This Acquirer Focuses on Companies With Strong Ties to the Community
John Gallucci, CEO of JAG-ONE Physical Therapy, joins Paul to talk about outcomes-based care, staying in network with payers, and why he partners with PT business owners who are visible in their communities.
Full transcript
Generated from the episode audio and lightly edited for readability.
Good afternoon and welcome to another episode of Paul Martin's Crucial Conversations. Today we are going to have a crucial conversation with John Gallucci. John is a physical therapist and an athletic trainer. And John is the CEO of JAG One Physical Therapy. JAG One based out of Bridgewater, New Jersey. But man, you guys have really grown over a 100 clinics in New Jersey, New York, and Pennsylvania. John, it is great to have you with us today. Paul, thank you so much. And I appreciate the opportunity to be here this morning.
I've been looking forward to this conversation, John, because you guys, you know, again, we're doing a little series with what we're claiming are the newer companies backed by private equity, maybe three years or less at this time. And you know I know you're not an infant and you guys have really grown but you are one of the newer companies and what we're finding is some of the newer companies have new ideas, new strategy and you know John when our clients want us to describe you know what the newer acquires and a new acquirer kind of enters the market they typically ask us three questions and the first which I will ask you is what is JAG 1 strategy for becoming a successful company in this industry?
How is that different from some of the larger legacy companies and the strategy that they're following? Well, that's a great question and I appreciate the opportunity to be here. As I said, ultimately when we look at JAG one and look what I bu I built legacywise, it was a true component of utilization of research, evidence-based and outcomes. And my legacy company, JAG Physical Therapy. We had a great opportunity to work with the payers, work with the referral sources, to really combine that concept of outbased outcomebased physical therapy and collaborate with not just your physicians, but also the payers.
We took that to the next level, keeping our culture. As you know, my first transaction was with my dear friends and colleagues on the other side of the river, which was one-on-one. And that's what made JAG one. And we wanted to make sure that every step we built, we maintained our culture, but most importantly making sure that the payers and the physicians collaboratively still work together with us for the best outcomebased physical therapy. As you know, being in an industry for years, some of these companies have come together and it's really been a direct numbers game.
Our strategy is it's to grow within a catchment area that we're successful in, reach out with our fingers, continue to grow. We're not looking to take over the world. We're looking to work within our catchment area and really give good outcomebased care. Now, as you know, the industry as a whole, not just physical therapy, health care as a whole, all of a sudden the pendulum is swinging where all transactions were going through and all these different specialties and outpatient specialties, but now the equity partners are getting more and more intelligent and that's what's important and I think Jaguar physical therapy is structured personal perfectly for that aspect of equity health care together, working collaboratively, but never forget it's about patient care.
Yeah, John, I heard you say outcomes at least three times. Which, you know, certainly is part of the culture that you're building and part of what you want to create. So I took what you just said as very state focused, getting really good in New Jersey, New York, and now Pennsylvania. So that you can show those outcomes and increase your reimbursement, which we all should be doing. So, it's very advantageous that we truly know the markets we're in. As you know, some of the giants out there are in multiple markets.
And you know, you can't be a specialist in every single market. Yes, on a business side, it's great to brand on a national level, but how great is it New York, New Jersey, Pennsylvania, look at that catchpin area. Look at the demographic. Look at the populace of people that are there. But then also look at the payers that are in the area that now know the name JAG One Physical Therapy over the last 18 to 20 years. And really nothing has changed. And people that have come and joined us and partnered with us and have come under our flag are the same people the payers have dealt with for years.
They're just doing it now under our flag. And then the denovo opportunity is really just filling in the blanks. So as you said we sit over a 100 clinics right now in the demographic wherein we can grow to more than 200 clinics and not overspend not over market and really work collaboratively with the health care systems the payers the physicians that already know who we are in the in the area. So it's really been a very good perfect formula and think about it we've been able to grow and succeed in the last two years which has been very difficult just because of the pandemic.
