This is the first in a two-part series by Dr. Larry Benz, Executive Chairman of Confluent Health. 

The tradition of making predictions is as old as Mesopotamia. Generally viewed as a way to obtain a strategic competitive advantage, forecasting has become an annual tradition in all aspects of life and business. 

These so-called informed “guesses,” broadcasted broadly, are generally inaccurate by any objective standard. Case in point: virtually 100% of banks and economic experts predicted that there would be a recession in 2023—yet, they were all wrong. Despite the assumptions that a scientific approach and AI would enhance the accuracy of predictions, data has shown that this assumption is, once again, incorrect!  

Humans, being human, along with weather patterns, the existence of viruses, and the complexity of behavior, among other uncontrollable variables, introduce too much variability. As a result, we engage in predictions for the pure sake of fun, as an annual tradition, and perhaps for a little bit of guidance.  

2023 Predictions: Results and Review 

For many years, I have been making #physicaltherapy predictions, and in keeping with this tradition, this year’s will be in 2 parts. Results and review from 2023 predictions form the substance of this Part I, and 2024 predictions will be Part II. 

By way of reminder, my 2022 predictions (this links to predictions going back to 2019) were pretty solid. However, they were likely a year too early. These predictions became more relevant in 2023, especially in certain areas.  

One key area was the declining application pool for PT schools. Acceptance rates are now around 80%, with application numbers reduced by roughly 50%. Another area was the continued shortages, which in many ways turned out worse than predicted. These shortages are further detailed here and will be discussed in Part II. Additionally, there were significant developments in Direct to Consumer (DTC) marketing and more direct to self-insured offerings, all of which accelerated in 2023.  

But let’s leave any memory of 2022 alone, given its unprecedented labor and general inflation issues, and review the 2023 prognostications, and then let’s forget about them as well. 2023 Predictions: 

Prediction 1: AI in Health Care 

Artificial Intelligent (AI) chatbots, like ChatGPT, will trickle to consumer healthcare consumption, including those seeking physical therapy as a solution. While this won’t, in the near term, replace Google searches, it will impact consumer healthcare as well as the business of healthcare PT practices, from marketing messages to scheduling to email responses.
 

Although there is clear evidence of increased use of and tools for AI in healthcare, it hasn’t really moved the needle in terms of clinical care or uptake by clinicians. I used ChatGPT to help predict 2023 and, judging by its results, will not ask it for 2024 predictions; however, I will address AI in my next article.  

Perhaps AI, due simply to utility or learning curve to broad adoption, is currently a far cry from common Google searches, even when in long-tail “asks”. Data continues to tell us that women make decisions for themselves and their families, in part through online Google searches and various rating systems, which are gaining traction.  

The positive trend of more consumer research bodes well for physical therapy, especially for those who want to avoid surgery, get better faster, and save money in the process! 

Prediction 2: Physical Therapist Shortages 

Physical therapist shortages will continue, and this will cause a bunch of downstream effects. While this was correctly predicted last year (2022), shortages must be highlighted again in 2023. The numbers just don’t mislead. 

We simply don’t have enough PTs graduating per year to meet the increased demand. Physical therapy is involved in roughly 12% of MSK (musculoskeletal) cases. Arguably, we should be involved in all of them. If we increase our involvement by just a few percentage points, we likely won’t have enough PTs. We have roughly 11,000 graduating per year, but recent trends demonstrate that 10–15% only want to work roughly 30 hours per week, which effectively lowers the number.  

Add those PTs that work in environments outside of outpatient, and you have a very limited pool that conservatively leaves about every 7 PT locations in the U.S. seeking one of these new grads. All in all, this leads to significant downstream consequences, including: 

Clinic Closures and Rising Costs

In some markets, there will be more PT clinics closing than new ones opening. The business of healthcare is such that increased costs are completely borne by the company, as passing on such cost escalation by increased pricing vis-à-vis reimbursement rates doesn’t occur in healthcare. Payors like United, who reportedly earned $23B last year, don’t pass their profits on to providers. On the contrary, they do all they can to extract more profit through utilization review, arbitrary limitations, and reimbursement rates that are now reaching below cost for many providers.
 

Closures of clinics did not happen in large numbers as predicted. However, many simply existed without the lights on. I have a lot of funny habits when I travel for leisure—I like to visit key local brands of grocery stores and private PT clinics. The former out of pure curiosity, the latter to learn.  

My visits this year included drive-bys of a substantial number of clinics that weren’t open at all or had limited hours with a PT “circuit breaker” (side note: “circuit breaker” is an old term used in 1980’s to describe a PT that traveled about just doing evaluations while a PTA or tech did the day-to-day treatments. It was broadly adapted by skilled nursing facilities and understaffed outpatient PT practices).  

