself. We found this person who was providing parenting seminars because we were new parents as well. That'll add to the stress. She also did some business consulting because a lot of it's about relationships, whether it's parenting or interpersonal relationships with the husband and wife or relationships that you have with your employees. It's about relationships. She did some coaching with us, but then we also reached out to a PT-specific consulting group, Measurable Solutions at the time and got some help in that regard as well to help us organize and establish structure and systems in our company.
Are cutting-edge PT owners ever done seeking coaching/consulting?
If you're me personally, I don't believe so. Consider the professional athlete, they're at the top of their game yet they still have coaches. I listened to a podcast about The Trillion Dollar Coach or something like that, but Steve Jobs had a coach through most of his existence as the CEO of Apple. It’s the same thing with the guys at Google. They have coaches. They need another perspective. They need some insight. They need someone to hold them accountable if they're going off the rails and not heading towards their goals. I believe that everyone needs a coach.
In your opinion, one consistent behavior of success of the PT owners that you've interviewed and interacted with is ongoing and regular coaching to help them grow personally and professionally.
I believe so, yeah.
That's good to know. Here you are back in the early 2000s. You're running and gunning with Will, everything is going well. For those of us who are not in Arizona, I assume that those cities that you identified are in that whole Phoenix Megalopolis area. Tell me more of your mindset at that time. Were you like, “I got the two PTs, 150 visits a week and the TiVo. Now we have two other offices. Let's just rinse, wash and repeat.” Where did you evolve from there and why?
The ultimate decision is to get some consulting help. I don't know how to put my finger on it. We have another physical therapist on here with us, Sean Miller, who might've gotten through the same experience. My thinking at that time is, “We can't keep doing this.” When I think about what this is, it’s that I'm treating full time. I'm running my business. I don't have a lot of time with my kids. Maybe financially I'm doing all right, but I'm not able to enjoy it per se. I didn't feel like I had a lot of freedom. I felt like I was a slave to the company. The company didn't work for me, which is the ideal situation. I knew I needed help at that time. You and I both know, everyone knows who's reading this blog, we haven't had any business training, so I also didn't know what I didn't know. I knew I needed some outside help to do that. Did I answer your question?
That statement you made of, “I can't keep doing this,” resonates with a lot of your audience. That’s a very scary place to be because you're leaving a comfort zone of you treating people and making the donuts so to speak. To leave that to then work on your business is not an easy transition for most clinicians/owners.
I believe a lot of us are high-achieving people. If we've gotten through physical therapy school, that's a common trait for all of us and we are very comfortable in being good physical therapists. Looking at it, if you were to say, “You're not going to do any physical therapy and you own a clinic, what are you going to do?” Most physical therapists might not know what to do to lead their company. They might go over and pay some bills or they might go market some doctors, but what are they going to do to achieve their company goals? That might be hard for us to accept, to set aside the physical therapy hat and put on a business owner's hat, one that we haven't been trained in. It can be an uncomfortable transition.
Once you had reached that point, Nathan, were you ready, willing and able to make that transition? Did you still have to be dragged into it by an outside person?
There was definitely some trepidation because if you get down to some numbers, you're thinking, “If I'm not treating on the floor and I hire someone else to take my place, I'm losing money at that point. There's a decrease in profit margin because I'm taking on the extra salary.” I’m no longer “productive.” I can't equate my time, which is time with a patient, to an outcome of money. It's hard to go from that to, “Now I need to set up a marketing plan.” You can't make the immediate correlation between my time and the results of that marketing plan.
You went from considering yourself productive to being one giant expense for your business.
Yeah, that's where it took a lot of mindset training. Maybe speak to this a little bit too, Sean, since you're on here. If any of you remember Sean Miller, he's one of my first episodes on the show and he went through some training as well. Maybe you can share your experience, Sean, in the same way, but I had to go through that mindset training that, “I'm not a physical therapist anymore. I'm a business owner who happens to provide physical therapy sometimes.” It’s to make that transition, to recognize that if I'm going to grow and make the company do what I want to do, I've got to work on the company to make it do what I want to do. Simply providing more patient care isn't going to get me there. You have to work yourself through that over and over again to wash that all out.
