The ABCs of Value-Based Care in Rehab Therapy and Private Practice

Value-based care (VBC) is a growing and evolving model for healthcare delivery that emphasizes quality, efficiency, cost-effectiveness, and patient-centered care. It encourages this by rewarding healthcare professionals not just for providing services, but for providing the most value through the services they offer. 

Central to value-based care is a focus on patient needs, ensuring they get the right care (and care pathways) at the right time and with the right providers—all to achieve the intended patient outcome. 

Where musculoskeletal ailments are concerned, the rehab therapy industry is uniquely positioned to be affected by the value-based care movement on two fronts: through value-based payment models like the Merit-based Incentive Payment System (MIPS), as well as through the wider role rehab therapy plays in adding value through smarter care pathways. 

Both fronts provide rehab therapy operations with the opportunity to boost revenue while doing what the profession has long done: improving people’s movement, function, and quality of life, which may offer the added benefit of helping them avoid unnecessary testing, surgery, or prescription medications. 

In this first section of our value-based care e-book, we strive to highlight each of these aspects and how they might impact rehab therapy as an industry. In addition, we will discuss the role data and technology play (and will continue to play) in making value-based care possible within the healthcare industry and for individual therapy operations. 

We’ll start by discussing value-based care in outpatient and private practice rehab therapy. First, however, it’s important to understand what led us to this value-based care movement. 

Why Do We Have Value-Based Care? 

The term “value-based care” first appeared in the 2006 book, “Redefining Health Care: Creating Value-Based Competition in Results” by Harvard professors Michael E. Porter and Elizabeth Olmstead Teisberg. This book made such an impact at the time that some of its policy suggestions (i.e., mandatory health coverage and subsidies for low-income people/families) can be found in the final version of the 2010 Affordable Care Act.2 

“The way to transform healthcare is to realign competition with value for patients,” Porter said. “Value in healthcare is the health outcome per dollar of cost expended. If all systems participants have to compete on value, value will improve dramatically.” 

The concept of creating a value-based payment model, however, was first introduced into healthcare approximately 40 years earlier. Developed in 1967 by the American Academy of Pediatrics, the Patient-Centered Medical Home (PCMH) was founded to help sick children receive better care coordination.3 

Other ensuing policies and legislation, such as the HMO Act of 1973 and the 1982 creation of Diagnosis-Related Groupings (DRGs) for inpatient services,3 strived to temper costs. But, wasteful healthcare spending continued to rise, resulting in higher costs and lower value for patients.

The Cost of ‘Inefficient Spending’ 

Today, around 25% of all healthcare spending—about $935 billion per year—is considered wasteful.4 While administrative and operational waste create the largest piece of this pie, inefficient spending in healthcare makes up around one-third of this overall waste. This category includes: 

  • Failures in Delivery of Care (Up to $111 billion per year): This involves providing patients with the wrong care at the wrong time, as well as failure to adopt preventative care practices. 
  • Low-Value Care ($76 billion to $101 billion per year): Low-value care includes providing patients with unnecessary medical interventions. These are interventions that provide little to no benefit to patients (i.e., an unnecessary MRI), or that have the potential to cause harm to patients (i.e., unnecessary surgeries or prescribed pain medications), incur unnecessary costs, or waste limited healthcare resources. 
  • Failures in Care Coordination ($27 billion to $78 billion per year): This includes poorly managed or incomplete electronic health records (EHRs), and the lack of communication between care providers and/or their systems. 

The existence of this much waste—much of which can be chalked up to the lack of proper care coordination and the creation of care pathways that simply lead patients in the wrong directions—is driving the faster advancement of value-based care in all healthcare fields, including rehab therapy. 

Nearly $1 trillion per year, or around 25% of all healthcare spending, is considered wasteful.

Source: Peter G. Peterson Foundation, “Almost 25% of Healthcare Spending is Considered Wasteful. Here’s Why.” April 3, 2023

The Role of Technology in Advancing Value-Based Care 

Also driving the value-based care movement today are advances in data and integrated technology. By investing in and using outcome management and patient engagement tools, rehab therapists can more easily track daily patient performance and compare their progress with patients who have similar musculoskeletal issues. 

