September 16, 2025 • 42 mins
In this episode of Agile&Me, Ryan Buckley joins Richard Leaver to get real about the pressures and opportunities for outpatient physical therapy clinics in 2025 and 2026.
There's real reason to be optimistic about the coming months and years as practices adopt new technology and look forward to rebounding demand for patients.
To learn more about us, visit our website at https://www.allianceptp.com/
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Alliance Physical Ther (00:00):
Alliance Physical Therapy Partners and
Agile Virtual Physical Therapyproudly present Agile and Me, a
physical therapy leadershippodcast devised to help emerging
and experienced therapy leaderslearn more about various topics
relevant to outpatient therapyservices.
Richard Leaver (00:20):
Welcome to PT Leadership Podcast Series.
I'm Richard Lever, and I'mexcited in my usual British
monotone voice to welcome RyanBuckley.
Welcome, Ryan.
Great to have you on the showtoday.
Ryan Buckley (00:32):
It's a pleasure to be here.
Thank you for having me, and Iappreciate all you're doing for
the physical therapy industry.
Richard Leaver (00:38):
Well, thank you.
I'm trying my best.
Ryan, you're a partner atLivingston Healthcare Banking,
and you've specialized in M&Afor many years within
healthcare, I think over 18years, I think, in M&A and
capital raising andrestructuring experience across
all sectors.
But within healthcarespecifically, you've spent a lot
(01:01):
of time specifically in theoutpatient space.
Am I correct in saying that?
Ryan Buckley (01:07):
Yeah, that's correct, Richard.
And maybe it would bebeneficial to give you just a
bit of an overview on our firmand our experience within
physical therapy.
So Livingstone, we're an M&Aand debt advisory firm based in
Chicago.
We have offices in across theglobe.
We're focused on the lower endof the middle market, which we
define as transactions valuedbelow $500 million of
(01:29):
transaction value.
We're predominantly outside M&Ashop representing sellers.
That's about 75% of what we do.
And many of our clients, over60% of them are family owned,
entrepreneurially ownedbusinesses, with the remainder
being private equity ownedportfolio companies and
corporates.
I have the honor of being aco-head of our healthcare
(01:51):
practice.
Our healthcare practice ispredominantly a provider-based
practice.
We have extensive experience ina range of provider-based
businesses, but specificallymusculoskeletal is an area where
we have deep domain expertise.
We've completed manytransactions in orthopedics,
interventional pain management,physiatry, podiatry, and most
(02:13):
specifically physical therapy.
We've been doing physicaltherapy for 20 years now, did
our first physical therapytransaction in 2006, advising
ATI Physical Therapy on theirfirst private equity
recapitalization.
We actually got to know GregSteele, Dylan Bates, and Matt
Kruger, who at the time werelate 20-somethings, early
(02:36):
30-somethings, founded a veryattractive and fast-growing
business, and they had an offerfrom a strategic, and we were
able to convince them to do aprivate equity transaction.
And what that transactionreally represented when we sold
them a year later to KRG, was inmany respects the beginning of
a consolidation wave backed byprivate equity in the physical
(02:58):
therapy industry.
And we've been at the forefrontof that for that time.
We've completed over two dozentransactions involving both
private equity funds andstrategic buyers.
And I would say we've completedtransactions in well over half
of the states.
So we have a pretty uniqueperspective on both the care
models, the state differences,care settings, and that's That
(03:21):
has afforded us the ability tobe a value-added advisor to our
clients.
Richard Leaver (03:26):
Yes, your depth and breadth of experience with
outpatient therapy, I think, isnot necessarily unique, but
certainly unusual.
And the reason why I waslooking forward to chatting with
you today was you recentlypublished an article on LinkedIn
called Physical Therapy BullMarket Has Begun, Signaling
(03:48):
Growth in Healthcare M&A.
and I was surprised a littlebit to see such a title
pleasantly surprised but Iwanted to perhaps pick your
brain a little bit about thisarticle because at the moment I
won't say there's necessarilydoom and gloom but there's
definitely a degree of pessimismas it pertains to the kind of
(04:10):
the economics and financessurrounding outpatient therapy
particularly really since Iwould say COVID if not slightly
before that so are excited totalk through about the article.
Before we dive into the weeds,though, I'd love to perhaps get
your thoughts on kind of whatprompted the article.
Ryan Buckley (04:34):
Well, the title needed to be something bold and
needed something catchy thatpeople would want to read.