I couldn't agree with you more, Nathan. I appreciate you guys having me on with you. That was a huge mindset shift for me as well. You're a full-time clinician treating patients. I remember working with a consultant and the first thing he told me was, “You need to block off five hours a week to work on your business.” I was like, “I can't do that. There's no way I can do that.” When I did it though, I said, “I'm going to trust this process. I hired this guy to help me for a reason and I'm going to do what he says. Even if I ended up losing money, we're going to do it to see what happens.” As we all know, when you set aside that time and you start working on your business, you are automatically starting to see results and all of a sudden you realize, “That was a good idea.” It is a mind shift change because we're not used to that aspect of thinking we should block off time instead of being with our patients
Sean, you bring up a very good point. I want to hammer it again. You said something that was key and that is you brought in a consultant who told you what to do. There are so many people out there who then will disregard that advice that they paid good money for. You happened to take the advice that you paid somebody to tell you. How difficult was that?
I was telling a lot of people in our company this story and it was that when I first started with this consultant and they were recommending all these things that I needed to do in my business to improve it, I was super skeptical. I was like, “No way. This will not work. This is not going to help my business. I had to stop and check myself and be like, “What I've been doing is not working or has given me lots of more work and headaches and stuff.” I told myself, “I'm going to go all in. If I totally disagree with what they're saying, I'm just going to do it.” Part of me was like, “I'm going to do it to prove him wrong, to prove that what they have here doesn't work.” I've put it in and started doing everything and all of a sudden, my business started growing way more than I ever had done before with this. I've proven myself wrong with it. It's that mind shift change. I love the saying, “When the student's ready, the teacher will appear.” There's so much out there that when we're ready, the teachers will be there for us.
If you're not ready to learn the lesson, it will keep showing itself up on your front door. Nathan, I know that there's a lot of ground in between these two points, but at one point you said to yourself, for whatever reason, “I’m going to end this and I'm going to go to Alaska.” I know there's a lot in between there. Here's a guy who is successful in Arizona. He's got Will working with him. He's got a number of clinics and now you have this idea of an exit strategy.
Going to Alaska wasn't necessarily the exit strategy. There was a goal there that Will and I had that I was going to develop this diagnostics business. We did so in Arizona, we started some in Alaska and it started getting better. We had been doing diagnostics for a couple of years and it wasn't getting any traction. We recognized that we weren't putting that diagnostics business into its own structure. We considered it this small department within our current structure. No one really had any ownership of it and so it didn't go anywhere. We had some ideas around it but we never really focused on it. We decided, “If this is going to do something, one of us needs to take responsibility for it, make it its own business and set up its own entity.” I took over that. The agreement was that Will was going to focus on developing our leadership team so that he could free himself as well up from the day to day of the Rise Rehab at the time.If the owner actually owns the company and is not one of the laborers within it, then there's some value to that. Click To Tweet
How many offices did you have at that point?
At that time, we had merged. We had that his, his and ours and we eventually merged. We had four clinics going.
I believe it was close to twenty when you partnered with Empower PT?
We didn't necessarily grow our clinics from four to twenty-plus. We simply gathered a bunch of people together to put ourselves on the market.
That's the interesting part. Here you are as your own entity, Rise Rehab. You're in the Phoenix Valley, I guess you call it, the area and you say, “I can sell my four clinics to a national company or I can partner with these other independent practice owners and roll it all up and market that out and sell it as a bigger package.” Is that correct?
Not totally. You make it sound like I was the brains of the operation. I definitely was not. This is why I'm glad we have Sean on, because he was in Arizona when a lot of this was happening. Will and I, we had a number of offers for our clinic over the years. People had approached us maybe three or four times and each time it was some variation of, “We'll give you 70% of what we consider the value of your company in cash. You guys maintain 30% and you become essentially clinic directors or middle management. Keep doing what you're doing.” That didn't sound exciting. We didn't get into it to become employees again per se. We'd said no a number of times. Like I said, this happened over the course of maybe five or six years.
This is a conversation that a lot of PT owners have and it can be very disheartening after you've spent all your blood and sweat and tears building this baby of yours and somebody comes in and says, “We're going to give you X amount,” when you thought it was going to be 3X. That might've been your feeling as well. What then gave somebody the idea to look around the area and say, “If we do this a little differently, it can be more than what the parts are?”
