This is the second in a two-part series by Dr. Larry Benz, Executive Chairman of Confluent Health. Read Part 1.
For 2024, there will be some consistent themes from the last few years, along with a few reaches! In no particular order:
Medicare Advantage Backlash
In 2024, there will be unprecedented Medicare Advantage backlash by providers of all types. By way of reminder, Medicare Advantage is the government program that has been the biggest windfall and source of profit for UnitedHealthcare and other large U.S. payors.
In essence, they are paid to administer Medicare at a fee from our taxes that is greater than the cost the government would incur if they administered the program itself. It has resulted in years of direct-to-consumer marketing (with the consumers being Medicare patients) through unending mailers, advertorials, commercials, and seminars disguised as health fairs, along with various payors attempting to merge (e.g., the failed mega-insurance mergers of the past and fairly recent).
Medicare Advantage now has the majority share, meaning that over 50% of Medicare-eligible patients receive their care from one of these private insurers. There is some speculation that, over time, the federal government might exit Medicare administration, a daunting prospect for providers given the strange truth that private payors are harder to deal with than Medicare intermediaries.
The beneficiary data tell us that five payors have 72% of the market share. If you doubt their incredible power over providers of all types, think again. How do they exhibit this power? Paying providers less than Medicare rates (e.g., 70% of Medicare fee schedule), imposing additional rules and regulations (arbitrary limitations on visits, codes, documentation requirements, etc.), and forcing providers into accepting their rates with ultimatums like, “you, Mr. Independent Primary Care Doctor, want to take our commercial product at 101.1% of Medicare rates? Then you must accept our Medicare Advantage product at 70% of Medicare rates.”
Lastly, in claims management, Medicare Advantage payors adopt a “deny, deny, deny” approach, further eroding the payor/provider relationship. And so it goes.
In 2024, providers will cease to mimic the famous “Animal House” spanking scene of, “Thank you, sir, may I please have another,” and revolt through lawsuits, refusal to take their patients, directing patients to competitors, and walking away from contracts. Rural hospitals are leading this revolt and will be joined by many.
Value-Based Payment Models Won’t Significantly Impact Physical Therapy Payments, but Alternative Payment Models Will Begin in Earnest
Going into 2024, discussions around value-based payment (VPB) models will increase, but they are unlikely to have a meaningful impact on outpatient physical therapy directly. However, pilots for musculoskeletal (MSK) VBP will start, and this will impact physical therapy.
Coming off Covid-19, providers, having got kicked in the shins, were not exactly rushing into taking on more risk through capitation or other risk-sharing methodologies, and frankly, none were offered. However, the cost of MSK is so compelling. Employers now spend $1 out of every $6 on all of life’s aches and pains, which leads to higher costs in surgery, pharmaceuticals, radiology, and injections. As a result, we can expect to see some MSK alternative payment methods in markets where value-based primary care is highly prevalent.
Primary care is a likely driver, given their experience and maturity in some VBP markets. They are attuned to managing costs through the acceptance of total capitation in Medicaid and Medicare Advantage markets.
There are a ton of dollars being counted on from Amazon to CVS to Optum, who now employ roughly 70k physicians. This can be a great opportunity for outpatient physical therapy practices that have been beaten up for years in utilization review and silly superimposed rules and regulations.
While direct value-based physical therapy is likely not meaningful in 2024, there will be a continued rise in APM’s (alternative payment models) which are not synonymous with VBP’s. This can take the form of payment for an episode of care, bundled payment, per diem, subcapitation, and a few others. This can bode well for physical therapy because these payment types tend to not include the overall CPT and superimposed rules, allowing PTs to operate at the top of their license, something I have not seen since my military days.
Unfortunately, the failure of CMS’s (Centers for Medicare & Medicaid Services) MIPS (Merit-based Incentive Payment System) program to universalize outcomes might impair this evolution, but for those practices who have built their culture around data and outcomes, opportunities abound.
AI Enters Physical Therapy, Not Through Consumers or PTs, but Their Back Office
First, some data:
- 1m+: The number of people who used ChatGPT within its first five days. Now, a year after the generative AI chatbot’s launch, 100m people use ChatGPT weekly, and over 2m developers are using the company’s API, including most Fortune 500 companies.
- $10B: The amount of money Microsoft pledged to invest in OpenAI over the coming years, on top of the $3B it had previously invested, as the tech giant looks to keep up with AI.
- $6B: The combined investment by Amazon and Google in Anthropic, OpenAI’s main competitor.
- 4.4%: The estimated adoption rate for businesses using AI to produce goods or services. Around 50% of S&P 500 earnings calls have referenced AI since May, on par with mentions of interest rates and the Federal Reserve, but this hype isn’t yet trickling down to everyday use cases.
This last data point is the most interesting. Generally, health care providers are laggards when it comes to adopting technology, and this trend is likely to continue. However, AI’s use cases for documentation, compliance (already in process), scheduling, chat functionality, insurance benefits verification, and revenue cycle management (RCM) will enter our market.
Generally, these technology entrants are expensive for providers (part of the reason we are laggards), but many of them are likely to be embedded by RCM and specialty providers. We should finally see some efficiency in tasks traditionally very manual, which is exciting for the business of physical therapy.