But I will say that this issomething that we've been
forecasting for at least thelast six to 12 months that the
physical therapy industry shouldreach a trough at some point in
2025.
And the premise to that is theindustry has really taken it on
(04:56):
the chin for the As we all know,a lot of commercial payer
contracts are linked to thoseMedicare rates.
And so we've been in thisperiod of declining
reimbursement at a time wherewe've all been experiencing
inflation in our costs.
(05:17):
Labor availability has been achallenge across many
industries, particularly thephysical therapy industry.
The industry has way moredemand than it has therapists to
meet that supply.
And so, yes, it's been achallenging market for the last
four or five years.
But many physical therapyoperators have taken that
(05:38):
opportunity to improve theiroperations, become more
productive, more efficient,encourage therapists to see more
visits, negotiate andrenegotiate payer contracts, cut
costs at the admin level whereneeded.
So a variety of different taskswere taken and initiatives were
taken by physical therapyoperators to weather the storm
(06:04):
that that was decliningreimbursements for the last half
decade.
We're now to the point where weshould see at least stable to
rising rates in 2026 at a timewhere cost structures are very
efficient and we have far moredemand still than we have
therapists to meet that supply.
And that, from our perspective,sets the stage for a very
(06:26):
strong industry heading into2026 and beyond.
Richard Leaver (06:31):
Lots of great points.
Definitely been a storm.
So essentially, I see fourprimary issues that you've just
mentioned.
First off is what seems to bealmost continual Medicare
reductions.
And even if you look at it inthe longer term, the value of
(06:55):
the reimbursement has gone down.
I think Medicare approximately30% over the last 10 years.
I think that was a number thatI kind of hear banded around.
But certainly the more recentcuts have all being well
subsided.
I won't necessarily say it'sover, but certainly subsided.
And then staffing shortages,that's been prevalent for a long
(07:20):
time, but exacerbated by COVID,wasn't it, as it pertains to
not only structural issues withthe numbers that are being
trained aren't sufficient, butthose leaving the workforce
around COVID and not all ofthose coming back.
And then inflationarypressures, as you say, and
obviously the primary cost toexpenses is labor, but certainly
(07:42):
all facets of the business haveexperienced inflationary
pressures.
And then the demand supply forcare itself.
What I...
think about the currentsituation is perhaps not so much
that these issues havestabilized or even reversed, but
(08:05):
the idea that with problemscome opportunities.
And I believe that perhaps themore effective, efficient,
better outpatient providers havestarted to be able to identify
(08:26):
and more importantly implementsolutions for some of these
issues.
Do you feel that perhaps istrue?
Ryan Buckley (08:37):
Absolutely.
And one of the things that wealso didn't mention is during
this period of time, you alsosaw rate increases, interest
rate increases that started inMarch of 22 and peaked in August
of 2023.
And when you have those rateincreases, what that, you know,
in many respects, you know,forces an operator to focus on
(08:59):
is the internal low-hangingfruit within the practice.
And what could that be?
That could be, you know, youknow, virtual kiosks at the, you
know, at the front desk.
It could be, you know, workingon productivity in terms of the
number of patients per therapistper day.
That's a huge element that wework a lot with our clients on
(09:22):
because it is one of the biggestlow hanging fruit.
If you've got a therapistthat's seeing eight or nine
patients a day, just seeing thatextra one or two to try to get
to something that looks morelike 12 patients per therapist
per day.
And it depends a lot on themarketplace.
But that, that incrementalvisit or two per day can have
profound impacts on theclinic-level productivity of the
(09:44):
practice.
We talk a lot about how do you,as opposed to opening up a new
de novo, do you have physicalspace or can you create physical
space within your clinic to addthat extra therapist or two?
Given the fixed cost structureof a physical therapy clinic,
that incremental therapist candramatically increase your
(10:05):
clinic-level profitability.
And it's these types of movesthat are required when you have
the situation where you havedeclining reimbursement and
rising costs.
By necessity, you have to getmore efficient, more productive.
Alliance Physical Therapy Pa (10:21):
At Alliance, we believe that
partnership means creatingsomething greater than the sum
of its parts.
Our focus is finding physicaltherapy practices with a strong
culture and thriving communityand providing them with
additional tools, resources, andexpertise to take their
practice to the next level.
To learn more about joining ournationwide community of
(10:42):
outpatient physical therapypractices, visit our website at
allianceptp.com.