For sure. We got some of those offers. We were a little bit disheartened. There were some that were better than others, but we're still relatively young. We'll focus on growing more. We're developing a leadership team to take off the day to day and we'll make it their job to grow the next clinic and open it up and that kind of stuff. A few years ago, a friend of ours, Jared in the Valley, he's someone that we talked to about selling our companies in the past. He came to us and said, “I work for a company that has some physical therapy clinics.” He was essentially the business manager, but he's a PT and they wanted to divest their physical therapy stuff.
He said, “I have an offer on the table.” I know I can get more if we essentially increase our value by increasing EBITDA, profit margins and revenues and that stuff. We can attract a bigger buyer who will pay more in multiples and that stuff. He called my partner Will and he was like, “That's a cool idea. Let me think about it. I'll talk to Nathan.” From what I recall, Will sat on it for a little bit and then Jared called him back a month later and said, “What'd you think about it?” He reached out to me. I said, “I think it's a great idea if we can do what he says he's doing. We could get more for our four clinics than we could on our own as the four clinics.”
We started making calls and that's where we reached out to Sean. I reached out to a couple of other people in the valley. Jared did some of his own footwork and reached out to some people. We started collecting some guys who were, and correct me if I'm wrong, Sean, in the mindset of, “If we can take advantage of the current market, it was a hot PT market a couple of years ago, we can get a higher multiple than what we can get on our own. It’s a buyer that we think is cool. We would consider it.” We didn't have any ties to it at the time. We had this loosely-held NDA between us. We formulated things together and got all got on the same page.
Let's use Jared as an example. Your business did not have to have shared resources or procedures or processes as Jared per se. Is that true?
Per se. Sean, how would you describe that?
Essentially, we ended up with five different entities with different policies and procedures, but most physical therapy practices were very similarly aligned. We had some that were stronger than others in terms of being organized and structured. It wasn't a unique situation. I've never heard of it happening anywhere else before, but it wasn’t a unique situation for sure.
Sean, to use a vernacular here, was it like herding cats?
In the beginning, it was a lot of work. It was like herding cats, but to the point of why we did it as well helps in this discussion, for me anyway. It’s to paint the picture that the market was hot, the timing was good and it was the right concept that if we do come together as a bigger entity, there is more value there, which then increases the sale price of things. 26 clinics are worth more than my four clinics, essentially. For me, something that everyone has to think about when they go to sell their practices or whatever they want is I'm about my legacy. What's going to happen to what I built? Because I was proud of what I built and what I had and what we stood for in the communities and I had a great name in the communities. I didn't want to sell it to some big national entity who then comes in and changes all the paint colors and essentially rips out everything I put together.
What this became was the opportunity to capture the market and get a great value for what I thought my business was worth, but then to also layout the fact that we could continue our legacy of what we had built. It’s not only to continue but grow it on a larger scale with more help and other people to help us do it essentially. That's what it was for me and how it worked out. With that in mind, we got five other owners and of the five, two of them exited and left out. The three of the other original owner stayed. The three of us then took our cultures, our processes and them all into place and are continuing them. At first it was herding cats to get everybody on the same page, but because we had the same vision of what we wanted to do, it wasn't hard to get the buy-in, if that makes sense.
I understand. Using totally false numbers, let's say I'm a practice owner and I'm considering this and somebody offered me $100,000 on my own. I then think about making this arrangement, and I won't call it a partnership, but this arrangement. How is it that then I get back $200,000 instead of the $100,000? Should I be thinking of it like that?
I think you can think about it like that. I want you to add on after I talk, Sean. I talked to a few brokers as we were going through this process and they shared some generalizations. They'd worked with many PT, mergers and acquisitions and they said, “Your typical practice is going to be maybe around $1 million, maybe $2 million if they're doing well.” That could generate maybe two times multiple of your EBITDA, maybe get a little bit more if the market is hot. If you don't know what EBITDA is, it's an acronym. It's essentially your net profits with some of the add-backs. You can get maybe two times a multiple for a small clinic like that. If your net profit is $100,000, maybe you get $100,000 to $200,000, but if you were to increase that EBITDA to a point where now you're talking to some larger buyers, not just some local dudes, but some national guys who want to plan a national scale, then you can get higher. You can get four times the EBITDA or five times maybe.
I think that's an important distinction to make for your listeners and that is that it's not just gross revenue, but it's EBITDA. The higher it can go, the more there is latitude and a higher multiple for your sale.
Do you want to add anything to that, Sean? What do you think?