Yeah absolutely John I remember one of the first times I met you in person it was at an ascend round table and you were sitting directly across from me and you said what we all should be talking about here is how we can get better reimbursement from our payers. That's what we should be talking about here. And you kind of jumped in because there was some conversations that didn't have a whole lot of interest. And I looked across I remember I said, "John, tell us how do you do that?" And tongue and cheek you said, "I punch him in the mouth." And then you said, "Because I show better outcomes." And when I can show outcomes, I can show insurance companies how they will save money based on the way in which we treat.
I was always so impressed by that. I can remember coming back talking. I said, "Hey, I finally met this John Gallucci in person. This guy is dead on." Well, as you know, it's all about relationship management. And when we're dealing with payers, they only care about one thing. They care about their stockholders. They care about generating capital. And and ultimately, although I am a businessman, a CEO, and president, never forget, I am a provider and a caregiver. Absolutely. And ultimately what I was seeing especially in the New York New Jersey market which the legacy company was in.
I saw everybody opening up and trying to do all these different types of relationships to pay their bills. Who was out of network? Who is in and out of network? And I'm like, well, why aren't we partnering with these payers and giving them what they want and showing them results? Not only showing them results, showing them the research that goes with the results, showing them the importance about physical therapy. I mean, remember, and listen, you and I are old enough to know Marilyn Moffett's push for the vision 2020.
Vision 2020 wasn't just an academic vision. It was a vision to let the populace of America know that physical therapists are the experts of rehabilitation. And ultimately I took that concept and kind of went to our partners which are the payers that have the participants and said listen I could save you money on simple muscularkeeletal cases that you're spending thousands of dollars on and here's the evidence and as you know the conferences now are coming out with the research on workman's comp PT first before specialist PT first you know before pharmacological intervention And ultimately now we're starting to live it live it the pendulum has swung so positively now for the profession of physical therapy that as long as all of us collaboratively work together for Marilyn Moffford's vision 2020 that we are the experts of rehabilitation we will continue to succeed and again now translated to business the equity partners do not want companies that are on the teeter on the edge where is they want to know where the revenue is coming from.
They want it identified and how better to be 100% in network working collaboratively with your payers in the marketplace. Yeah. Hallelujah. Yeah. Very well said. So, what are the characteristics of a company that would really thrive really succeed by joining Jagu One? So, that's a great question and I just met with someone that's joining us and we were talking about philosophy and cultures and ultimately if you look at all of the partners that have joined us over the last three and a half years, it's people that have had legacy success based on a provision of care and visibility in the community they serve.
If the community doesn't know you're there, how can any business succeed? Better yet, the community has to know you're best at your craft. And ultimately, we try to partner with people that have good followings, not just referral-based followings, but community-based followings. You know, we partner with a great group in Pennsylvania, as you know, Bill Gregory over at Bucks PT. Bill has been a guy that's been in that community for 25 years. But not only is he in the community, his children's in the community. They're in the high school.
They're working. His wife has been in the community. And collaboratively, we've had the opportunity to basically say, "Bill, it's exciting. You're under our flag, but we don't want you to change a darn thing. You're in the community. Keep it up. Make sure the referral sources collaborate with you just as they had the last 25 years." And when we do a denovo, it's that same concept of growing within a clinical director that understands our culture, understands the drive for outcomebased physical therapy, understands though you have to be in the community.
And we ask our clinical directors to have a five town radius of connections. And that could be anything from knowing the mayors in every town to knowing the PTA presidents in every town to knowing who runs the little leagues in every town. You can't just stay in your clinic. The we're treating the community and the community needs to know who we are, but they also need to know how successful we are with outcomebased physical therapy. We know Bill and he brings that same passion, I believe, that you do for what he does there in his local market.
