How To Grow In Uncertain Times
In the first episode of our new series, Paul speaks with Rick Lybbert, CEO of Mountain Land Physical Therapy. Rick asserts that despite growing instability, owners can still focus on growth. Rick also offers key insights into how you can make your company stronger.
Full transcript
Generated from the episode audio and lightly edited for readability.
Hello and welcome to another episode of Paul Martin's Crucial Conversations. I'm Paul Martin, founder and president of Martin Healthcare Advisors. And in today's episode, we've titled this clarity amid the chaos. What rehab owners need to know and they need to know it now. And I am thrilled today to be joined by a new guest to our show, Rick Libert. He's a physical therapist. He is the CEO of Mountainland Physical Therapy. Rick, welcome. Thank you. It's it's great to be chatting with you, Paul. Great to have you as well.
Rick is not only a board certified orthopedist specialist, but he's also a passionate advocate of adaptive sports and community wellness. A lot of good stuff written about you, Rick. And under his leadership, Mountainland, which is a minoritybacked private equity-backed company, has grown into the largest outpatient physical therapy provider in the Mountain West with over 70 clinics across Utah, Idaho, and Montana. Congratulations on that growth, Rick. Thank you. Yeah, it's been a lot of fun. And Rick brings a wealth of experience and insight into what we're going to be talking a lot about today and that's the complexities of the rehab M&A industry.
So Rick, let's dive in. Okay. All right. I will be the question guy. Is that okay, Rick? Yeah. Yep. That's that's fine. So, you know, we don't we don't jump on either side of an election, but Trump is now back in office. Okay. How would you describe kind of the M&A outlook for outpatient rehab in 2025? Are we feeling more optimistic or cautious and why? Well, you know, I can just speak from my experience and my experience has been that there it's still a very strong market and I don't see that changing.
If you've got a good business that you've prepared for sale and it's it has a good future in it, we're seeing still seeing a lot of people, you know, a lot of activity around them. I I'm not the only one that's interested in these assets and so I don't I don't know that it's changing a whole lot. Good to hear. And I'm sure that's good to hear from the folks out there. You know, and these are both public, you know, they they've gone public that they are in the market.
Confluent H2 Health, but those deals at least with no new announcement seems to have stalled, you know, do you think that brings concern to current investors or would that drive the appetite bigger or for bigger deals or for smaller deals? How do you think that has impacted the industry? You know, again, from my experience, it hasn't changed a lot. There's still seems to be quite a bit of interest in M&A in the stronger assets, the ones that are welldeveloped and prepped for an acquisition. There still seems to be a lot of interest there, and it hasn't changed my interest any.
I'm still looking to grow, especially in the Mountain West states, and looking for those businesses that align with our culture and align with our vision and that have good strong metrics in place and good operational processes. Yeah. Any reason why you think some of these larger deals would have stalled? You know, I can remember in the in the past when any of the big deals, and I'm not asking you to dissect either one of these companies, but it seems to be more on the buy side than, you know, these companies, but any thoughts as to why some of these larger deals seem to stall in the in the in the big market?
You know, Paul, honestly, I don't know. That's probably above my pay grade and I wish I had a better opinion for you on that, but I really don't know. Yeah. Yeah. And I don't think that's too different from many CEOs out there now. Again, none of these things are public on the inside. So this these are just surface things that we're seeing. I'm going to use the T-word that everybody's hearing, but you know, you got you got tariffs in place, inflation concerns resurfacing. Are these pressures impacting deal volume or deal structure and higher debt costs?
Is that changing the way acquirers like yourself are approaching acquisitions in any way? It it probably is making you know we're definitely thoughtful in the price that we're paying and you know we want to make sure that we're competitive and at the same time that we're comfortable being able to continue to grow without putting ourselves in any situation where we could you know put ourselves in a future problem with debt. But it I don't know that it's really changed like multiples a whole lot at this point.
It's not like we're seeing multiples go down, but we're also we don't have an appetite for multiples to go up either. I would say it's pretty steady. Yeah. You know, there's also been some talk of corporate c tax cuts. How would some of these changes affect for you guys timing and should sellers be thinking about their timing as it relates to, you know, some of these things that are going on now and some of these things that may be coming in the future? What would your advice be there?
