Prognostication can be a tricky business, even for those among us who have insight to lean on, and a strong set of evidence and research (like my friend and colleague Larry Benz, who also has shared his 2023 predictions). Larry and I have done these prediction blogs for quite a few years now, independently of each other, to be clear, so I was interested and flattered to see we have some overlap, with a few differences. We have a pretty good track record going into 2023, but I will be frank, I wouldn’t mind being wrong about some of this years predictions. Regardless, it’s smart to look ahead so that we can be as prepared as possible for what’s coming down the pike.
The economy will get worse before it gets better.
I hate to start off on a downer, but a recession is likely on the horizon in 2023 because of some long-gestating trends like high interest rates, increasing inflation, and global trade and political instability. And it’s not just me doomsaying: there are plenty of experts predicting an economic downturn at some point next year, both in the U.S. and around the world.
PTs will continue to bear the brunt of cost-cutting measures.
We avoided the worst-case scenario when Congress reduced the physician fee schedule cuts from 8% to 2.5% with the passing of the omnibus legislation. However, with this $1.7 trillion push into the economy, inflation will remain a big issue, perhaps for longer than we would like. This will create some unfavorable scenarios for physical therapists in private practice.
As the economy takes a hit, we’ll likely see additional spending cuts across governmental agencies and organizations, CMS included. Reimbursement cuts are nothing new for PTs, we saw yet another reduction in this year’s final rule, and in pretty much every final rule for the past five years, which the AMA summed up to a 22% overall reduction to physician payments between 2001 and 2022. And there’s not much hope for a reversal in those trends if we find ourselves in a global recession in 2023. The government is likely to look to reduce spending during the recession—and rehab therapy could be a likely target for an additional 5% to 7% cut to reimbursement when next year’s proposed rule is rolled out.
Such a cut may be the last straw for many small to mid-sized businesses and a decline in PT providers willing to see Medicare patients altogether, which could mean a disappointing disruption to vital healthcare services for many communities across the country or worse yet, we lose ground to chiropractors, personal trainers or massage therapists who are willing to see these patients on a cash pay basis.
Start planning for the inevitable.
I don’t think that PT is as “recession-proof” as much of health care is perceived to be, which means that our profession must be prepared to deal with a potential decline in traditional insurance-based patient visits when creating a 2023 budget, at least temporarily (Q1 through Q3 is my guess). With the contraction of the economy, higher co-pays and new year deductibles, patients may be swayed from seeking the services they need. And with interest rates likely to continue to rise during the first half of 2023, it could be expensive and risky to find the ROI on a business bridge loan.
During WebPT’s webinar on pandemic readiness, we recommended building up cash reserves equal to three months’ expenses. I would recommend at least that in preparing for a recession, and if you can build those reserves to four to six months’ expenses, all the better. Now is the time for some austerity measures to weather the storm ahead. With that in mind, it may also be time to start looking seriously at alternative revenue streams and hybridized care models if you haven’t already—which leads me to my next point.
Add remote care to your offerings.
Remote therapeutic monitoring (RTM) has seen tremendous growth over the past two years, as the pandemic forced clinicians to look to new methods of treatment. And it could prove to be a lifeline for rehab therapy once more—this time as a new source of income during an economic downturn. Diversifying and maximizing revenue streams should already be a priority in your clinic (goodness knows I’ve belabored this topic enough over the past couple of years), and a recession will put even more pressure on practice budgets. If you haven’t already made hybrid care, telehealth, and/or RTM a part of your treatment plans, building a plan on how to implement it in the new year is prudent.
Financial turmoil will lead to more consolidation in rehab therapy.
Uncertain times can prompt business owners to seek security for themselves and their employees—which is why I predict that the looming recession will lead to more mergers and acquisitions (M&A) within the PT industry. Private equity-backed businesses are offering both stability and economies of scale, with more benefits and resources to support and grow clinics under their umbrella. And interest in this option is growing.
In WebPT’s most recent State of Rehab Therapy report, we found that 13% of clinic leaders were more interested in selling than they had been in the previous year, with the figure reaching as high as 30% for physician-owned practices. Similarly, 27% of clinic leaders listed
either merging with another practice or getting acquired as a growth strategy for the next five years, with 15% considering acquiring another practice as a growth strategy.
