The Path to Greater Value, Part 04: Duration of Care
Paul continues his series on maintaining value in a down market, explaining how measuring and improving visits per new patient can raise EBITDA without simply pushing therapists to add visits.
Full transcript
Generated from the episode audio and lightly edited for readability.
Good afternoon and welcome to another episode of Paul Martin's guide to finishing well and the Martin rehab M&A advisory. Today we are going to continue in our series and this series is how do we maintain value in a down market when multiples are down? How do we maintain and even improve our value? And today we're going to talk about a strategy that we call duration of care and how by utilizing that strategy we can actually increase our EPIA by improving and measuring how we can improve our duration of care.
You know [sighs] we've talked over the last many weeks that there is bad news. The bad news right now in the market is that the economy is struggling. Multiples are down. But I come today with to you with good news. And that good news is there are still 20 plus strong acquirers and aggressive acquirers who are looking to acquire and do great deals. And in order to maintain and get the same value that your peers in 21 and 22 received, you can increase ibida. You can lower your risk and you can drive significant value.
So where do you start? Well, we need to draw a performance baseline. Performance baseline is your company and how you perform in many areas of the business as compared to high performing companies. And these are companies that we compare to companies in similar settings based on your size, your geography, the patients that you see, the type of patients that you see, and the payers that you serve or that serve you. And so driving EBITDA up is the goal of driving your value to maintain that value in this D down market.
And what we have come up with and what we have found is that there are common opportunities for significant improvement in that epa. And those areas that these are what we would call the levers that we pull. One is charge capture. We talked about that a few weeks back. Another one is professional staff productivity levels. We've talked about that one. Today, we're going to talk about patient duration of care, better known as visits per new patient or visits per referral. And then finally, referral generation. Now these first three that I just described are all what we call proforma changes which means these changes stay with you every day that you maintain these levels of performance.
Referral generation is something that happens over time with new patients more new patients coming in each week each month and so on as you continue. So these perform changes are significant and are crucial. So let's talk about duration of care. Again, better known as visits per new patient. Hospitals will call it length of stay. This is a very difficult change for many practice owners to make with their staff. And why is that? You know, the goal for many physical therapists is to get the patient better in as few visits as possible.
Less is better. In fact, we have seen this to a point where it appears as though physical therapists are playing the old game, name that tune. I can name that tune in five notes. I can name that tune in four notes. So, how few visits can you make and still get the patient better? And so, just simply pushing your professionals to do more visits. Hey, we need you guys to just do more visits, that is viewed as unethical and that is not the approach that you want to take in order to improve your patient duration.
You know what is the right metric for duration of care? What's the what's where is it right? Okay, look we commonly see across the country anywhere from 10 to 12 visits per referral or visits per new patient and then you kind of work up from there. Right? That is what I would consider a topdown approach. I mean, we might as well just set a profit target. Okay, we want to get a profit of $500,000. We want to increase that to $570 and we want our therapists to help us do that.
Professionals do not buy in to arbitrary topline financial or operations target setting and again especially financials targets. So that top-down approach will not work. Name that number. We want it to be 12. We want it to be 13 and work up from there does not work. So, how about a different approach? How about an approach that we first get right to the center of what we do, which are our patients? And some questions that we should have answered by our team, by our professional team, okay?
Is first of all, should all of our patients be formally discharged? Meaning they come to an end of their care. The therapist deems that they are now able to continue on a home program, continue follow up with us in three weeks, whatever it may be, and they're formally discharged. A little celebration for a discharge. I believe that answer is absolutely yes. Drifters are dangerous to your practice. Meaning I'm not sure what happened to Mr. Jones. You know, he seemed like he was getting better and then he didn't show up Wednesday and then now we're two weeks later.
I'm not really sure what ever happened to him. Drifters are dangerous to your practice. What are they saying out there in the community that they were able to be left to just drift away? I went to physical therapy many years ago. It was after I had sold my practice, went to physical therapy, and I was a drifter. I was a drifter because I thought I got better. They never called me. They never followed up. I canceled my appointment, which was the only appointment I had that week.
My duration of care was four weeks, three times a week. I only went for four visits and I canceled the rest. Nobody ever called me. Nobody ever asked why I drifted. Come forward about 15 years. I had therapy here in Florida for an injured knee. I'm a runner and an injured knee and I canled an appointment. That therapist called me the next day. Hey, Mr. Martin, I just want to make sure you're doing okay. Hey, I want to make sure you're not on the schedule next week.