This information is then used to set performance-based goals for a rehab therapy team, ensuring their patients’ results align with—and in some cases exceed—industry standards. This can guide clinician hiring, training needs, and results-based employee incentive programs. 

The data can also lead to positive payment adjustments for those practices and clinicians who participate in value-based payment programs like MIPS and SNF VBP. 

In addition, technology is making it easier to seamlessly facilitate care coordination for patients who see multiple clinicians and specialists. Improved communication and integration between caregivers and their electronic health record (EHR) systems lead to greater efficiencies and simplified workflows. This reduces delays and potential errors that can negatively impact the value of care. 

Even digital care tools and services, such as those that fall under the digital MSK umbrella, can improve value to the patient while reducing the cost of care. Providing patients with an option for hybrid care, for example—a combination of in-person and virtual care, depending on the specific needs of the patient—effectively reduces barriers that may affect patient attendance and adherence, leading to improved outcomes. 

When patient needs dictate, hybrid care solutions may rely on other digital tools and services like telehealth, remote therapeutic monitoring (RTM), digital home exercise program tracking, direct secure messaging, outcomes management tools, patient portals, etc. The goal is to lead each patient down the smoothest pathway toward his or her outcome goals. 

“EMRs can be a better partner in working with customers to show the value of, for instance, the adoption of advanced outcome measures, and then the adoption of telemedicine,” said Kevin Keenahan, Chief Product Officer at Net Health. “We think that these are going to be important bridges to transitioning to more widespread value-based care programs.” 

Value-Based Care in Private Practice Rehab Therapy 

Few will disagree with the assertion that private practice rehab therapists have the longest and smoothest runways when it comes to offering the highest levels of patient-centered, outcome-based care. Such outpatient operations are generally smaller and more intimate. This gives rehab therapists an opportunity to create closer patient relationships as they provide individualized, one-on-one care based on the patients’ goals. 

From initial assessments through patients’ episode-of-care completion, private practice rehab therapists have the chance to connect with patients on a deeper level, which can lead to long-term connections that culminate in the coveted “patient for life” status. 

This sets private practice rehab therapists apart from their cohorts in other care settings like hospital acute care and skilled nursing. It also sets them up nicely for a transition into value-based care. 

In healthcare, however, few transitions are made without challenges, and private practice rehab therapy is no different. In private practices, making the turn toward value-based care can be more difficult due to issues like: 

  • Clinical staffing challenges: More than 15,000 physical therapists left the profession between 2021 and 2022. This equaled 11% of the physical therapy workforce during a time when demand for rehab therapy was, and continues to be, growing.5 
  • Payer reimbursement reductions: The CMS final rule for 2024 introduced a 3.4% reduction in the conversion factor, a key element used in calculating final payment amounts for various codes, including those related to physical therapy.6 
  • Low rates of patient adherence: Up to 50% of rehab therapy patients do not comply with their home exercise programs, which can significantly impact outcome success.7 
  • Unfavorable care choice and/or pathways: Despite being one of the most effective and cost-efficient avenues for treatment and prevention of musculoskeletal ailments, just 10% of adults utilize physical therapy services each year.8 

Rehab therapy industry efforts to help lower the bar on some of these challenges—last decade’s lobbying for direct access to physical therapy being one success story—are garnering varying levels of success. In addition, CMS is continually working to evolve and improve value-based payment programs for private practice rehab therapists, providing incentives for practices to invest in value-based care efforts. 

Despite it being one of the most cost-effective avenues for the treatment and prevention of musculoskeletal issues, just 10% of U.S. adults utilize physical therapy services each year.

Source: Centers for Disease Control and Prevention, “Physical, Speech, Rehabilitative, or Occupational Therapy Use Among Adults Aged 25-64, by Veteran Status,” Aug. 2022 

A History of Value-Based Payment Models 

In response to the growing effort to tie healthcare payments with the quality and value of services offered by rehab therapists and others in the medical profession, the Centers for Medicare and Medicaid Services (CMS) have made efforts to gradually transition Medicare reimbursements from fee-for-service to value-based incentive models. 

In 2006, CMS rolled out the Physician Quality Reporting System (PQRS), the first national incentive program of its kind. A pay-for-performance program, PQRS rewarded eligible providers (including outpatient rehab therapists) for reporting healthcare quality data to CSM. By doing so, incentive payments for Medicare patients had the potential to increase up to 2%. 