This trend has certainly been reflected in the current market—as Martin Healthcare Advisors Founder and President Paul Martin MPT, CBI, M&AMI lays out in this webinar, 2021 saw more than double the number of M&A deals than took place in 2020. And while there were some mitigating circumstances that kept the number of 2020 deals low—namely, COVID—we’ve seen an overall increase in the number of acquisitions year over year.
Meanwhile, with cash being more “expensive,” acquiring companies are likely to be more discerning when it comes to which PT businesses they’re looking at—and definitely more stringent when looking at metrics. In this type of economic environment, cash is king—so there may be less patience exhibited by the acquiring company to implement cost-cutting measures to gain the return on investment far sooner than their peers who were acquired a year or two ago.
We’ll see the continued growth of Medicare Advantage.
In case you haven’t noticed, Medicare Advantage is having a moment. Although Medicare Advantage plans are offered by private insurers, CMS limits what patients will have to pay out-of-pocket. And a growing number of Medicare patients are taking advantage of the potential savings.
According to MedPAC, there are 28.7 million enrollees in Medicare Advantage as of February 2022. That’s an increase of 2.3 million from the 2021 enrollment numbers, and an increase to 49% of all eligible Medicare beneficiaries enrolled in Medicare Advantage. This growth isn’t a sudden spike, either—enrollment has steadily increased from 2010, when the number of beneficiaries stood at 11 million. With the cost of living rising with inflation, I believe that we’ll continue to see patients switch to Medicare Advantage in 2023 and beyond.
Why this shift?
People are looking for ways to cut their healthcare costs and are lured into the promise of extended benefits, limits on out-of-pockets costs and more provider choice. Patients and insurers see these plans as a win-win situation: patients have more benefits for cheaper costs, and with a relatively active aging population the profit margins on these plans are remarkably high for the insurers
So where does this leave the provider?
Unfortunately, we are not sitting in the winner’s circle. Medicare Advantage plans have greater administrative burdens than traditional Medicare and often pay less than traditional Medicare depending on your contract with the insurance provider—which is why revenue and referral source diversification is going to be key to navigating the trends of consumer insurance choices.
As insurance costs continue to rise and economic trends tighten patients’ budgets, expect to see Medicare Advantage enrollments continue to rise.
More businesses will move away from private insurance.
Along those same lines, I think we’ll continue to see more businesses move away from the traditional private insurance model. Healthcare costs continue to skyrocket, with employers expecting costs to increase 5.6% in 2023. Companies are looking to save money and cut expenses where they can, and an obvious candidate for cost-cutting is getting rid of the insurance middleman and taking the route of direct-to-employer contracting—and it’s where rehab therapy has an opportunity to play a big role—and we will!
PTs are making the case to the growing number of self-insured employers that physical therapy offers long-term savings on their health care costs and working with them to figure out the best way to offer care to their employees—whether that’s onsite or in-office visits or some combination of those options. Larger rehab therapy organizations like Confluent have already implemented these types of programs, providing both onsite PT services and accessible clinic locations, making it easy for employees to see a PT for treatment and furthering the “PT-first” cause.
Digital MSK companies will bring AI into traditional care models.
The past few years have seen an influx of digital musculoskeletal (MSK) startups. Companies like Hinge Health have capitalized on the trend toward telehealth and employer-sponsored healthcare. And while I think that digital health is a vital tool, and will only continue to grow, I’m quite certain that PT will not (and should not) go away entirely from hands-on care.
That’s not to say that these companies are going anywhere; they’ve clearly garnered some impressive financial backing and are catering to a growing number of employers. Rather, my prediction is twofold: on the what’s-old-is new-again side, I’m predicting these digital health companies will need to incorporate some traditional models of care, complete with placing therapists inside their customers’ brick-and-mortar buildings. Conversely, the use of data, artificial intelligence, and bots (like OpenAI) by these companies and others are the diagnosticians of the future.
We are on the horizon of an incredible technological revolution in healthcare and physical therapy services will not be immune. AI-human collaboration will be the future as we gain access to massive data sets and quantum computing capabilities. This is not about replacing PTs but rather enhancing our ability to treat patients with more precision, decreased human error, and predictability. This is by far the most interesting prediction, in my opinion, and the area to be mindful of and open to—the future is coming much faster than you think.