It's spot on. Now that I'm on the other side where we're trying to acquire people, you hit it on the head. You're a one or two clinic platform. The two, maybe three multiple off of your EBITDA, the bigger your platform, the more that EBITDA goes up, that valuation goes up. If you're a six, seven clinic, you're probably more four or five. Depending on where you're at and how strong your EBITDA is, that can even go above five. The typical PT practice is probably a three to five EBITDA. It’s what you typically see.To add a lot of value is to essentially work your way out of your business prior to the sale if your goal is to sell it and not work at anymore. Click To Tweet
Sean, I want to come back to something that you said and dig a little bit deeper in them. That is what you said the timing was right. How would a clinic owner figure out if the timing is right?
There are a few factors there. One is where are you in your career with your business? I was taught by our consultants a few years ago that you need to start preparing your business for sale now. I was like, “I'm not selling my business for several years,” but I started to do it anyway because back to my point of listening to them. The stronger you are to position your business for sale and there are things you should do to do that, which maybe should be another podcast, there are some key things there. As far as the market side, what I noticed being in the profession for over fifteen years is the first probably eight years of owning my practice. Nobody was knocking on my door. Nobody was sending me any emails wanting to buy my practice.
All of a sudden, like Nathan said, I started noticing, “We'd like to buy your practice,” or soft reaches, “Will you be interested in selling it?” That's when you started noticing things come around. Then you started getting more and more people hitting you up. It's like selling your house. What's the market doing? Where is the pricing at? We all know when the market is high for selling or house. The PT clinic side was the same thing for me. That was all of a sudden out of the wood where people were coming left and right trying to make offers to come in and made me pause and go, “What's going on here? What is happening?” We can all remember back in these days, but in the ‘90s, the same type of thing that I saw happening in our profession was happening in our profession in the ‘90s. It has its cycles as the housing market does. It was one of those things like, “Here's the cycle and now's an opportunity. If I'm ready to do this and go on and do different things with it, this would be the perfect timing to do it because the market is so hot.” I hope that helps.
It certainly does. I think that your audience will have maybe one office or two. They could be a little bit heartbroken right now to think about that the value of their business is two to three times their net profits and, but what you're showing with your journey, Nathan, is that in “partnering up” with other local independence, your one to two office platform might permutate into a ten, twelve to fourteen-office platform and be much more attractive to a bigger fish. Is that accurate?
For sure. A lot of the value comes off of the numbers. That's how they're going to value the company. You can add value to your company by not increasing the numbers, but they want to see general growth trends. I had done some episodes on this. I did one with Paul Martin. I did another one with Steve Stalzer of 8150 Advisors. One of my first episodes was with John Dearing who works with mergers and acquisitions. There are a number of things you can do to prepare, but they're going to look at the numbers. They want to see good policy and procedures in place.
They want to see growth trends over the last few years. Not stagnation, but continued growth and a strategy for continued growth because they want to know that once you sell, you're not going to walk away. There's going to be a focus on increasing what they're buying so they can increase the value of their investment. Another strong aspect is if the owner's not treating. If the owner owns the company and is not one of the slave laborers within it, then there's some value to that. If they take him out, they're going to have to replace him with someone else. That goes back to structure, policy, procedures, organization and all these things that make a company more valuable without necessarily hitting the bottom line. When you do those things, your bottom line improves.
Back to your question a little bit, maybe they're a little bit disheartened, but I've told a number of people across the country, what we did could be done in other places. If you know any of the other people in your community, some of the other owners, and you're looking at an exit strategy, we called a lot of people. I called a number of friends that weren't ready. They're like, “I don't know what I would do if I would sell.” They're like, “I'm happy with what I'm doing,” or “What is an EBIDTA?” They're across the board. They weren't interested in selling at the time, and that's fine. If you are looking at an exit strategy or if you want to take advantage of the market, start working your network.
Talk to some local people, see if you can get some people who are on the same page and then there are opportunities out there. You reach out to some people who might represent you on the market. Yeah, you can get a little bit more for what you're doing. I know you didn't ask this question Steven, but I would say if you're looking to sell any time in the next few years, now's the time to do it because it's going to go through that cycle again. I don't think it's going to be as hot as it is now. I think we're at the tail end of that cycle, honestly. It's not going to come around for a little while.