Have had many conversations over the years with Bill and yeah, you got a great business there and a great person for sure. The only thing the team can't stand is Bill and I in the same room because a 30 minute meeting goes about an hour and a half because we both have so much passion and drive. So it's great to have Bill [clears throat] as a teammate and a partner. Very exciting. Absolutely. Absolutely. So let's talk about the nuts and the bolts of an acquisition process.
How do you see that you acquiring a company the process that you use, how is it different from some of the larger legacy companies in the industry? So, some of these giants out there have these advanced teams that go out there. There's no personal touch. There's no, you know, hey, give us a list of information. We'll get back to you with an LOI and if you're interested, come back to us. I'm meeting with each individual company that has an interest in joining. I want them to know who I am, what we built, what we want to continue to do, and ultimately what is your place within our company as a teammate and partner.
You know, again, listen, it becomes a game of numbers. And luckily enough, based on our success in our market, we don't have to chase, you know, five, six different states to try to get to numbers. Our budget is very easily strategically done on a year-to-year basis based on bringing in good culture and good people. So, one thing most of the owners love is they're meeting JAG of JAG one. So on the first the first day I'm on the phone with them having a conversation within two weeks we're at a dinner or a lunch or a breakfast and they're spending time with me to understand what is our vision and where we going.
The other thing that I think that makes us a little bit different is we are 100% in network because we want to be able to give care to every single patient that needs care and everybody loves to hear that we don't have a difference in New York versus New Jersey or Pennsylvania versus New York. We are an inet network company. We work collaboratively with our partners on in network utilization. We work very good in presenting research. Again, as you know, I'm involved in the APQI. I think them gathering evidence to show Medicare, Medicaid, CMS, evidence-based research on why physical therapy helps save costs will help us over time stop the cuts, but actually give us increases over time.
If you can imagine CMS giving us an increase, I mean, look what's happened in the workman's comp market. They read, they're reading the research. They understand it. They understand how important PT is. And I think what's happening is when you take the providers we're speaking to and they're like, "Oh my god, it's a physical therapistrun physical therapy company with a presentation of taking care of patients and making sure we're doing right by patients. Everybody loves that and it's fantastic." And the really nice thing is if you look at my executive team, yes, we have a CFO that's not a physical therapist.
We have a chief marketing officer. She's not a physical therapist, although she's in the marketplace 14 years. We have seven physical therapists on the executive team that surrounds me and they are still all practicing including me. I'm still touching patients as you know. I've always had my sports medicine niche. People want to see me. There's opportunity to see me. My chief clinical officer is treating patients today in Brooklyn. My two VPs are treating patients in Brooklyn and New Jersey. So, we have opportunity that everybody loves the fact that yes, we're running the business.
Yes, we have an equity partner, but we're physical therapists still in it each and every day. Yeah, John, that's unique. And you do see a lot of companies that have elevated physical therapists out of management positions up into executive positions to be putting their hands on patients that that's unique. You know, John, something else that I think is very unique about JAG 1 is the alignments that you have done with hospital and hospital systems. Just talk to me briefly about kind of that strategy and tell us whatever you can and want in regards to, you know, why that strategy seems to work for JAG One.
So, as you know, Paul, and I and I know that you and Jamie know me a long time and have watched me. I was raised in New York, New Jersey, and I worked for some of the largest health care systems in the tri-state area. I've worked for NYU. I worked for New York Presbyterian, Columbia. I worked for RWJ Barnabas. I consulted to a bunch of other companies on an outpatient PT component. What we've been able to do is really look at the outpatient component, look at the demographics that these institutions are trying to touch, and we're just collaborating.
We're collaborating with them on their in-et network utilizations. Especially some of the physicianowned groups, the larger physician owned groups are all in these utilization programs and we've been able to fill in catchment areas based on in network utilization concepts. And when it comes to the collaborative component, think about it. They're hiring physicians, but there's no opportunity. A young physician comes out of school and has no marketing background, has only learned to be a doctor, knows nothing about the community he moved into. Who better than collaborate with a physical therapy company that's been servicing the community for over 18 years, but two guys, me and Rich Bodian, that have been in the industry in New York and New Jersey for 35 years.