Could we make sure? I was going to drift, but I didn't. And I'm so glad I didn't because I went in, he had some new things for me to do and to try and I wasn't ready for those things. So, how many drifters do you have in your practice? Next question is, how do we measure full recovery? Now, I know APA and many sources will say we're not supposed to take patients to full recovery, but I will tell you this. If I have an athlete and that athlete has to play in a football game next Saturday or in a wrestling match, whatever it may be, we better make sure that athlete can do those things to mark a level of recovery that they can go back to the sport or the job or the kitchen or whatever they were doing before.
We have to know how we measure that and then we can come back to how we then formally discharge. Another approach and a question is what is our level of engagement with each and every patient and I think as therapists we don't always see ourselves as service drivers. You know customer service is not important to a therapist because we're providing skilled clinical care. Well, how does customer service drive improved clinical service? I think it's dramatic and I know you do too because strong levels of customer service means engagement and engagement absolutely has an impact on the outcomes that you achieve with your patients and that your therapists are achieving with their patients.
Now, you'll notice in all of this, I have never talked about 10 visits per referral or 12 or 14 or 20. We're talking about bottom up, which is what if we had a practice that every patient needed to be formally discharged. We'd be calling on those people who have just drifted. And do we all have an understanding of what full recovery means? And have we engaged with each and every patient. So literally they would want to have us over for Thanksgiving dinner. This is the bottom up approach that we have used and have been extremely successful in driving significant increase in duration of care because many of the reasons why these patients did not have long durations we because they drifted.
They did not get a call back. They did not get a reminder, etc., etc. So, what is the best clinical care model on our bottom-up approach? Hands-on functional activities. What does a patient have to do to get hands-on and have us skilled professionals watching them do functional activities? They have to come in for their treatments. Home program success has been measured to be about 35% of our patients are actually doing any of their home program. They may tell you they're doing it. 65% are not. Okay?
I'm not taking that chance with my patients that they're just going to continue on a home program and continue to make the improvements without my hands on them watching them with their functional activities, etc., etc. So, what's the best patient engagement model? How do we truly engage our patients? Well, I really think it comes down to the commitment that has been made. And that commitment needs to be made by the therapist and by the patient. I will work harder for you, Mr. Jones, than any therapist that you have ever worked with.
I'm going to give you all that I have, but I need to get a commitment from you that you're going to come into every scheduled visit and stay with me through the duration of care that we have set out and the plan that we have set out from you. Will you make that commitment to me? Not sure our therapists are doing a lot of that, but that is powerful. That is powerful. Having your therapist give that commitment and requesting a commitment from the patient. So again, the bottomup approach, best clinical care model, best patient engagement model.
What's our best service model? Well, service starts from the second that a patient gets on the phone or steps into our office. But some of the things that I have seen that patients talk about when they're talking about high levels of service for physical therapy facilities is flexible scheduling. If I can't come in later today, is there any way I can get in tomorrow morning? Yeah. In order to have flexible scheduling, you need to have flexible staff. Okay. Your staff needs to be flexible. Best service model I also believe is two or more visits per week.
I don't say that because I know what but I'm telling you when you get to one visit per week and we're not actually putting our hands on the patient we're not actually going through some of those skilled whether it's neuromuscular rehab therapeutic exercise activity whatever it may be two or more is I think a best service model constant reminders for patients that they have agreed to that remind them about their patient about their treatment tomorrow about their visit the next day, whatever it may be. And we have to follow up missed appointments as though literally they have not shown up on a date.
I mean, you know, we want to follow up on missed appointments first by that front desk. If the front desk can't get to the patient has to go to the therapist, we have to have a system set up to follow up on missed appointments because we cannot have any drifters. No drifters. And then finally, a steadfast approach to our therapist making all of their appointments. You can't just come in for a few of your appointments. We need to come in for all of our appointments because this is very important to your health and this is very important to me being successful with you and you having a successful outcome.
This is a bottomup approach. And I will tell you that if you take an approach like this, and we can help you do that. We do this all the time. The topline numbers of visits per episode, visits per new patient is probably going to take care of itself. Not saying you should not set a target, but first and foremost, let's look bottom up at what we can achieve. And I think it's going to be significantly greater than where you are today. So look, you know, when you are clicking on all cylinders of these proforma changes, all right, we've now made charge capture changes, we've now made professional productivity changes, and we've made visits per new patient changes.
You will see that your IPA will literally go through the roof which will then take your value through the roof. So let's continue to look at your practice and how if in fact you want to take your business into the market sometime in 2023 or 2024 that you can be clicking on all cylinders. And if you want to be doing that, click below and let's talk. Thanks and have a great day.
Want to talk about your own business?
Marlton, NJ 08053