Sean, from your perspective, what Nathan did was he got a consortium of local practice owners, probably within 25 to 50 miles of him. Is there any advantage for him to have said, “I'm going to get my pal in Tucson and my pal in Albuquerque and my pal in Colorado Springs. Even though we're not going to have a map or a footprint that's every three to five miles in that geography, I’m placing some pins down in a very large area?” Is that an increased value, a decreased value or a wash from your perspective?
I think it's an increased value from my perspective. When we did our deal, we ended up with clinics in California and one in Louisiana, which is the off beaten path one and kind of weird. The market share, getting it in multiple states is good. I will say some states are more attractive than other states are depending upon reimbursement rates. Is your market dominated by a hospital-based system? We're in the process of acquiring clinics that are states that we are not even looking at it based upon reimbursement rates and the hospital-based systems that we don't even go into. I do want to go back real quick as well and adjust something that Nathan said about selling your business.
I think the key thing to learn is that as owners, we are the goodwill value of the clinic. If you look at selling your business down the road, if you're in the business, working it a lot like say 40, 50, 60 hours a week like we all did some times. You go to sell your business and you're telling the people you're selling it to, “I'm going to sell it to you and I'm walking away,” your business is now less valuable because you are a huge integral part of why the business is successful. Another way to add a lot of value is to essentially work your way out of your business prior to the sale if your goal is to sell it and not work at anymore. That's a key point. The way I got my business is it was running where I didn't have to work in the business unless they want it to where it didn't need me. If I wanted to exit, I could've left and left all the key people who were the key to making the business run. There's more value to that if you want to exit out, if that makes sense.
It certainly makes sense to me and one way you can test your ability to do that is to take a month off. If the prospect of taking a month off makes you want to vomit, then it's likely that you have not put the systems and processes in place to allow you to do that. That's a good stress test.
Yes, there's more value in a business where you can take a month off because you're no longer the goodwill value of that business.
It makes total sense. Nathan, looking back on this process, what would you have done differently?
I don't know. Sean might agree there was an element of timing there. We found a partner and this was something that Sean and Will were definitely a part of as far as they interviewed the interested parties that came through Phoenix. We found a partner that I would say is relatively ideal in allowing Sean and, Matt and Will to carry forth our company values, visions, policy and procedures that we all had some loosely held agreements too and not disrupt that. Empower physical therapy became something that's greater than ourselves and a greater expansive are divisions that we already have. I think I'm speaking for you Sean, but things came together in an opportune way for us to do this because we had a great footprint across Phoenix. We met up with a great partner. We have some great leaders in place. When you talk about Will and Sean and Matt and the CEO that we brought on, there's not a lot I can look at and say, “I would've done things differently.” Things worked out well for us.
You don't think that all the stars were aligned perfectly and it can never happen again. This situation can be repeatable across the country with other practice owners.
I would think so. The benefit that we had was that Jared had been through this process before. The guy, Jared Bowman, who started this ball rolling, he knew the landscape well. He also knew the people to talk to. We did have that in our favor that other people might not have. Anyone that puts forth a little bit of effort and takes the banner and runs with it could do the same.
I would agree. It does take a little work. Jared was a huge help because he understands the business acquisition side and understands the power of the equity world better than we did. That was where our strong play was. You would need someone like that, but that's what you definitely could do. What was different about us is that in the beginning, Nate mentioned it and I said it too, people were approaching us to buy our business. What we did that was different was we came together and then we started approaching the private equity firms and shopping them.
What we realized is that there were people were approaching us whom I'll never sell my business to them. We're like, “Let's find somebody who understands our vision and what we want to do and is excited about it.” We went through that process, which was close to over 30 PT firms that we reached out to interview about ten of them in person. We ended up finding the group that we went with that loved our story and loved what we wanted to do as a profession and was totally on board, so it definitely can be done.When you do things that add value, your bottom line improves. Click To Tweet
You’ve brought up a good point there, that maybe we didn't iterate it, but we had an ideal partner in mind. If we're going to exit and we're going to sell our legacy to someone else, this is what they're going to look like and this is how they're going to be. It's not necessarily the best idea to take the highest bidder. It's valuable before you sell to number one, maybe have an idea of the number that you want, but also number two, who do you want to partner with? You want to vet that because that's going to affect your life significantly going forward. You want to make sure you've got the right person with shared alignments in values, vision, growth strategies and whatnot. You want to make sure that you're partnering up with the right person or group.
