Your Relationship With Your Payers Is Everything
Paul revisits his interview with John Gallucci of JAG-ONE Physical Therapy on working with payers, PT First, health system alignment, growing within your geography, and staff after a transaction.
Full transcript
Generated from the episode audio and lightly edited for readability.
Good afternoon and welcome to another episode of the Martin Rehab M&A advisory. Today we're going to take a look back one week ago when we did an interview with John Gallucci and we're going to discuss opportunities for action that you can put into place now. As you recall, John is the CEO of JAG One Physical Therapy and I can tell you this was a really unique and interesting interview and I think there's going to be a lot of opportunities for you to put some strategies into action.
You know, John is one of the first acquire CEO guests of our show that when we asked him to distinguish his company, why his company is was unique, he talked about the fact that they work collaboratively with the patient, the doctor and the payer. And he described that collaboration. He described that collaboration to result in the best outcomes for their patients and in addition the opportunity to be paid for the value that they provide. You know, this is something that is funny and John is not afraid of the payers.
In fact, in one of my first meetings with John in a small group, he said tongue and cheek when asked, "How do they get better reimbursement?" He said, "We punch the payers right in the mouth." Now, obviously, he didn't mean that. What he was saying is that they work very closely with their payers and they're not afraid of them in any way. As a smaller company out there in the market, whether you're one clinic, five clinics, or 25 clinics, yes, this is definitely more difficult than a JAG 1 that has a 100 clinics and has a lot of market coverage.
But the only shot you have of improving your reimbursement is via the payers. So whatever you can do to start a relationship with the payers, the better shot you have of repeat of improving your reimbursement levels. And you know given this relationshipbased model, JAG 1's strategy for growth is to stay within the geography where they believe they have a distinct advantage over their payers. I'm sorry, over their competitors. And so for you as a small company, this is a great strategy that we can all learn from.
And that is to look within a radius of our clinics and our practices to where we're going to grow to make sure that we continue to bring along those relationships that we have with our patients, our communities, our physicians, and our payers. You know, we're a big advocate of what we call the Olympic ring strategy for growth. And what that means is that as you continue to put when we call dots on the map, where your clinics are, that the radius around each one, there's an intersection where you have commonality between your referral sources, potentially your communities, as well as your payers.
And this and this is something that Jagu has done a really good job. They're very very cons very focused in staying within a geography that they believe they know well. You know, another area that we discussed is that John is a huge advocate and implement PT first. And again, this is an initiative that as a part of the physical therapy private practice in the United States, we have all been pushing and this is definitely an opportunity for us to show the payers the evidence on the value that we that our care provides and how we can save the insurance companies money in the future.
And that's how John has approached the insurance companies. Not simply we provide better care than our neighbor, but how can we save that insurance company money in the future by providing them a higher value care and PT first has shown lots of evidence on when PT is chosen first that these patients have a much better outcome. What a great lesson for all of us. You know, another really great point that John brought out was that the investors in this industry, meaning the private equity groups that are behind these companies like John JAG one, that they see less risk with companies that are in network.
And so John's point is to find a way at all possible to work with your payers and ultimately that will get you a better value in today's market. I know many companies out there believe that being out of network or a cashbased practice is going to sell better, but that is actually not the case. The large companies in this industry see greater value in companies that are primarily in network. You know, it's also remarkable and very unique that JAG 1 with over a hundred clinics, they have seven therapists on their executive team and all of whom still treat patients.
And again, this is very unique. And John and Jaguan have made a big investment in aligning themselves with local health systems. This is something that back to my former company and with many companies that we have worked with over the years, we are strong advocates of trying to align yourself with local hospitals, local health systems. And you can do this whether you're a large company or you're a locally focused company. There are opportunities to align with health systems and provide value to them. You know, something that is similar among all or most of the large companies out there, and this is something that most business owners have a great fear of when they consider that they're going to go into a partnership with a larger company, is that they believe that their staff will be at risk if they move forward with a sale or a partnership that their staff that they're going to lose staff, that their staff is going to be let go.
And John made it really clear that the last thing that they want to do is to eliminate staff after a transaction. And that in just in the large majority of the cases, these staff members that may be at risk are always identified before the closing of a transaction. In our experience, we rarely see staff eliminated. And if they're going to be eliminated, it's something that's discussed with the practice owner, the business owner before the closing of a transaction. And we heard that loud and clear from John.
You know, if any of you out there right now are considering that you want you may want to take advantage of this current market that is very unique, the mergers and acquisitions market in this industry is very unique right now. Click below and let's have a conversation. Thank you. You. I look forward to talking to you in the very near future.
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