We know the demographic. We know the populace. We know the people in the area. We also know the hospital executives. Some of these people have colleagues of mine for years. So that collaborative works that we get phone calls to say, "Hey, we just hired two orthopedics. Can you introduce them to the community possibly?" And again, it goes back to we serve the community. Well, who's more entrenched in the community than health care systems, than hospitals? How better to relate? And then we have some great data set programs going on with several emergency departments on treatment of MSK.
So we're very excited about that. So you know we're trying to put the numbers in front of the payers. So who better than to collaborate with the institutions that have the communities going with them. And we've been very fortunate in both New York, New Jersey, and now Pennsylvania. We're having the same conversations now in Pennsylvania. And it's just opened up the doors for our company to be successful in the communities we serve. Yeah. Now I c coming from a background of building developing hospital contracts and seeing the value of that it's been remarkable how much growth you guys have achieved simply by through those relationships and as you said serving communities.
First hospital we ever did a contract with. You know, Riverside, New Jersey, one of the teeniest little towns in New Jersey. And so, yeah, I just wanted to make sure that, the folks out there realize that you guys are doing really great work with some of the major systems in your market. So John in the initial discussion we had you mentioned culture and the culture that you have once a business joins you guys. How has the view of the staff as well as the owners? How do you think they would describe your culture having been with you for a period of time?
How would they describe you guys? I think the best way to do it is engaging, friendly, and team. I think if you look at those three words, it's very exciting. Listen, change, as we know, human nature, people hate change. And when you get past the business part of benefits and salary and compensation, it's it really comes down to do I gel with this company? Are these people good people? Am I part of this team? Do they communicate well? And we from day one appointed I mean literally from day one appointed an integration officer her name is Taylor Alder Rasillo and she has been a part of our team that makes our team integrate with any team that's joining us and it's all about communication with all the departments and as you know listen there's never a day you're going to make everybody happy but you need to put your best foot forward to try to make everybody happy we know that from patient care.
So, it's not hard to understand that employees have to be happy. And at the end of the day, I would probably say that our team is friendly. We want to bring you on the team and collaborate and show you where you fit on the team. And the most important thing, as you know, is the sustainability. We don't want to lose people on transactions. They've helped our legacy owners build their practices. We want them to be part of the team. But again, change is difficult. It's human nature.
You know, somebody used to tell me all the time, the most consistent thing in life is change. We need to adapt and understand that some people just don't want to adapt, but we put our best foot forward to show them they're part of something better. And the opportunity and growth is huge. If you look at some of the transactions we've done over the last three years, we've actually had physical therapists that were maybe you know treating patients became a senior physical therapist. Never thought they'd be out of the clinic that they were with the legacy owner.
All of a sudden now they're running and operating their own clinic with their name. They're in the community. Everybody knows them. And Paul, you know how you built your business was all about everybody knowing who Paul Martin was. And that's how I built my business. You know, first thing I had to go is, well, who's John Gallucci? And then what's this JAG brand? Well, John Anthony Gallucci is John Gallucci. So, it's all about making sure the community knows. And when you do an acquisition or you do a partnership, it's very important for everybody to understand you have an opportunity now to stand on your two feet just with us waving our flag.
So, it's been very advantageous. Absolutely. So, you touched on this earlier as well, but what what's your geography strategy? I know you're in three states now. When you look at new geography or your current geography, what's the what's the strategy there, John? So, we have great opportunities still in the five burrows of New York City. As you know, we're a New York, New Jersey company that is still striving to get to get a stake in the Bronx and we're working very hard because listen, I'm born and raised in the city and the city is five burrows and we should be in the five burrows.