Well, us specifically, we're just getting started. So, and things can change over time. So, my head's in the space of growth. I imagine if we were more at a at a spot where we were looking to have a transaction, that would be influential and it would be part of the conversation. But for us, we're just looking to grow and looking for really good businesses that align with our culture. So, you're staying steady, kind of like the ship going through the ocean. Yeah. And not a little speedboat that's getting bounced all around by these changes.
No, Paul, we're having so much fun. I mean, this is, you know, I see all of this as fairly temporary and it'll solve itself. Yeah, physical therapy is such a strong market. When you look at the need for physical therapy and the more that we're recognizing that there's a primary care provider shortage in the nation and physical therapists are really best positioned to help solve that problem. Muscularkeeletal standpoint. I think all of this is just kind of noise for a moment and in the end physical therapy is a is a strong solution to something that the country needs and it'll work itself out.
Sure. You brought up a topic that we talk to so many of our clients about. We talked to so many of our you know our prospects and it's as you described we have just such huge demand. You know what we don't have are PTS or even PTAs with this nationwide shortage. How do you think that that's affecting the M&A market in rehab when companies just can't hire and retain? It seems like it's a thing, you know, I that's definitely a factor. You know, when we're looking at a business to purchase, one of the questions we have to ask is what's the potential for that business to grow?
And if a challenge in recruiting exists, that you know that can affect value. So, it's definitely an area that should be addressed when you're going to market. You you want to set yourself up in a position where you if possible you have a relationships and a pipeline to be able to continue to recruit and grow your business. Sure. Sure. Any suggestions on how they go about that? Would that be outside recruiters? Would that be an internal recruiting system or structure? You know what basic suggestions would you have for some of those companies that are really finding it tough a tough time to recruit?
Well, I think at the at the very basic level, you want to have good relationships with the physical therapy schools in your region and have systems in place where you're meeting with the classes and meeting with the faculty and you know having a relationship there so that you're giving internship opportunities to the schools and you have a relationship there so that you have the ability to recruit through the schools. The more networking you're able to do and you know develop those relationships I think are helpful.
Internal you know programs are helpful where you know you incentivize therapists to refer friends that are physical therapists. I think those are kind of the basic levels. If it's a business of size that's capable of having a recruiter, that certainly can be helpful as well. There's all sorts of AI that's helpful these days as well through LinkedIn and other other pathways that can be helpful for linking or for recruiting. Sure. Yeah. No, I we agree. And you know, it's amazing having conversations at the private practice section meeting or just conversations that we have that many companies don't participate in those things that you just described you know we we've also seen that you know there are local APA chapter meetings and while you know many business owners may not be all that interested in going to these local chapter meetings, physical therapists do when they go there they go there, you know, just to commune with other physical therapists.
So yeah, we see and companies that seem to be able to stay staffed do, you know, a couple, you know, many of those things that you just described. Bottom line, it affects your value. You know, if you're if you've got the relationships and the infrastructure in place, the processes so that you can continually recruit and you have a track record of that brings value to the business in a in a meaningful way. And if that doesn't exist, that also affects the value. It's time well spent.
Yeah, absolutely. We're talking a lot about the shortage of PTS, but I think it's important. What do you think generally for the PT profession kind of moving forward? What do you believe will have the greatest impact on the shortage over the next couple years? Well, the elephant in the room is how much physical therapists make relative to the cost of the education. You know, we've seen education, you know, costs go up significantly, inflation go up significantly. That's one of the bigger challenges in Utah that, you know, the cost of living has gone up substantially in the last few years.
We have got to come to a place where we're able to pay our physical therapists more, which means reimbursement needs to go up. And I think if we continue to think in the same, you know, kind of realm of utilization and negotiating with commercial payers and, you know, where it seems to be this game of the more we get, the less they get. At least that's the mindset. We're not going to get there. Yeah. We really need to switch gears and look at the bigger picture and go, hey, you know, there's no argument.
We have a primary care provider shortage in the nation that's even bigger in the Mountain West states. In these states that have more rural areas and one out of three visits to the to a primary care provider is muscularkeeletal in nature. There's no group better to solve this problem than physical therapists. Now, there are some barriers. The social security act is written such that that's a barrier to us being primary care provider. But there's also opportunities. Utah just became the first state in the nation to pass legislation where physical therapists are included in the definition of a primary care provider.