Patient awareness of PT will continue to grow.
We’re slowly but surely seeing progress in our years-long mission to bring greater awareness of PT to the patient population, and I believe that 2023 will be another good year on that front. Much of that is due to the vital work done by both individual PTs and practices to build relationships within their communities and to educate on the value of PT. But circumstances have also conspired to offer PTs this moment to demonstrate our value.
As of 2018, MSK conditions cost the U.S. healthcare system $420 billion, making it the most expensive chronic condition for payers. As the number of MSK conditions continue to increase, we’ll see more patients and PCPs recognize that the “PT-first” approach is the right solution for treating many MSK conditions in terms of efficacy, outcomes, and long-term cost savings. And with the growing evidence of the physical cost to patients of relying upon opioids, surgery, or both in treating those conditions, it’s never been more important to promote the benefits of the “PT-first” approach.
Getting there may still take a bit of work, however. At the risk of sounding like a broken record, PTs must continue collecting and sharing data that demonstrates both improved incomes and a return on investment for insurance companies and employers. And we have to be ready to meet the moment—which means having enough PTs for the new influx of patients.
PTs will continue to leave clinical settings for digital healthcare opportunities.
There’s a lot of evidence that PTs are looking to leave the profession in great numbers. WebPT’s 2022 State of Rehab Therapy report found that 14% of respondents were considering switching to a non-clinical role, and 12% are considering legging healthcare altogether. Similarly, the Bureau of Labor Statistics (BLS) projects an average of 15,400 job openings a year for physical therapists between 2021 and 2031, as clinic leaders look to replace PTs that have retired or left the profession.
Anecdotally, we saw the greatest number of PTs applying for positions at WebPT in our history in 2022, so there’s definitely something to the trend. And digital healthcare seems to be the beneficiary of this mass exodus, as they offer the chance to stay within the industry without having to deal with the headaches of Medicare reimbursement cuts and the ever-increasing demands to work more hours and see more patients just to turn a profit.
To meet the demand of the aforementioned increase in new patients, we must do better at keeping the PTs that we have and expanding our workforce. Unfortunately, we can’t even come to a consensus on whether there’s a turnover problem; while the workforce is telling us that there’s a retention crisis with their feet, the APTA and academic governing boards seem to believe that we’re producing too many PTs, and expanding DPT programs too quickly.
We must come together to understand both the staffing shortage we’re contending with in the industry, as well as the challenges and pressures that working PTs are enduring and address those issues—otherwise, we will continue to move talented therapists out of clinical care and face a staffing crisis of our own making. In the meantime, the pace of transition to a greater use of technology and self-serve options for patients must accelerate to allow clinicians to have improvement in their workflow efficiencies and do more with less.
WebPT will have its best Ascend yet.
On a more positive note, this year marks the 10th anniversary of WebPT’s Ascend conference rehab therapy’s premiere business summit hosted by WebPT. I’m beyond excited to see so many of you in person. Rest assured, this year’s event is going to deliver incredible speakers, stimulating educational content, and unique networking opportunities attendees have come to expect. But being a celebratory year, we’ll be pulling out all the stops to ensure it’s our best Ascend yet. I’m hoping you can join us in Phoenix from September 21-23 for what’s going to be one heck-of-a celebration.
Speaking of celebrations, this year’s Ascend is also an opportunity to raise a glass to WebPT’s 15-year anniversary and take a look back on just how far we’ve come. I would’ve never imagined as a working clinician with no previous experience in tech that we’d go from the back of a coffee shop to nine consecutive years on the Inc. 5000 list of fastest-growing companies, or that we’d have such a tremendous impact on my cherished industry but here we are! And while awards and plaudits are great, what I’m most proud of is the team and the culture that we’ve built at WebPT, the Members who have stuck with us through all the bumps in the road along the way, and the incredibly supportive friendships that have been made over the years—with John Childs, Larry Benz, and the EIM team being among them. I can’t wait to see what the next 15 years have in store for all of us!
Well, there you have it—the year to come in a nutshell. The good news for you is that you’ve got advance warning, so that you can plan accordingly for what the future might throw our way.