So, it's very important. As you probably already know in conversations we've had offline, I come from Staten Island and we're about to open up two clinics in the next three months in Staten Island, which will double the original imprint from four to eight over the last three years. And we've been doing very good with the with the people I grew up in Staten Island. In Brooklyn, as you know, the dense population there is enormous, and we've had great opportunities to partner with some people in there.
Westchester County, Rockland County have been very good for us. We are looking in Orange County. It's very important to us. As far as are we going to another state? Everybody keeps asking me that question. What's the next state? I don't know if you count Greenwich, Connecticut or Stanford as another state. It's in Connecticut, but as you know, it's the referral sources of New York. So, we'll probably be in the next 12 to 18 months or Stanford. And then listen, we have opportunities in Long Island. We have opportunities in New Jersey.
As you know, we made a big jump in New Jersey and now we're filling in some catching areas, central and southern New Jersey. We've done a great job in Morris, Essex, Hudson, and Bergen County. Now it's and Mammoth and Middle Sex. Now it's time to take care of Ocean and Mercer and really make sure our footprint is visible. And then in Pennsylvania, listen, we're very excited to be in Bucks County and touching Philadelphia and I'm not looking to throw a jablin and hit Delaware or throw I'm looking to grow next to Bucks County and kind of take that.
So, as I mentioned earlier, for us to continue under an investing equity partner and be able in our catchment area, not more than 30 miles outside our catchment area, be able to grow to 200 facilities with good partners and good denovos. We should be able to do that over the next three years and we're excited about it. Yeah, that that's really exciting. And you know with with Russia and Ukraine at war right now, all Russia is the onlybody that's at war, but John didn't mean the Javelins that they're using in Russia and Ukraine.
John was speaking of the regular old Javelin. Yeah, no, that again you guys it seems like anywhere you go, you want to be experts and you want to because you to be an expert is to know the payers. You know physicians community very important but when you get to know the payers it everything changes and it sounds like that's you know the goal of wherever you guys are going to go we've been very fortunate so very lucky especially in the last two years so and the community has accepted us unbelievably so that's awesome so what advice would you have for business owners who are considering doing something looking for a partner in 2020 22.
What do you think is most important for them? So, I think it's important that they understand that the climate has changed to a component of don't fear the opportunity. You know, we're all physical therapists. We've all opened our own businesses and our business has just deviated a bit where it there's a consolidation component based on community and payers. And you should not fear the opportunity. I think that's the most important thing. As you know, you've got people calling you and your partners each and every day.
And I think your team does a great job in calming the fear. But I think everybody gets intimidated with the accountants, the lawyers, the investment bankers. Understand at Jagu One, we are physical therapists talking to physical therapists. At the end of the day, when the transaction is done, there's no lawyers. There's no accountants. It's all about treating patients and giving the best outcomes. And sometimes people fear the process because they think the lawyers are going to be here the rest of their lives. Once the deal is done and transacted, we don't see the lawyers again and it's all about business as usual.
So I think it's really don't fear the process but also don't put yourself in a situation that the consolidation happens around you and you find yourself on a short sale. You have the opportunity to be partnered. You have the opportunity to grow. You have the opportunity to generate capital off of a transaction. You should definitely start having conversations. And Paul, as you know, look at what's going on around the country in every outpatient specialty, not just physical therapy. And as you know, it's being driven by the payers wanting that consolidation factor and wanting it to happen.
Yeah, John, great advice. And you know, it's just so great. You know, I am a physical therapist. It's so great to see folks like yourself physical therapist, athletic trainer that you know John, you're a physical therapist and athletic trainer at the core but you have become a sign a really great executive and have done a great job at managing something that's over a hundred clinics. So yeah I certainly commend you for all of that. John, I appreciate your time today. I think our viewers got a lot of great information.
And if any of you out there have questions on anything that John and I discussed today, click below, let's talk. John, thank you so much for joining us today and I look forward to talking to you and seeing you in the near future. Sounds good. I appreciate the opportunity. Thanks again and everybody have a great day. Thanks, John.
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