Richard Leaver (10:50):
Yeah, lots of great points with regards to
perhaps ways or tactics orstrategies for perhaps digging
out of the hole or the trough.
But before we focus a littlemore on those, my gut feel is a
lot of the number of the reasonswhy entities are perhaps
(11:10):
struggling are self-inflicted.
And let me perhaps explain thata little bit more.
Up until relatively recently,as you say, interest rates were
low.
Whilst reimbursement washeading in the wrong direction,
reimbursement overall wasreasonably robust or sufficient,
(11:32):
shall I say.
not so much the inflationarypressures.
And I think a lot of providers,be that mom and pop shots or
even larger entities, kind ofgot over their skis somewhat.
And one of the things I feelhappened was people grew perhaps
(11:52):
too quickly or became kind offat and lazy, metaphorically fat
and lazy.
And over the last two, threeyears, they've suffered
indigestion as a result of that.
So obviously there's a lot ofexternal factors that have
changed and certainly notnegating or trying to
(12:13):
underestimate those significantchanges.
But I think there has certainlybeen a number of internal
factors for certain entities aswell that haven't helped.
Would you agree with that?
Ryan Buckley (12:27):
I think you're describing it in a very good
way.
And certainly I'm not going totalk about specifics within the
industry, but I think that youhit the Certainly impacted a
(13:05):
number of operators.
I think the other side as wellis the importance of culture
within a practice.
When you start to get to acertain scale and a certain size
culture, being able to continueto disseminate the culture that
made it successful when it wasa small practice is critically
important.
And there's no right or singleway to disseminate that culture.
(13:30):
You kind of know it when yousee it, but at the same time,
When you get to a point ofcertain large operators
maintaining that culture acrossthe country and or across
multiple regions can be tricky.
And it is something that needsto be focused on.
The pandemic certainly didn'thelp by limiting the amount of
in-person travel.
(13:52):
But that is that has been anarea that I think a lot of the
successful operators havefocused heavily on in the last
handful of years is continuingto maintain that culture.
And why is thatimportant? It's because the
therapistsare in such high demand
that they are capable of moving toanother operator,
with the perception of a - and maybe the reality - of a better culture. And that is, when you have an industry that has hadsome turnover, you want to be able to limit that, given the fact that you're not able to replace those therapists as efficiently as you might once have.
(14:19):
Yeah. I always think that it's easyto run a business when you've
got virtually no inflation,interest rates that are through
(14:41):
the floor, basically money'sfree, and reasonable supply of
healthcare workers andreasonable reimbursement.
It's difficult to really losemoney, isn't it, in that
environment?
And I think many companies werelulled into a false sense of
(15:02):
security for so long.
And, you know, they've had tohave a significant wake up call,
haven't they?
And for some, it's been a realshock.
And for others that perhapsoperated more conservatively
prior to to these challengeshave had have fared better.
You know, when I look at USPHand you reference them, they
(15:25):
they've seemed to have weatheredvery well the storm.
And I feel that that's in partbecause they've always operated
in a more conservative way.
manner and position themselvesslightly different with regards
to their M&A strategy and justhow they operate generally.
Would you agree with that kindof thought process?
(15:47):
Certainly would.
And having had the pleasure oftransacting with U.S.
Physical Therapy last year, youknow, we saw firsthand, you
know, they provide theirpartners a great deal of
autonomy and it allows them inmany respects to have, you know,
many CEOs, if you will, and indifferent markets all around the
country.
And that local ownership, thatlocal model, you know, is one
(16:09):
that allows them to continue tomaintain that culture that we
were talking about earlier.
There's a point that I thoughtyou were actually going to go
down when you talked about, youknow, the struggles that the
industry has faced over the lastfive years.
And I want to sort of come backto this.
And I don't mean to be doom andgloom around like the
depression back in the 1930s.
(16:29):
But what the depression of the1930s created was some of the
best innovation ever experiencedwithin our country.
And that happens out of tryingtimes over the last four or five
years, despite the headwindsthat we've been talking about.
Again, physical therapyoperators have been able to
(16:49):
adapt and they've gotten better.
They've gotten more efficient.
And from our perspective, thatis why we have such strong
conviction that this industry iscreating that bull market over
the next three, five, sevenyears.
Richard Leaver (17:03):
Yes, Following up on that point, there's
definitely some, I believe,technology innovations or
implementation.
