What Is Your Cost Of Care?

Have you noticed the increasing trend of payers wanting you, as a physical therapy practice owner, to remain in their network at a reduced, often flat, rate for treatment?  I know for me, and my practices, it has happened left and right. Over the past few years I have seen major players (Anthem, Cigna, United HealthCare) all “force” these new per-diem rates at less than what it costs us to provide an hour of care.

How do you know if you can remain on these contracts of you don’t know your numbers?  The most basic metric every practice owner MUST know is the cost of care per visit.  If you don’t know this most basic metric, you don’t know if you can (or will) survive in the new healthcare economy.  The Affordable Care Act is only successful if the insurance companies can lower their costs to make more profit, at your expense.

How can you determine your cost of care?  The easiest way to calculate is per visit of care, and once you know this magic number, you will know if the new contract is sustainable.  For a quick determination of your cost of care take the total expenses from last year.  These total expenses do not include the profit draws you took as an owner but must include employee salaries, rent, admin/billing expenses, etc.

Once you have this number, divide it by the total number of patient visits during the same time frame.  Example: your total expenses were $625,000 for 2015 and your total visits were 7,128.  When the costs are divided by the visits the cost of care per visit is $87.68.  Can you remain on a contract that reimburses you at a flat rate of $60 per visit?  If you know your metrics, yes you can.

Do you need help realizing your true cost of care?  Do you need help determining if that contract is right for you?  Click Here to find out how we can help you!

Andrew Vertson, PT, DPT, ATC
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