Jobs Applied: Put Products Before Profits


Steve Jobs, when creating the first Macintosh computer, famously ignored cost trade-offs and profitability in favor of making the computer ‘insanely great’ and with a mantra ‘don’t compromise’. This actually led to his ouster in the early ’80s as the Macintosh ended up both amazing and too expensive to compete with the cheaper PCs of the day. In response, Apple hired a less product-oriented CEO recruited from Pepsi, John Sculley, who focused on profits. Focusing on profits led to a decline in quality and Apple nearly died before Jobs’ return in the early ’90s. The return to a focus on innovative, ‘amazing’ products led to Apple’s emergence as a market leader.  Even in the face of challenges, such as we are facing in healthcare today, Steve Jobs kept the focus on providing the best product, rather than on profits.

A few weeks ago I  posted ‘Jobs Applied: When Behind, Leapfrog‘-  a discussion of Harvard strategy guru Michael Porter and Thomas Lee’s timely HBR article “The Strategy That Will Fix Health Care”. One of the key principles Dr. Porter brings up is the definition of value in healthcare.

“Value is defined as the health outcomes achieved that matter to patients relative to the cost of achieving those outcomes. Improving value requires either improving one or more outcomes without raising costs or lowering costs without compromising outcomes or both.” (Porter and Lee, HBR Oct 2013)

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In health care and other service industries the ‘product’ is a patient’s experience and a health outcome… so the lesson here would be ‘Put the patient’s experience and health outcome before profits’. As the payments for providing health care services decline this is a reminder to continue to put the patient’s needs first.

Our physical therapy practice has been a leader embracing a care model that allows for improved efficiency, but keeps the physical therapist (PTs) firmly engaged with each patient. Texas allows physical therapists to utilize technicians (unlicensed assistants)to assist with some treatments under the direct supervision of the physical therapist. While when we first started in this model we were challenged by PTs providing ‘1 patient for 1 therapist for 1 hour’, these practices are increasingly failing in states with the greatest payment challenges and have either evolved or are hanging on by a thread. While in part due to other issues, the 2013 chapter 11 filing of the largest physical therapy provider in the US accentuates the idea that this lesson might be better termed ‘put products before survival’.

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Many states have strict requirements requiring care be provided by only licensed personnel (PTs and PT assistants – or PTAs) and federal payers (i.e. Medicare and Medicaid) will only pay for services provided directly by one of these licensed personnel. These regulations in our ‘over-licensed society’ (Litan, R. HBR Apr 2012) have created a perverse incentive where a model that may decrease value to the patient actually becomes the most easily sustainable model of provide PT services.

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For the first 10 years of my career I was a physical therapist in the US Air Force. I am proud to say that the US Military employs perhaps the finest orthopedic and sports oriented PTs in the US. Direct access to PT services and an advanced level of musculoskeletal screening and cross-collaboration with other specialties is integrated in a manner that the public sector should look to when reforming our health care system. There is mounting evidence that early referral to PT, which is sometimes available in the military system and now available in some states improves outcomes and reduces downstream costs.

One of the challenges, particularly in military medical centers, is that many of the actual treatments are not provided by PTs. A typical patient encounter would include an evaluation with a PT, then multiple treatment sessions with personnel roughly equivalent to a physical therapy assistant (PTA) with a follow-up visit with the physical therapist at somewhere between 2 weeks and 1 month after treatment.

PTAs have associates degrees and are licensed to provide PT treatments under supervision. Manual therapy is a key challenge to providing care that is centered around the utilization of PTAs in an outpatient orthopedic setting. The APTA has issued guidance discouraging PTs from allowing their assistants to provide manual therapy interventions. One of the reasons I eventually left the military medical system was to be able to provide these evidence based interventions without requiring a lesser-trained intermediary.

The regulations imposed primarily by the federal government in conjunction with steadily declining payment for services have created a concerning incentive. The care model long utilized by the US military looks as if it may become one of the few viable business models for private practice. Driven by a high median income ($52,160 in 2012)there is a flood of interest in becoming a PTA. With the median salary for physical therapists (doctoral degree) at $79,860 this is no surprise. There are now 21 PTA programs in Texas (compared to 12 PT programs) with more on the way.  In my opinion, the relatively high cost of PTAs (and their wages) will likely dramatically decrease as demand is met and then exceeded over the next few years. At that time the incentives provided by declining payment for services  and regulatory requirements align very well with a business model where a single physical therapist provides minimal oversight to multiple PTAs.

1194984910785474358stop sign miguel s nchez svg medI have encountered this model recently, when interviewing PTs for director’s positions within our practice. One PT I encountered reported evaluating over 100 new patients while supervising 2 PTAs providing over 900 visits in a single month. By his report he was able to follow up with his patients for a short time approximately every 4-5 visits.

Utilization of PTAs, in itself, is not what I would argue is the problem with this business model. I believe there are models where PTAs can be leveraged as part of a tightly knit team to improve efficiency and to maintain or improve quality. However, as the ratio of PTAs supervised by each PT increases, the level of involvement of the PT in the patient’s care invariably diminishes. In the Air Force we would see this in the variability in the quality of care provided at medical centers versus in the smaller outpatient facilities or the deployed setting. My wife, Alexis, has experienced this in the home health setting, where she was asked as the PT to provide an initial evaluation and a follow-up visit at 30 days. I believe it is hard to make the argument that the patient’s progression is meaningfully guided by the physical therapist in that scenario.