I don't necessarily think it'sinnovation because I think the
technology has been there forquite a while in one form or
another, but certainly thechallenges have been a catalyst
for change.
There is a saying, isn't there?
(17:26):
You never let a good, you know.
Right, so it's got to waste.
That's exactly.
And I think that's probablysomewhat the case here, isn't
it?
So you've mentioned it already,you know, virtual front desk,
for instance.
I think There's definitely amovement towards optimizing
labor and also nearshoring,offshoring where appropriate as
(17:51):
well in order to try and reduceoverall cost.
And I think for the first timethat I've seen in my career in
the U.S., I think these thingsare actually gaining some
traction or significanttraction.
And certainly when you look atU.S.
PHAs, focus, one of their areasis expense control.
(18:12):
And I think in the past, thatside has perhaps been less
focused than revenue generation.
Ryan Buckley (18:20):
Yeah, I think that that's well said.
We have had certain clientsthat have outsourced certain
functions like RCM to lower costlocations.
They've been able to do thatwithout impact on the business,
which is always a criticalcomponent to evaluate such a
move.
I think one of the other areasmaybe to talk about would just
(18:40):
be around how do you improveyour net reimbursement rates in
an environment where you'reseeing declining rates.
And I think that you can lookat that in a few different ways.
You can try to augment yourpayer mix a bit, focus on some
of those payers that havehigher, higher reimbursing and
suggest that being, you know,workers' compensation, maybe
(19:01):
certain areas like personalinjury, focusing on those payers
that truly do value what theindustry and the profession are
delivering.
So scheduling for success,certain other areas to drive
demand.
Many therapists are utilizingLuna in the evening,
moonlighting and picking up ashift or two to augment some of
(19:23):
the costs that they had fromeducation.
And we've seen physical therapyoperators start to look at home
care as a potential way todifferentiate for their
therapists to provide them suchthat they don't have to use
something like a Luna.
So there's, you know, again,going back to the let no crisis
go to waste, there are areaswhere the savvy PT operator is
(19:47):
looking for improvement.
Richard Leaver (19:49):
The reimbursement component is
really interesting.
This is one of the five areasyou talk about in your article,
isn't it?
It's Up until relativelyrecently, I did question, wonder
whether there was any value inpayer relations because
historically a lot of payershave just had a very shut-door
(20:14):
mentality with regards to, youknow, it's difficult to get them
to move at all.
But I feel that there has beensome movement, I won't say it's
dramatic movement by payers, butsome movement more recently
from to just abusive rates bysome of them.
But there has been a littlemovement, and I think that's
(20:36):
multifactorial perhaps, and I'dlike your thoughts on this.
But I think in part it'sbecause there is this supply and
demand mismatch, and certainproviders have become
comfortable with walking away,including Alliance PT partners.
The irony is because of theshortage of outpatient
(20:58):
therapists, Many clinics have anissue with actually excessive
demand for the first time sinceI've been in the States for the
last 20 years.
So then that creates theopportunity to actually push
back against the payers.
And for those that aren'tprepared, willing to reimburse
(21:19):
at a rate that even meets theactual costs, we're able to
actually say enough is enough.
but certainly gives leverage tothe providers, which hasn't
been there in the past.
And I think that's one of thefactors that I believe has
perhaps contributed to yourthinking as it pertains to
(21:42):
botting it out and coming out tothe other side, yes?
Ryan Buckley (21:47):
Correct.
I mean, I think if you look at,if we were to look back at our
proprietary index of clients andothers, generally speaking,
actually net reimbursement haseither stayed roughly stable or
slightly increased over the lastcouple of years, which is
counterintuitive when you thinkabout it in the context of the
Medicare rate cuts and then someof the other rate cuts.
(22:07):
And I think a lot of that isbecause, to your point, if you
have more demand than you cansupply in a day, that enables
you to get more aggressive withlower reimbursing payers than
the industry previously was everwilling to do.
And to the industry's point,every patient is the same and
(22:29):
needs that treatment.
But at the same time, there'sthe practical element that comes
into it that if you have apayer that wants to pay $60, $70
a visit, it's just impractical.
You're losing money on thosevisits.
Richard Leaver (22:45):
Yes, I did some back of the napkin analysis a
while ago to try and justify toa certain payer why they should
reimburse higher.
And I calculated that if aclinic was seeing visits at an
average net revenue per visit of$70, the average clinic would
(23:05):
actually have a margin ofnegative 22%.