Functional Limitation Reporting for Medicare Part B patients was also required by CMS during this time, with patient reimbursement contingent on providers’ willingness to comply. This reporting was part of an effort by CMS to track the effectiveness of the rehab therapy Medicare patients received, data that could be used for the potential development of future therapy service structures. 

Then in 2017, these programs and others—the Value-based Modifier (VM) Program and the Medicare Electronic Health Record (EHR) Incentive Program—were replaced by the Merit-based Incentive Payment System, or MIPS. 

How Does MIPS Support Value-Based Care Today? 

The MIPS program was launched by CMS in 2017 as a replacement for all the programs mentioned above. Its goal is similar—to provide affordable, high-quality care to Medicare Part B beneficiaries by rewarding high provider performance and quality of care—but its processes were updated and streamlined for today’s value-based care environment. 

As a program, MIPS allocates Medicare reimbursement payments based on the performance scores of eligible clinicians. Depending on these scores, participating rehab therapists may receive positive payment adjustments, bonuses, or even face negative payment adjustments. 

The tracking and reporting of quality measures and improvement activities is a critical aspect of MIPS, a process that’s done efficiently by partnering with a CMS-approved Qualified Clinical Data Registry (QCDR). 

Participation in MIPS can be mandatory for some, but many private practice rehab therapists are not likely to meet all the requirements for mandatory enrollment. However, any rehab therapy clinician who is committed to value-based care, able to invest in tracking and reporting performance scores, and feels the quality of care they deliver warrants higher Medicare reimbursement rates is welcome to opt into MIPS. 

What are MIPS Value Pathways (MVPs)? 

Soon after MIPS started, provider feedback suggested the program was confusing and overly complex. There are just too many quality measures and improvement activities to choose from, which made participation in MIPS overwhelming. 

To help ease this complexity, CMS developed MIPS Value Pathways (MVPs). 

MVPs are subsets of measures and activities tied to a specific specialty, clinical condition, or episode of care. In 2023, for example—CMS’s first year of creating and releasing new MVPs—these included categories for cancer care, care of heart disease, kidney health, joint repair, and chronic disease management, to name just a few. 

By trimming the fat, so to speak, from the overwhelming reporting options offered through traditional MIPs, MVPs make it easier for clinicians to assess, report, and compare data within their own pathway(s). 

“MVPs give clinicians an easier way to report MIPS and packages it up neatly,” said Sarah Irey, PT, MSPT, CHC, Senior Product Compliance Analyst at Net Health. “Each MVP includes a short list of items to report from each of the four MIPS categories: quality, improvement activities, promoting interoperability, and cost.” 

This year, CMS approved five new MVPs including the first-ever MVP created specifically for rehab therapists. Titled “Rehabilitative Support for Musculoskeletal Care,” the MVP includes a subset of 10 quality measures (seven that use FOTO measures) and 17 improvement activities that are meaningful for physical and occupational therapists.12 

According to Sarah Irey, PT, MSPT, CHC, Senior Product Compliance Analyst at Net Health, those who opt to report through this MVP will be required to report data on just four of the 10 quality measures. This is a lower mark when compared with the six quality measures required when reporting through the wider MIPS program. 

Less reporting for improvement activities is also required for when going the MVP route. However, MVPs include a “population health measure” that isn’t part of the general MIPS program. 

“If you are reporting an MVP, you’ll be required to choose one of two population health measures to report on,” Irey said. “CMS mines data from claims for those, so there is no extra work for you with that.” 

Just like traditional MIPS, MVPs offer participating clinicians the incentive of positive payment adjustments in return for high quality care. However, clinicians who wish to participate in an MVP must register during the first half of the performance year, which ends on June 30. 

“While MVP reporting may not be on your radar now, it’s important to become familiar with MVPs because CMS has clearly signaled to us that MVPs are the future of the MIPS program,” Irey said. “It’s only a matter of time before providers will be required to report MVP data to participate.” 

Rehab Therapy’s Role in Value-Based Care Pathways 

It wasn’t long ago when rehab therapy professionals across the country were lobbying lawmakers to pass bills enabling direct access to rehab therapy. This meant the removal of laws that mandated patients receive a physician referral before seeking a rehab therapy evaluation and treatment for musculoskeletal care. 

