Here Are 6 Market Factors That Will Make 2025 A Pivotal Year
This week, Paul reflects on what lies ahead for Rehab M&A in what promises to be a pivotal year.
Full transcript
Generated from the episode audio and lightly edited for readability.
Hello and welcome to a special New Year's episode of the Martin Rehab M&A Advisory. I'm Paul Martin and as we enter into 2025, I just want to reflect on many of the opportunities and challenges that lay ahead for the rehabilitation industry. First, you know, I feel privileged to have been connected to the network of people leading this field, and that's all of you as business owners. Your dedication to your patients, your communities, your teams continues to inspire me and I'm glad that I am able to be here to help you navigate what promises to be an extremely pivotable year.
We've been running a series doing lots of interviews on how you can make the best decisions for 2025. So, let's talk about what kind of lies ahead. First, the economy is expected to remain somewhat stable. Let's face it, though, there's always uncertainties, especially with new policy changes on the horizon. Unpredictable shifts from Washington as well as international developments could impact all of us. And as business owners, staying agile and prepared for these challenges in 2025 will be critical. Unfortunately for all of us, one of the first challenges of 2025 is again once again a proposed 2.8% reduction in the Medicare conversion factor for physical therapy practices.
This means tighter margins which you already have tight margins and it could absolutely strain your bottom line. But how can we respond to this? And I'm going to give a couple ways that I believe you can respond to this with strategies to try to maintain that bottom line. First and foremost is a focus on operational efficiencies. Sounds simple. Capture what your therapists perform, all that they perform, and make sure that they're billing for all that they are doing with their patients. This sounds simple, but it really is a challenge in this current environment and it needs to be confronted in ways that actually inspire your therapist to comply with this.
If you go to them with operational efficiencies, that is probably not going to be the best approach. It's let's go to them with you are providing the level of care necessary for each and every patient and we as the therapist community deserve to be compensated for the efforts that you are making. And remember when it comes to focusing on operational efficiency small improvements can make big differences to your bottom line. Secondly is continue to advocate for reform. Stay informed and engaged with advoc advocacy efforts led by the American Physical Therapy Association and many other organizations that are pushing for long-term solutions to these Medicare cuts.
Look, the Medicare decrease is a challenge, but it's also an opportunity to tighten your operations and improve financial resilience. Later this year, we anticipate and now we're moving towards acquirers, but we anticipate as we move through 2025 an increased interest from acquirers, but this market is not what it used to be. There are more sellers in this market than ever. And this increased competition for each and every deal. And it increases competition for the best deals. Acquirers are more experienced. They're somewhat more cautious and they're carefully evaluating where and how to invest.
So, what this means is that sellers need to be strategic. It's not just about the highest price. It's about finding the right fit with the best structure for your long-term success. The market is evolving with new acquirers and introducing fresh approaches to deals every single day. And some of these strategies will align with your goals and others may not. Take the time to evaluate all potential partners and understand how their vision fits with your vision. That is first and foremost. The new ad administration is eager to impact bold challenges in healthcare.
These changes could create opportunities or risks for we in the rehabilitation business. Staying informed and proactively adapting will be key in staying ahead. More midsize businesses in markets across the United States. Businesses with clinics between seven and up to 50 clinics. It seems like those businesses are popping up in markets every single day. And I don't mean popping up starting with seven to 50, but they're continuing to grow into that midmarket as we consider in the physical therapy industry. Their business sophistication and strategic preparation really raises the bar for everybody.
So, if you're considering selling or growing, you're going to need to position yourself competitively against these more advanced and larger players. So, I think 2025 is a year of both challenge. As we mentioned in the beginning, it's a year of both challenge and opportunity. And here's how I think we can compare. Here is how I think you can prepare. First and foremost, it's a great time to conduct a business assessment. Look at your strengths, look at your weaknesses, look at where you are positioned in your market, and have a great understanding of your current value in today's market.
Number two, plan for these Medicare cuts. Titan operations focus on maximizing every revenue opportunity that you have. If you have a couple key players in your practice, pull them together and discuss with them strategies that you can employ going into 2025. And as we've mentioned a number of times, keep informed. Keep up with the policy changes, market trends, and try to adapt quickly. I will tell you we continue on a weekly basis to come out with anything new that we are saying seeing that will impact the rehabilitation industry.
And finally, seek expert guidance. Whether you're looking to grow, looking to sell or transition or partner, or simply improve your operations, get advice that is tailored to your goals. At Morn Healthcare Advisors, we are so excited for 2025 and we are here to help you make the best decisions for your business in what we are continuing to see is a very dynamic environment. 2025 will undoubtedly bring its challenges, but it's also a full opportunity and it's a year that will have potential for those who are prepared.
Those who are prepared, as I just said, to take full opportunity. So, let's tackle this together. Let's tackle it with optimism. Let's tackle it with strategy. Let's tackle it with a commitment to making a difference in our community and for our patients. So, once again on our special New Year's episode for the rehab Martin rehab M&A advisory, from all of us at Martin Healthcare Advisors, we wish you a happy new year. Let's make 2025 a year of growth and success. Thanks for listening in and have a happy new year.
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