So there is definitely a needto address the lower payers
because Because financially,it's just no longer viable
whether we like it or not.
It's nothing to do with ethicsor morality.
It's just the ability to keepone door open, isn't it?
Ryan Buckley (23:26):
I would maybe look at it a slightly different way.
I mean, at $90 a visit, if youhave three therapists in your
clinic and they're seeing onaverage 11 patients a day, that
clinic is likely generatingabout a 27.5% clinic-level
EBITDA margin before rev cycle.
And so when you think about thecorporate overhead that's
(23:48):
required plus the rev cycle, andthat approximates about 15%,
you get to something that lookslike about a 12% post-corporate
EBITDA margin.
If you look at other areas ofhealthcare, home care and
others, that is not, anythingless than $90 a visit starts to
then get to the point ofunsustainable from our
(24:11):
standpoint.
Now, this is obviously, we'retalking, you know, across the
board or across the country onan average basis.
It costs a lot less in upstateNew York to deliver care than it
does in New York City.
But at the end of the day, thatin my mind is a framework that
some can look at to what is sortof a livable wage within
physical therapy.
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Richard Leaver (25:15):
Yes, it brings us on to the point of staffing a
little bit and tying intoreimbursement.
What amazes me is theshort-term nature thinking of
payers.
So bear with me one minute withthis.
If payers are reimbursing at arate that is just not
sustainable, what we are seeingas a result of that is weight
(25:41):
pressure, essentially.
And In conjunction with that,the costs of education have gone
up immensely, where I think theaverage debt for a PT student
now is about $150,000.
So you're ending up with asituation where, because the
wages of therapists is, I wouldcertainly say, less than other
(26:04):
perhaps healthcare professionsof similar education, the
incentive and the debt is ashigh, if not higher, than those
other healthcare professions.
entities or professions.
You're ending up with asituation, we're seeing this,
where the amount of peopleattracted to the profession is
(26:25):
declining or certainly notincreasing at the rate in which
we need it to meet demand.
And then those are actuallyalready in the workforce and
certainly recently have exitedthe workforce.
So in a way, you're reducingoverall supply further while
which will then actually createa situation where the providers
(26:50):
will continue to cherry pick orcontinue to go out of network
with those payers that pay less.
So the circle finishes offwhere the payers are only
actually hurting themselveseventually.
Now that's a very long-termview, but that's in my mind how
(27:11):
I see things occurring unlessthere is a substantial increase
in reimbursement, which thentranslates into higher wages
eventually.
Ryan Buckley (27:22):
You're like, no, no, I would agree.
I think the silver tsunami orhowever you want to kind of
characterize, you know, the babyboomer generation, you know, is
just going to furtherexasperate the issue that we
have on our hands here from toomuch demand and not enough
supply.
Set aside the amount of hip andknee procedures, which many in
(27:46):
most cases will requireoutpatient physical therapy.
You're also talking about thebenefits of therapy for, you
know, other issues, balanceissues.
These are ongoing issues that,you know, if treated
appropriately, can reduce costsdownstream from falls and other
challenges.
And so there's just atremendous amount of demand on
(28:08):
one side of the, you know, callit the Medicare population, at
the same time that we have, youknow, an ever more active
population that's requiring thetherapy.
And so it's a challenge thatthe industry has to figure out.
There are multiple ways that itcan figure that out.
Reimbursement, therefore,allowing physical therapy
(28:29):
operators to pay a higher wageto encourage more to enter the
profession.
The other way to look at it isutilizing tax, utilizing PTAs in
a way that it is on astate-by-state basis.
But there are certain statesthat have a little bit more of a
liberal usage of tax, whichallow the physical therapy
(28:51):
operators in those markets toincrease the amount of access,
patient access that they have,treating more patients per day
because they're utilizingextenders in a way that is
prohibited in other marketsaround the country.
So, you know, of course, rateis one of the key drivers, but
there are other ways to try toattack the access issue that is
(29:13):
facing this country.
Richard Leaver (29:15):
Yes, I think the silver lining from staffing is
with the reduction in supply andthe change in network, in
network, out of network, it'sactually, as you said earlier,
really, it's really supportingnet revenue per visit or
actually increasing it, whichthen in turn actually will
actually translate into beingable to provide therapists with
(29:37):
higher salaries.
So it's kind of helpingindirectly.
about labor as well.