This effort proved successful. Today, patients in every state can bypass their personal physicians and go directly to a physical therapist for an assessment and treatment. Within the realm of value-based care, this matters because delays in seeing a rehab therapist can lead to higher costs, decreased functional outcomes, and generally bad patient experiences.13 

In contrast, payer, employer, and clinic-based programs that incentivize patients to “get rehab therapy first” make rehab therapy a central player in larger value-based care efforts that provide optimal outcomes. 

Early Therapy is Value-Based Care 

When patients are allowed and encouraged to see rehab therapists first when they have musculoskeletal-related pain or injury, both patients and payers see a dramatic decrease in spending.10 This includes spending reductions of: 

  • 30% in imaging services (i.e., X-rays, MRIs, etc.) 
  • 68% in surgeries 
  • 76% in ER visits for non-emergency musculoskeletal problems 

Just last year, the American Physical Therapy Association (APTA) took a deeper dive into the impact rehab therapy can have in saving healthcare costs and adding value for patients with eight specific musculoskeletal ailments. 

Their findings, released in a report titled “The Economic Value of Physical Therapy in the United States,”11 found that over entire episodes of care, the use of rehab therapy can save patients and payers thousands of dollars while providing them long-term management and/or relief. This is when compared with other common treatment alternatives. 

Specifically, the study found that a rehab therapy-centric treatment approach to the following eight common ailments resulted in significant average net economic benefits (a.k.a. savings): 

  • Osteoarthritis of the Knee ($13,981 net benefit): This degenerative disease affects more than 32 million people in the U.S. 
  • Carpal Tunnel Syndrome ($39,533 net benefit): As the most common entrapment neuropathy, carpal tunnel syndrome affects one in every 20 people in the U.S. 
  • Low Back Pain ($4,160 net benefit): This most common musculoskeletal disorder affects 39% of the U.S. adult population and is the leading cause of missed workdays and work limitations. 
  • Stress Urinary Incontinence ($10,129 net benefit): This is the most common form of urinary incontinence in women and can result in the loss of support from pelvic floor muscles and tissues. 
  • Tennis Elbow / Lateral Epicondylitis ($10,739 net benefit): Most common among people 40 and over, tennis elbow affects as many as 15% of people who work highly repetitive jobs. 
  • Vascular Claudication ($24,125 net benefit): A symptom of a more serious underlying condition, this pain in the calves, thighs, and buttocks affects 5% of men and 2.5% of women 60 and older. 
  • Cancer Rehabilitation ($3,514 net benefit): As many as 39.5% of the U.S. population will have cancer at some point in their lives, with the effects of the disease making it three times less likely that survivors under 65 will return to work. 
  • Fall Prevention ($2,144 net benefit): Falls result in nearly 3 million emergency room visits each year, resulting in over $50 billion in annual medical costs. 

“Physical therapy can also prevent unnecessary future health expenditures, which may be realized through avoiding a more costly alternative treatment and/or reducing the need for future medical intervention,” the report stated. “Cost benefits of physical therapy services may be realized as reduced out-of-pocket expenses for patients, reduced insurance payments for private health insurers, and reduced overall health expenditures for the government.” 

When patients see a rehab therapy first for musculoskeletal-related pain or injury, both patients and payers see a dramatic decrease in spending. This includes spending:

  • 30% less for imaging services (i.e. X-rays, MRIs)
  • 68% less for surgeries
  • 76% less for ER visits for non-emergency musculoskeletal problems

Source: International Journal of Sports Physical Therapy (IJSPT), “Physical Therapy and Value-Based Care (VBC) … The Future is Now!” Oct. 1, 2023 

Promote ‘PT First’ Initiatives 

Both public and private payers are paying attention to these and other studies that promote the cost-benefit of including rehab therapy as part of one’s healthcare journey. It’s unlikely, for example, that many payers will improve an MRI until a patient first visits a rehab therapist. 

This is no doubt a step in the right direction. But with so much competition within the private practice sector—this includes competition from hospital- and physician-owned rehab therapy clinics, which in some communities are most likely to benefit from such referrals—it’s often up to individual practices to publicly promote the value of rehab therapy. 

