Capitalizing on Opportunities From Rehab Therapy Consolidation

How Consolidation is Impacting Outpatient Rehab Therapists and Their Patients

By Tannus Quatre, PT, MBA
SVP & Chief Business Development Officer – Therapy, Net Health

If it seems like consolidation in outpatient rehab therapy has accelerated over the last few years, you’re probably right. While the bigger fish within the market have been gobbling up smaller practices for years now, the pace at which this is happening appears to be quickening.

The reason for this surge can be summarized in two words: market potential.

According to Fortune Business Insights projections, our country’s occupational and physical therapy services market is expected to grow from $53 billion in 2023 to more than $92 billion by 2030.¹ Much of this growth can be chalked up to our aging population. The U.S. will see a 47% increase in people 65 and older by 2050.²

With more seniors comes a greater need for services related to chronic pain and disease (i.e., osteoporosis, arthritis, diabetes, etc.), pre- and post-surgical rehab, fall prevention, and general wellness that promotes independent living — all services rehab therapists excel at providing.

In addition, when investors examine the current rehab therapy industry, they see a highly fragmented market. With the 50 largest competitors within the rehab therapy space capturing just 29% of the industry’s total revenue, stakeholders see a space that’s ripe for market leadership and potential consolidation.³

Thus, according to a recent rehab therapy industry analysis by Marketdata, “This industry is experiencing increased [merger and acquisition activity] from both strategic suitors and private equity investors.”⁴

Know Your Role in the Rehab Therapy Ecosystem

You’re likely on track if you feel consolidation is impacting your rehab therapy community more today than a decade ago. But while such news is often viewed negatively by clinicians and patients, does this upward trend spell gloom and doom for local rehab therapy markets?

Not exactly.

As consolidation is unlikely to slow anytime soon, it’s worthwhile to consider the pros along with the cons when evaluating this phase in our industry.

For one, it’s unlikely large-scale investments in the rehab therapy space will have a Walmart effect on “Main Street” clinics. Current market conditions and growth projections leave plenty of room for smaller, local practices to succeed side-by-side with regional and national health systems.

Big or small, however, this success largely depends on understanding the role you play (or can play) within your local rehab therapy ecosystem — and then embracing that role.

Below are some of the main benefits rehab therapy operations, both large and small, can offer a single market when they fully lean into their roles while not losing sight of patient needs.

Opportunities for Small Clinics in an Age of Consolidation

Most of us have lived long enough to see the effects — some of them negative — of consolidation in industries like retail, banking, airlines, and the media. So, when a large health system or a nationwide rehab therapy brand comes to town, perhaps acquiring local clinics, this can be cause for concern.

With more capital, robust operational efficiencies, and greater negotiating power at their disposal, it can be difficult for smaller private practices to compete from purely a cost perspective. Larger clinics often maintain strong referral networks, as well, which can redirect patients who might otherwise choose an independent clinic.

While these can be powerful hurdles for smaller operations to overcome, it’s not impossible. The fact is many patients today are looking for more personalized care from clinicians who are accessible, engaging, and accountable. Consider that:

• 62% of patients prioritize good communication and continuous engagement above all else when it comes to patient satisfaction.
• 82% of patients consider customer service quality their most important factor when choosing a care provider.⁵

Communication, engagement, and customer service are areas where smaller private practices can shine within the wider healthcare ecosystem.

With smaller size comes differentiating factors that, when amplified, can position so-called mom-and-pop clinics as local wellness centers that truly reflect the needs of a community. This may involve the types of services offered and how clinicians engage with patients during and between visits. It can also include the look and feel you choose for your clinic.

A more modestly sized practice also has greater operational agility that allows them to experiment in innovative ways. For example, clinics may develop wellness- or performance-based partnerships or programs with area employers, schools, senior communities, athletic clubs, etc. They may also test cash-based service options or develop a concierge-type wellness program that caters to higher-end clients.

And, as the economic wheel continues to revolve around the business of healthcare, successful local rehab therapy practices have opportunities to sell their clinics during times of greater consolidation. This provides owners with a more seamless and rewarding “exit strategy” from the market, should that time come.

The Role of Larger Clinics in the Rehab Therapy Ecosystem

As for larger health systems and nationwide practices that offer outpatient rehab therapy services, higher reimbursements and broader referral networks aren’t their only strengths. These clinics, in fact, often do well in filling in gaps in services offered by their smaller counterparts.

Generally, these operations operate more sophisticated systems that, when attached to other healthcare providers (as in a larger healthcare system), enable greater continuity of care that can improve patient experiences. This is especially convenient for patients who prefer a more centralized point at which to access most of their medical needs.

In addition, larger rehab therapy clinics are often able to connect patients with clinicians who have specialized training. While it’s also common for smaller clinics to employ rehab therapists who specialize in areas like oncology, neurology, geriatrics, women’s health, and wound management, larger programs typically offer more options that may better align with individual patient needs.

From an investment standpoint, larger operations typically have access to more capital. This enables them to invest in tech-based services — patient portals and automated reminders, for example, or digital tools for telehealth, remote therapeutic monitoring, and home exercise programs — that provide patients with improved engagement and access to clinicians.

Yes, it can be argued that some larger clinics and rehab therapy operations run the risk of putting too much emphasis on rewarding investors, which can cause operators to lose sight of the overall quality of care. You’ll find that regardless of clinic size, however, most rehab therapists keep patients and their outcomes front and center within their business, enabling them to more seamlessly transition toward future value-based care models.

Where Does Your Rehab Therapy Clinic Fit?

Overall, the better you understand your rehab therapy marketplace and where your operation fits within the ecosystem, the better job you will do in forming strategies that will help your organization compete in both the short and long term. The key is to avoid preconceived notions about what constitutes “best” within any individual healthcare market.

Patients are a diverse lot, so being able to provide them with a wide range of musculoskeletal care options not only benefits them but also enables individual clinics to identify and embrace their distinctive positions within the market.

It’s only when this is done that rehab therapy owners and operators are best positioned to thoughtfully establish a game plan for long-term success.

About Tannus Quatre, PT, MBA

Tannus Quatre is a physical therapist turned entrepreneur who develops business services and educational content for PTs in private practice. The crux of his perspective comes from his experience launching several rehab services companies, his extensive work with private practice owners from across the U.S., and his experience as part of numerous acquisitions in the physical therapy services space. Tannus holds advanced degrees in physical therapy (UCSF ’99) and business (Duke ’06).

SOURCES:
¹ Fortune Business Insights, “U.S. Occupational & Physical Therapy Services Market,” Oct. 2023
² Population Reference Bureau, “Fact Sheet: Aging in the United States,” Jan. 9, 2024
^{3 4} Marketdata, “U.S. Physical Therapy Clinics: An Industry Analysis,” April 2022
⁵ Silverline, “Improved Care Through the Patient Contact Center,” Oct. 14, 2021