I feel I have a similar kind ofperception to you with regards
to the bottoming out.
With regards to labor, thepost-COVID hangover which you
mentioned seems to be at lastover.
(29:59):
Certainly from a non-clinicalperspective, I would say in the
last six, 12 months, there'sbeen a transformation with
regards to the ability toattract and retain non-clinical
healthcare staff.
But I would say probably in thelast six, six months this year,
there has been, I won't saynecessarily a complete easing,
(30:23):
but it's slightly better as itpertains to recruitment.
Certainly retention, I think,has improved across the board as
well.
The great resignation seems tobe over.
So I think that turmoil as itpertains to staffing, labor has
certainly settled.
And with that comes somestability, which then will
(30:45):
then translateinto all being well-better financial
performance, yes?
Ryan Buckley (30:48):
Yeah, I think that's right.
I think certainly you'refinding that, you know, in a lot
of our clients, for example,for a period of time, they were
utilizing travelers, therapisttravelers at great expense, you
know, basically almost likebreak even type of visits when
you have to utilize those, butyou do it to ensure that you can
treat the patients in yourmarket and treat those referring
(31:11):
physicians as they expect to betreated.
The other side here could alsobe those that exited the
industry over the last three orfour years.
Did they exit the industrybecause of burnout or because of
other factors?
And one thing that will beinteresting over the next couple
(31:32):
of years, if we're on theprecipice of a recession or some
type of economic weakness, doyou start seeing therapists who
exited the industry come back?
And maybe that might not befull time.
Maybe that's more on apart-time basis, at least
initially.
But that could be a portion ofwhat helps solve some of the
(31:55):
short-term demand and supplyissues here.
Richard Leaver (31:59):
Yeah, I completely agree.
Whilst nobody wants perhaps tohave a recession, it certainly
may help as it pertains tosupply because there are a lot
of therapists that are eithercurrently out of the workforce
or only partially within itbeing PRN per diem in status.
(32:22):
And oftentimes the therapist isa second income.
And when the economy takes abit of a dive, then the need for
that second income may increaseand could actually add
significantly to supply,couldn't it?
So I couldn't agree more.
(32:44):
Other component that I thinkyou touched on that I'd love to
explore perhaps a little bitmore, I always say that there
are two key differentiators inhealthcare.
One is labor, and thensecondly, technology.
I think the majority of otherfactors are fairly ubiquitous or
(33:06):
can be difficult to achieve adifferentiator.
But certainly, I thinktechnology can be a factor And
there's certainly a lot that'sbeing done from a technology
perspective, both from aclinical and more so at the
moment from a non-clinicalperspective, I believe.
What are you seeing inoutpatient therapy companies as
(33:29):
it pertains to kind of theperception and use of technology
generally?
Ryan Buckley (33:36):
Yeah, I think we're going to continue to see
more, you know, note-taking, youknow, usage through AI, which
should, one, save time, alsoimprove, ideally, or reduce
maybe the human element and, youknow, improve the note-taking
capacity.
We talked earlier about theself-check-in kiosks.
(33:57):
You know, there have beenoperators that have tried to,
you know, go with a leaner staffat the front desk, expecting
the therapist previously to thenpick up those, you know, that
check-in process.
And it's just more to put onthe therapists who are already,
you know, really need to beprepared.
So there's a variety ofdifferent ways to do that.
(34:41):
ways to try to implement thattechnology.
You know, I would say also backto the Luna example that we
talked about earlier.
I mean, in certain markets, theuse of home care is a way to
try to increase, you know, theproductivity of your clinician
base, given that they otherwiseare already probably doing that.
(35:02):
And so you've got to implementsome technology within your
business to figure out how doyou, how would you, you know,
capture, you know, what at theend of the day are probably 10%
of referrals are for home carethat most outpatient PT
operators don't.
don't utilize, but is a realpotential growth avenue that has
been overlooked for years.
Richard Leaver (35:20):
The last thing I'd like to perhaps touch on is
the larger providers haveperhaps, shall I say, entrenched
themselves the last two, threeyears, or they're currently
still entrenching.
(35:41):
So basically taking a harderlook at the business than they
perhaps ever done with regardsto looking at what is
profitable, what is notprofitable, and focusing on the
core, which is usually samestore growth as well.
So for instance, I keepreferring to USPH, but they
(36:02):
actually do a very good job inmany, many ways.
One of the key measures theyhave is actually visit volume in
the same store.