“We know that the market broadly still doesn’t understand the value of physical therapy—not in the same way physical therapists understand the value,” said Tannus Quatre, PT, MBA, Senior Vice-President and Chief Business Development Officer at Net Health. “Because of that, it creates a barrier to being that provider of choice who is accessed directly when someone can benefit from physical therapy. [Patients] just don’t know when they need us.” 

Educating the masses to change this mindset can be challenging. To start, consider the following two suggestions: 

  • Provide incentives to get rehab therapy first. The incentive does not have to be financial, though cash-based incentives can work. Sometimes, just lowering the bar to make it easier to speak with a medical professional to assess musculoskeletal pain or a potential injury is enough. Offering brief triage-based telehealth visits can motivate a potential patient to contact a rehab therapist over visiting an urgent care facility.  
  • Expand your definition of “referral network. While making connections with potential referral sources like physicians and orthopedic surgeons is important, expanding this network into other areas can pack an even greater punch. Consider those outside the medical community who may impact a person’s chosen care pathways: athletic clubs, senior communities, labor organizations, and self-insured employers. Such organizations would likely be perceptive to strong value proposition based on cost savings, access, increased athletic performance, improved independence and longevity, etc.

Private Practice Network Promotes PT-First Care Pathways, Improves Value for Self-Insured Employers 

When the leaders at Confluent Health, a self-insured network of rehab therapy companies with more than 600 outpatient clinics nationwide, endeavored to reduce healthcare costs, they did what most clinicians pride themselves on doing: they followed the research. 

“We’ve got lots of research that shows that if you see a physical therapist early or first, you’re going to have a significant savings in musculoskeletal spend,” said Jeff Hathaway, PT, DPT, a Founding Partner with Confluent Health. 

For example, when low back pain patients saw a rehab therapy first for their ailment, this resulted in the lower utilization of high-cost medical services as well as lower opioid use.1 

The organization put these findings to the test by starting PT First, an in-house health program with a simple premise. 

Rather than visiting personal physicians, chiropractors, urgent care, etc., when experiencing a musculoskeletal ailment, PT First encouraged employees to begin their healthcare journeys by visiting a rehab therapist first—which Confluent paid for. 

During this visit, the therapist would triage the patient. The clinician would assess whether he or she would benefit from rest, a home exercise program, or rehab therapy treatments, or if further testing and treatment may be needed by a physician or orthopedic specialist. 

The program, Hathaway said, proved wildly successful. Over five years, it led to a cost savings of around 40% per musculoskeletal patient. It also led to the development of mōviHealth, a similar program Confluent rolled out to help other self-insured employers save money while offering greater value to their employees and their families. 

“The whole idea is working with self-insured to get that patient into a physical therapist first, or very soon after they start to have symptoms or an injury,” Hathaway said. “Again, [it’s about] changing the clinical pathway to match research that’s been out there for years.” 

1 National Library of Medicine, “Physical Therapy as the First Point of Care to Treat Low Back Pain,” Dec. 2018 
2 Harvard Business School, “Redefining Health Care: Creating Value-Based Competition in Results,” 2006 
3 Arcadia, “What is the History of Value-Based Care?” Dec. 14, 2022 
4 Peter G. Peterson Foundation, “Almost 25% of Healthcare Spending is Considered Wasteful. Here’s Why.” April 3, 2023 
5 Definitive Healthcare, “Addressing the Healthcare Staffing Shortage,” Sept. 2023 
6 Patient Studio, “2024 Physical Therapy Reimbursement Rates”  
7 National Library of Medicine, “Patient Involvement With Home-Based Exercise Programs: Can Connected Health Interventions Influence Adherence?” Mar 2018 
8 Centers for Disease Control and Prevention, “Physical, Speech, Rehabilitative, or Occupational Therapy Use Among Adults Aged 25-64, by Veteran Status,” Aug. 2022 
9 American Physical Therapy Association (APTA), “Direct Access Advocacy” 
10 International Journal of Sports Physical Therapy (IJSPT), “Physical Therapy and Value-Based Care (VBC) … The Future is Now!” Oct. 1, 2023 
11 APTA, “The Economic Value of Physical Therapy in the United States,” Sept. 27, 2023 
12 CMS Quality Payment Program, “Rehabilitative Support for Musculoskeletal Care” 
13 APTA, “Therapy Outcomes in Post-Acute Care Settings,” April 2021