There's a lot of due diligence that needs to be done. There’s no doubt about it. Sean, where can our audience contact you? Hopefully from this show, people have a lot more questions now than they did before work. Where do they contact you if they had additional questions for you?
They could always reach out to me in my email. It’s SMiller@EmpowerPT.com. I love helping people and I love showing people what to do and what I've learned from it. I'm a big believer that we're always growing and learning. I've always said, I'm the biggest rip off artist there is. I steal from other people what they've done and implemented it. If that works, I'm going to do that. It’s not to say, “Come steal from me,” but come steal from me. I'd love to share with things that people are interested in trying to do this or what we did and I’ll be more than happy to take time and talk to and discuss it with them about it.
Going back to what you were asking me about me, Steve, if other owners can do that nowadays what we did, go ahead and try it. Reach out to Sean and say, “I'm thinking about doing this. What are some tips that you have?” Reach out to the guys at Empower PT that did it. We can guide you. If you're looking to sell, Empower PT’s a great place to go. I'll put in a plug right now.
I've got to say the same thing. If you are looking to sell, we are still looking. We are trying to expand and grow and we have a huge vision belief behind therapists. Our core value is patients first. We’re a PT-centered company focused on the profession, trying to enhance the profession. We're looking for people with that same mindset that want to help us continue that vision out to the public. Come talk to us. We're always open to that as well.
Sean, I want to thank you for your time and your expertise. Nathan, I want to thank you for being on your own show. That's very nice of you to show up. I'm sure it'll be an interesting listen for yourself and your family and all your friends. I encourage everybody to tune in for every episode because there is a lot to learn. Nathan is spouting out truth bombs left and right and we're all the better for it and everybody in the profession thanks you for it. Thanks again for your time.
Thank you, Steve.
Thanks for having me.
I think it was great to do this little forum. A lot of people could learn from what we did and if they wanted to reach out to us personally and bounce some ideas off of us or ask for some insight or maybe you can help me with this, feel free to do that, whether it's Sean or me, it’s Nathan@PTOClub.com. By all means, reach out. Steve, thanks for offering to do this and I'm excited that we got the opportunity to sit down and do it.
All good things happen when you shoot from the hip and have no script and let it rip. You guys are very good sports and, we came up with something good, don't you?
Definitely, thank you so much, Steve.
Enjoy the rest of your day and thanks.
Thanks for your time.
Stephen Rapposelli, PT, OCS opened his private practice in 1992 at the tender age of 26, because he was told by his previous employer that he couldn't buy into the existing business. He has since grown into 3 clinics and has been voted best PT business in his state for numerous years. H
e also serves as Vice President of the Delaware PT Association, as well as sitting on the IMPACT editorial board. Stephen plans on devoting the rest of his career to promoting independent practices across the country.
Growing up Sean always felt the desire to make an impact in others life. It was in high school when a friend got hurt playing sports that Sean was introduced to the power of physical therapy and the impact it has on people’s lives. From that experience, Sean has set a course in his life to be a Physical Therapist and change lives. Receiving his Bachelors of Science from Brigham Young University in 1999, Sean then pursued his dream of getting his education in Physical Therapy. In 2001 Sean graduated from Texas Woman’s University in Dallas, Texas. Moving to Arizona in 2002 working for others Sean became very proficient as a Physical Therapist.
He now specializes in treating vertigo, balance, and orthopedic cases involving the shoulders, cervical (neck), and knees. After years of treating patients, full-time Sean realized that he was just 1 Physical Therapist and only had the ability to treat so many patients at one time; It was this realization that sparked the dream of owning his own practice. “What if we had multiple therapists all with the same skill and passion? The impact would be even bigger than just 1 therapist”. From this Sean along with his brothers opened Kinect Physical Therapy in 2012. “Opening Kinect Physical Therapy has been one of my greatest challenges, but to see the larger impact we have on the communities and in our patients is why I do this.”
Sean when not making an impact on others life’s enjoys spending his time with his wife and their 4 children. He is often found on the sporting fields coaching his boys teams, at the lake wake surfing or headed to the beach to enjoy the waves and surfing. His favorite quote that he lives by is: “We are what we repeatedly do, excellence therefore is not an act but a habit.” – Aristotle.
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