A counter-argument would be to compare this scenario to the increase in utilization of care extenders to decrease the cost for primary care providers to care for patients or even the explosion of ‘minute clinics’ and the like. While the situation is similar on the surface, it is perhaps more extreme when looked at more closely. To compare these arguments would put the doctorally trained physical therapist in the provider role (not inappropriate from my perspective), but would put the PTA in the same category as a physician assistant or nurse practitioner. While I have worked with excellent PTAs, the training received at an associates degree level is not comparable to the masters degree level that physician’s assistants and nurse practitioners receive.

The lesson of putting the patient’s experience and outcome before profits may come into play if we allow over-utilization of PTAs or any other extender to disconnect the PT from the patient’s intervention. In the face of ever-increasing costs of doing business, it is my hope that we can continue to ‘put products before profits’ and create innovative care models that meet Dr. Porter’s charge of improving patient experience and outcomes while doing so at a decreased cost. Removing well-meant but misguided regulatory hurdles would improve our ability to meet the charge to provide high quality care by PTs in a model that can accept lower payments for services while maintaining the patient’s experience and outcomes.

I suspect that this post might touch a few nerves – even in some of my good friends and fellow private practice owners – and I am looking forward to engaging in respectful debate on the topic. Please add your perspective!  I don’t pretend to know the answers and freely admit I might be wrong.  Maybe we can come up with some ideas together to move our profession forward in these challenging times.

Please note: I reserve the right to delete comments that are offensive or off-topic.

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4 thoughts on “Jobs Applied: Put Products Before Profits

  1. I’m a process girl… in my opinion, there isn’t anything wrong with using non-licensed or even licensed extenders. The process involved in training those staff members needs to be considered in the discussion. Also, the scheduling process is relevant. Who determines who treats the patient? If the front desk staff determine, that should be a red flag. If the PT determines when to delegate and to whom, consistency and continuity of care can happen – especially if the PT has a close supportive team. Exactly how does the PT provide oversight/supervision? I have a feeling if it is quite infrequently and only via documentation, that affects outcomes. There can easily be a system flow where every patient initially sees PT, if only for 2-5 minutes and then moves on to supportive staff: game plan can change on a dime with just that 2-5 minute interaction and help keep utilization in acceptable range.

    • Hi, Selena – thanks for your reply. I agree – the key distinction is not licensed vs. not licensed. Its PT centered care vs. models where the PT becomes less and less involved. A PT evaluating and re-evaluating is not enough. The PT needs to be actively involved with the patient, in my opinion, for there to be best outcomes. That can be done efficiently with the aid of unlicensed extenders, and if the cost of PTAs comes down, with the aid of licensed extenders. In any case, training and supervision of extenders will come into the quality equation and will be something PTs have to learn to effectively manage.

  2. 1-on-1 PT failure? Tell me more about it; I’m all ears. Including bankruptcy of PT Associates is a bit of a misnomer. They entered Ch 11, not Ch. 7. It is debt restructuring driven by the Private Equity group that owns the company. Anytime PE is involved, you can rest assured that capital restructuring will be forced with the end goal of return of capital with worthwhile appreciation to their stake. Assuming 1-on-1 somehow lead to this is a bit false.

    Again, I can imagine 1-on-1 having difficulty. I want to hear more of your thoughts on this.

    PTAs will be (already are) more utilized. However, this will fluctuate depending on reimbursements. One health system near me recently laid off a number of PTs and PTAs to cut costs due to reduced (and potential further reducing) of insurance reimbursement.

    In the PPPT world, consumer will drive business behavior (quicker than hospitals or institutions). I think external factors will (and already have) effect change more than internals. The ultimate job of internals is to survive the transition in order to foster potential to take advantage of new externally driven opportunities.

    • Thanks for your comments! Forecasting the future is always tricky business… “He who lives by the crystal ball soon learns to eat ground glass.” – Edgar Fiedler . That said I think we can say a few things with some certainty:

      1) Reimbursement is facing continued downward pressure.
      2) Regulation (ie federal payers and some states) continue to stifle innovation and efficiency by mandating the methods that PT can delegate.
      3) Student loans, inflation, health insurance costs and the availability of other settings with different reimbursement levels (although also under pressure) tend to limit the ability of the PT labor market to self-correct salaries.
      4) If you only provide 1-on-1 services by a PT your productivity/therapist/day is effectively capped at 32-40 units/day. (15′ blocks with some allowance for dovetailing).

      If a given practice that focuses on 1-on-1 services only utilizes PTs and generally ‘participates in insurance networks’ I would argue that in most regions that practice is yielding below average margins… 7-10% or worse. A 10-15% reduction in payments (surely you agree possible in the next 5 years) either puts that practice out of business or forces them to evolve.

      The challenge comes in a lack of resilience to the business model. This single feature limits productivity… salaries/wages and benefits are the single highest expense class in private practices, the other expenses are only mildly variable or tend to rise (i.e. lease payments go up). Either salaries would have to go down, margins contract further or businesses fail in those that don’t adapt to a more flexible model. If you sign up for the free gift its a webinar I gave on this very topic ‘How to build a winning PT business model’.

      There is a breed of cash based and concierge niche practices (some really cool practices) that I think will do very well with a 1 on 1 model. However, I think these practices are self limiting, thrive mostly in relatively affluent markets and are somewhat of a special case.