Montana just passed legislation like this last week that that defines physical therapists as treating physicians for injured workers. There's opportunity there and it's going to take effort where we can elevate the profession to an area where we're truly solving health care problems and we'll have a if we do it right we'll have a second chance to almost repric ourselves and hopefully put ourselves in a position where we can be paid fairly for the value we bring to the prof to the medical community. Absolutely. You you know you think back I think back to being in physical therapy school.
You know what I remember so vividly is much of what we were taught was about evaluation. You know, doing that evaluation and, you know, then coming up with that treatment plan and I would never knock physical therapists ability to carry out a treatment plan. But I think, you know, we talked a little earlier, physical therapy assistants are trained to carry out treatment plans under the guidance of a physical therapist. And that guidance doesn't mean that they're not seeing their own patients. It means that I'm there.
I've written the treatment plan and they're carrying it out. And I think that if physical therapy businesses are not willing to incorporate that in their future, they're going to have a tough time staffing and they're going to have a tough time if they try to go into the market. Well, Paul, I couldn't agree more. And the reality is we're going to have a tough time solving the shortage of primary care providers. Physical therapists at my opinion need to be thinking how can I deliver exceptional care while operating at the top of my license and utilizing extenders well-trained extenders appropriately so patients can still achieve their goals in the same fashion.
You know, an area that we're putting a lot of energy into right now is training our therapists in doing diagnostics, doing, you know, we have therapists that are performing EMGs. We've got a number of therapists being trained right now to do diagnostic ultrasound. This is the level that we need to be functioning at as primary care providers for muscularkeeletal problems. And if we're doing that, we're going to need assistance to be able to carry out treatment plans because we'll be so busy doing evaluations. Absolutely. Absolutely.
You know, you see in hospitals, nurses and nursing assistants and what they're able to do. And I think we need to start, you know, at some level taking that approach or we're just going to run out of the supply and the demand's going to overwhelm us. Yes, Rick. That was really key insights there. I appreciate that. So what do you believe sellers should be doing right now to position themselves for a successful deal in this current market? And are there any common mistakes that you see or kind of blind spots that you're seeing for them?
I mean, the bottom line is they should build a really strong business that's transferable, that has potential for continued growth. I think the most common mistake is probably staying keeping the business for too long. You know, I'll I it's not uncommon at all that I'll talk to somebody that wants to sell their business and they really wanted to retire two years ago and it's just at that point their business has started to decline. So, the value isn't as strong as it used to be. They really would like to be able to move on.
So, it's not quite as transferable. And so I think that's probably the biggest mistake. People need to be thoughtful about their exit strategy or how they're transitioning the business. They need to probably think five years in advance. This is just my opinion. You'd know better than me, but I think that's probably a reasonable window to start thinking about it. And then talk to somebody like yourself or somebody who understands how to create value in a business. I personally would much pre much prefer to buy a good strong business and pay more than to buy a business that is weaker and pay less be simply because it the my risk is a lot lower.
If it's a well-prepared business, my even if I pay more, my risk is significantly lower. And I and I I'm much more excited about a good strong business than I am maybe a good a good deal fixer upper. Sure. Do you see more value in companies where the leader, the owner, is willing to stay on for a few years, two to three years plus, versus a company where an owner wants to make a fairly quick exit. It I think the simple answer is yes, there is more value.
It also depends how the role that owner is playing. You know, if the owner is key to the business, then the answer is absolutely yes. And if the owner is playing less of a role and they've actually done the work in advance, so they've somewhat replaced themsel, then they have a little bit more flexibility on exiting sooner and quite frankly, the business might even be worth a little bit more because it's not cont, you know, the value isn't contingent on the founder. Yeah. Yeah. Really great insight.
Really great insight. Well Rick, I'm out of questions. But I will tell you that this has really been helpful and I'm hopeful that for the audience out there today that this has been valuable for them as well. Rick, I really appreciate you spending the time with us today. And for all of those with you out there, if you have any questions for Rick or I, don't hesitate to quick click below. And Rick, any final words? No, only I wish we spent the time with me asking you questions because you have all the real insights.
I always enjoy the time I spend with you, Paul. Thanks for asking me to be on this and I, you know, it's been a lot of fun. We'll come back to you again, Rick. Don't you can be rest assured of that. And for all of you out there, again, if you have any questions for Rick or myself, click below and let's talk. Thank you and have a great day and a great weekend.
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