Unfortunately, physical therapy documentation and coding will be among the last to gain significant traction with AI. This delay is due to the complex mix of rules and regulations placed on providers, from the 8 minute rule (not to be confused with the rule of 8’s), antiquated care plans requiring manually signatures, and a host of additional requirements from payors, especially in worker’s compensation where PT is more highly utilized and the payors are more fragmented.
A likely scenario is a blended environment where AI transcribes documentation through digital recording, with PTs spending time only on coding. I am optimistic AI will eventually impact patient care, just not much in 2024.
As to PTs themselves, there will be evolving applications in education primarily through the ability to access large language models (LLM) quickly. The recent multi-modal AI ChatGPT app is fascinating in this regard (think accessing all applicable research and evidence like you would ask Siri or Alexa, but it is in a handheld app on your phone).
This might also be the application for future note generation. Also, look for free-standing LLM AI handhelds or desktop appliances (e.g., like an Amazon Echo) with access points for multiple uses without needing a connection to the internet. Great stuff is coming!
Retention in Physical Therapy for New Grads Will Continue to Be Challenged with Turnover Rates Greater Than 33% for New Grads Being the Expected “Norm” at the 18-Month Point
The demand for physical therapists will continue to put pressure on employers. There are not enough new graduates to fill the positions in a profession known for cost-effectiveness, efficacy, and outcomes in MSK care, and as the preferred pathway.
Practices will continue to follow the trends of nurses, who are far ahead of our learning curve, particularly in hospital settings. These trends include sign-on bonuses, perks, promises related to limited productivity, student debt retirement, and a host of other new-age items, including expanded paid time off.
These “attractors” will work until, of course, the sign-on bonuses wear off, and other new age benefits and sign-on bonuses by other providers across town are available. Given preferences on work-life balance, and the reality that few in the current generation will remain lifelong with one employer or one geography, the emergence of local registries is likely. Currently, such registries are mostly nonexistent in physical therapy in the U.S., but we should not let constraints of credentialing and payor limitations get in the way.
The use of travel PTs will likely continue to increase, especially in the most difficult environments, such as acute care and skilled nursing facilities (SNF). Despite a pay reduction in Medicare, a record year in hires for PTAs is likely.
Physical Therapy Businesses Will Pass More Work Onto the Patients
At one time, all airline tickets were sent in the mail or issued at the point of service on NCR paper. Over time, we were able to print tickets at home, and now we choose our own seats and save the boarding pass on our mobile phones. These are all forms of pushing work to the traveler or consumer, akin to self-service gas stations and fast food ordering on a kiosk.
In 2024, more of the work will likely be pushed to the patient, from scheduling online or through an automated chat function to electronic payment, automatic deductions for copays, digital paperwork, and automated and virtual reception. If done right, patients will view it as better service, creating a win/win situation that simultaneously lowers cost for the practice—a necessity given the unholy triad of decreased reimbursement, enhanced regulatory pressure, and cost inflation.
Physical Therapy Transactions Will Rapidly Increase in 2024 vs. 2023
This prediction is the opposite of the 2023 vintage. PT practices generally had better performance in 2023, leading to improved market valuations. If interest rates decline, many PT platforms in the public and private markets will likely reenter a sellers’ market.
Transactions are not expected to reach the fury of circa 2018–2022 but will be noticeably more frequent. The challenges for small and medium-sized practices are daunting: staffing, technology spending, cost inflation, compliance, and ongoing reimbursement reductions. Thus, the driving factor will be, in part, practices struggling to cope with the current operating environment.
Year of the Ozempic Olympics
2024 will be the year of weight loss, but not in the old-fashioned way. Instead, it will be through injections of semaglutide drugs like Ozempic, Wegovy, and Mounjaro, among others. Originally created for treating diabetes, these drugs have become the latest fashion statement. They are often paid out of pocket and, unfortunately, sometimes create shortages for those diabetics who actually need them.
These drugs are being highlighted for their impact on everything from alcohol consumption and cravings to potentially preventing heart attacks. The run on these drugs is so high that many self-insured employers are already limiting their use or putting requirements in place prior to subscribing. Some of these requirements include trials of physical therapy/movement, exercise programs, and behavior modification.
While this might be a good opportunity for PTs, data are not on our side. Most people default to pills or injections rather than the harder work of exercise prescription and behavior modification. Some even suggesting that these drugs will impart a healthier America and decrease overall health care utilization. From my perspective, this is laughable and will only increase health care costs through recidivism, complications, and the co-morbidities associated with yo-yo dieting.
While I genuinely hope that the right drug gets to the right person and has the right impact, history suggests the unintended consequences of diet drugs have a worse impact than intended. Examples like Fen-Phen(heart valve and cardio risk) and Belviq (cancer) quickly come to mind.
Hope you enjoyed reading! This is something fun I have been doing for years and it is meant for thought provocation. As we head into 2024, we don’t have to predict another great, move-forward year for our profession; we know that it will be one.
We are blessed to work in such a great field. Physical therapists have demonstrated for years our resilience, patient-centric approach, and passionate for providing quality and differentiating care. These qualities will undoubtedly remain in 2024—and that’s reality, not a prediction!
Cheers to a healthy, prosperous New Year!