There was a significant slowdown on new clinic openings throughout the US. This was in part because practices at scale (public and private equity) limited “denovos,” likely due to staffing or, more likely, simply wanting to find staff for the vast numbers that were opened in 2021 and 2022.  

Let’s also remember the other externalities against new practice openings—many insurers don’t let you on the panels, and then, of course, commercial real estate and general costs have escalated, making the viability of the 1700 square foot, 1-person PT clinic akin to WeWork—a model that doesn’t work. 

A Bidding War for PTs 

There will be a bidding war for PTs up to a point. Recent hiring data suggests some stability, so the competition will come in the form of sign-on bonuses, student debt repayment programs, perks of various types, and likely variable compensation program opportunities. Much of this is in contrast to a generation of  PTs that simply aren’t looking to be business owners.
 

This prediction was very accurate, except for stability—in fact, far from it. Going through the various PT want ads, it appears to me to be a race to sameness, with almost all employers offering pretty much similar tactics—more sign-on bonuses, many more adopting the IRS program for student debt repayment, and various perks consistent amongst the largest employers.  

What’s missing? Support of advanced clinical competencies in the form of employer-funded residencies or long-term training programs. These enrollments continue to stall as new providers seek more compensation to pay for continually escalating student debt—and employers have to cut back on something. The exchange of purpose and mastery for economic rent is as old as piecemeal factory incentives. Retention rates are the focus, when the problem appears to be more about selection. More on this in 2024, but suffice it to say, the turnover, retention, and recruiting challenge will continue on an upswing. 

Challenges in Meeting PT Demand 

Our questionable inability to meet demand, coupled with the continued rise in the use of physical therapy for MSK, will mean much more encroachment by personal trainers and other imitators, including the trend toward franchises of stretch zones, group fitness models, hyperbaric recovery centers, and the tremendous number of alternative therapies. Many will try and mislead by claiming a physical therapist is involved, and recent digital health solutions are already on this path, bringing completely justified clarification by APTA. This highlights the commonsensical notion that physical therapy must be directed by a physical therapist.
 

The above predictions are perhaps a little ahead of their time, as these likely add-ons are not seen as replacements versus another way to spend disposable income in the name of health and fitness. There has been no attempt to trade off physical therapy for any of these consumer franchise models. 

Medicare’s Impact on Patient Access and Clinic Business Models 

Medicare patients will be selectively scheduled and given far less access, as the business model of lower reimbursement and higher cost (including the burden of additional rules and regulations for Medicare patients) will make non-Medicare patients much more attractive. We will likely see more Medicare patients opting out of traditional Medicare, showing a willingness to sign waivers, and many clinics doing the same or adopting some alternative model of accepting Medicare patients who opt out to pay cash rather than be denied service or given a 3pm Tuesday slot.
 

I was a bit over my skis on this one but again, perhaps a year too early. Medicare Advantage backlash by providers, including limiting access, will occur in the 2024 Part II. However, if the planned continued cut for 2024 stays in place, this selective scheduling will have to be implemented at many PT clinics. With so many variations between Medicare and Medicare Advantage, every clinic will likely have multicolored folders to remember what they can do with whom and on what date. 

Pressure on Physical Therapy Education 

More and more pressure will be put on PT programs and our PT regulator, CAPTE, to expand programs, start new ones, embrace innovation, or streamline the approval process, similar to what is happening in nursing. It’s hard to tell whether the application pool will increase (if a soft recession occurs, history says yes) or decreases (if the ROI of a PT education is not seen as being worth it compared to other professions).
 

Ironically enough, this was not very accurate. While there was definitely pressure being put on CAPTE, this was offset by about every state developing a workforce development plan and incentives for healthcare workers that included almost everything except anything focused on the educational institutions and guilds like CAPTE.  

If anything, the opposite of streamlining occurred at CAPTE, with new program launches being moved further out, not accelerated. Unfortunately, the monopolistic powers for our own guild will be a friction point for supply meeting demand. On the other hand, consumer demand and demand to be a PT are not the same thing, as we will explore in next article. 

Rising Tuition 

PT programs will continue to increase tuition far in excess of inflation. With looming relief of student debt, it simply means that increases in higher loans will ultimately be relieved, and there is zero pressure to do anything but increase tuition. The forgiven portions will be paid by taxpayers.
 

Spot on. Never underestimate higher education pricing power. Debt retirement programs by the federal government were put in place last year, if anybody can understand them. 

Prediction 3: Evolving Healthcare and PT Models 

“PT First” will continue to increase because it works! This approach will be much more common in self-insured plans and will be recommended by TPA’s and encouraged by plan designs. The attempts at completely virtualizing physical therapy will be far fewer, with many more opting towards a blended approach.  

This is the exact evolution of education and is much more consumer-friendly, as it will meet patients where they are at. There is already some evidence that digital health providers were finding therapists who want to work from home, but they didn’t find enough patients who wanted all their PT at home, thus decreasing such employment. A related trend is the significant Primary Care shortage and exodus, which will create more opportunities for PTs to be the MSK primary. Answering this demand will be difficult.
 

This trend has not accelerated as predicted, which is sad—but the data and efficacy of PT as a pathway for first or early intervention and as an MSK disruptor are unarguable. I do believe this trend will become more commonplace as MSK spending continues to escalate—at least I hope so! 

Prediction 4: Shifting Dynamics in PT Transactions and Valuations 

There will be fewer physical therapy transactions and lower valuations than the last 5 years, due to cost of debt and the overall business model of physical therapy. This doesn’t suggest that consolidation will slow down, as the larger groups will become larger, and the smaller will get smaller (just like last year).  

Most PT clinics and groups retracted their earnings last year due to labor costs and PT shortages, thus making them less likely to sell because they would be at a lower valuation. Many practices will struggle to find a business model that works, and the expansion of cash-based service options and supplies will significantly increase. Valuations are partly based on growth, and year-to-year declines make them less attractive to buyers. The flip side is that those who have overcome those challenges will still command premium valuations.
 

This prediction was pretty accurate, although high interest rates also played a role. Reimbursement headwinds, regulatory constraints, and cost are definitely impacting margins, which can only get mildly better with scale. Part II will address this a bit more. 

Prediction 5: Challenges and Transformations in Digital Health and RTM 

Significant changes in the digital health players and Remote Therapeutic Monitoring (RTM) will mostly fail due to variability, and low reimbursement, lack of clarity on the right technology, and being too disruptive for the already overburdened clinician.  

PTs cannot meet current clinic patient demands, and their availability to add RTM or even hybrid solutions is simply too disruptive. Adoption is also hampered by shortages, and neither patients nor payors seem to be much in demand, nor will they be in 2023. There will be a few players adding value by creating remote solutions and enhancing patient care, but getting to scale will be too difficult given the inability to access enough PTs.  

All of this will lead to consolidation and significant devaluation of the current digital health players, who have seen their valuations during fundraising be higher than adding the top eight physical therapy platforms together, despite the digital health companies having no positive cash flow. Many will follow a few of the current offerings and pivot completely away from physical therapy.
 

Again, pretty accurate. RTM is seen as a possible add-on by using PTA’s, but the added dollars are not substantive, and if using Medicare Advantage, they are illusory. The efficacy and utility of RTM is fantastic, and hopefully, more solutions at scale and greater uptake will occur.  

But ultimately, it has to be paid at a rate that makes sense, and understanding the codes has to be paramount. Hopefully the codes will be completely redefined in terms that clinicians can make sense of, but I am not willing to make that prediction in 2024! 

Prediction 6: The Shifting Landscape for PTAs in Outpatient Settings 

PTA’s will leave the outpatient profession in droves—salaries are part of it. They can make more in other setting and even in other vocations. PTA applications and schools will suffer. Many small PTA programs will close. The primary cause, of course, is Medicare’s failure to recognize them as caregivers by lowing their reimbursement rate by such an extensive amount in 2022.
 

This prediction was a mixed bag. There is no evidence of PTA’s leaving outpatient settings in droves, even with increased salaries. The smaller PTA programs are hurting. However, PTA’s are now being embraced in many Medicare markets due to volume necessity, even though they are finding it to be about a 15% fee schedule hit. 

Prediction 7: Complexities of Medicare’s MIPS Program 

Merit-Based Incentive Payment System (MIPS) in Medicare will be harder to understand and comply with than ever and will wreak havoc in the profession. It currently remains elusive whether individuals or groups are going to be mandated or penalized, and even conversations with CMS versus what their website states are conflicting. Has any provider actually ever received a financial incentive in the program in the past few years?
 

The prediction was spot on. MIPS is an unmitigated failure of a CMS program at every conceivable level and, counterintuitively, has produced fewer PTs doing outcomes, the exact opposite of its intention!  

There remains no evidence of real financial incentives, although there are threats of inheriting a hired PTs -9% to +9% payments for Medicare 2024 (plus the cuts, of course). There are so few PTs mandated for MIPS that any movement toward making universal outcomes a reality has been derailed. Virtually no PT (or for that matter, anyone) can clearly demystify the PT MIPS process, the penalties, incentives, ranges, and utility of MIPS, and then defend any rationale for voluntarily implementing them in your practice (that sentence might take a second read). 

All in all, not a bad year of predictions—I’ll let others decide. I know there is shared optimism and pessimism around much of this—and that is not a prediction but a reality of our profession that has been around in some form for me since 1985. 

Next, Part II.