And many entities have divestedor just closed clinic locations
in the last two, three yearsand continue to look at their
portfolio clinics and adjustaccordingly based on financial
(36:27):
performance or even justgeographical presence from a
strategic perspective.
And I think that has alsohelped with improving margin
and, again, another indicatorthat perhaps we bottomed out and
trimmed a lot of the perhapsfat off the business.
Ryan Buckley (36:52):
Yes, I would say from the strategic standpoint,
the large strategics, that thereis most likely an ongoing
review of which markets shouldwe be in and which areas maybe
have smaller clinics.
We talked a little bit earlierabout the type of clinic-level
(37:13):
performance you should generateas a three, four, five therapist
location.
But when you look at one, twotherapist locations, when you
ended up having...
of the turnover and the GreatRecession that we ended up
having, it really exposed forthe industry what happens to
clinic-level profitability ifsomeone's out with COVID or
whatever forces them to not beable to be in the clinic
(37:35):
practicing.
And so I think that that's areview that many of the
operators are looking at.
They're also looking at, youknow, are there markets that we
got into that maybe we shouldn'tbe?
Because what the private equityuniverse truly values is market
density and leader in thoseregions.
And if you're the fourth,fifth, sixth largest player in a
(37:56):
market, maybe that's not amarket that we should be
spending significant dollars onfrom a corporate overhead
perspective to support.
Maybe there is an operator thatactually is better suited to
manage and oversee and reallydrive those clinics.
Yes.
Richard Leaver (38:14):
So a lot of work being done to improve operator
operations operationalefficiencies internally and
externally as well I thinkthere's definitely signs of
light as it pertains toreimbursement improvement
certainly not going down anyfurther and possibly some upside
(38:40):
for the foreseeable futureinflation well and interest
rates who knows we'll see whathappens tomorrow as it pertains
to that but certainly I thinkcertainly from the inflation
perspective, nowhere near as badas it was, you know, 12, 24
months ago.
And interest rates, you know,people tend to be of the general
(39:02):
opinion that they will go downquite when we're not sure that
we go down.
So there seems to be a lot morestability generally combined
with some operationalimprovements to kind of give
this perception or the realitythat we've bottomed out on the
way up.
So to really finish with, I'dlove to get your thoughts with
(39:23):
regards to perhaps the type oftimeframe that it's going to
take.
You know, is this, do you thinka kind of a J curve or do you
think this is just going to be akind of a long hard log or, you
know, who knows?
Ryan Buckley (39:43):
Well, I'm a glass half full kind of guy, so I'm
hoping maybe more for that Jcurve as opposed to the long,
hard slog, given that that'swhere we've been for the last
five, seven years.
I think that when you look atthe physical therapy platforms
that are in private equityfunds' hands, there were a
(40:05):
number of platforms that wereinitially created in the late
2015 through 2017 times.
There were a number of othersthat were, let's just call them
the COVID babies, if you will.
And, you know, certainly forthose that those platforms that,
you know, that traded tofinancial sponsors during COVID,
(40:25):
there was probably a year ortwo of lost, you know, kind of
time because of COVID and thelate all of the factors that
we've been talking about here.
So those those businesses arelikely, you know, still to
continue to benefit from, youknow, this rebound.
We do anticipate that some ofthose longer vintage performance
And in really doing so, weanticipate with the tailwinds
(40:55):
that are supporting that weexpect to support the industry
in 2026.
Richard Leaver (41:01):
For those private practice owners that may
want to reach out to you, Ryan,and talk further in regards to
possible M&A in the future, howmight they get hold of you?
Ryan Buckley (41:15):
Certainly via the website, livingstonepartners.com
or my email address, buckley atlivingstonepartners.com.
We take a very long-term viewon the physical therapy
industry.
We want to be a resource tooperators, both small and wide.
I love talking about physicaltherapy and where we think the
(41:36):
industry is going.
So again, I very muchappreciate what you've done here
for the industry and having metoday.
Richard Leaver (41:43):
Thank you so much for your time Hopefully
it's been fairly enlighteningfor our listeners.
And as I say, when you're inthe trenches as a provider every
day, it's fairly easy to slipinto the glass half empty.
So it's refreshing to actuallyspeak with somebody that is a
glass half full and certainlyfocusing more on the positives
(42:05):
than perhaps on the strugglesthat we've experienced the last
first few years.
So thank you so much, Ryan.
Ryan Buckley (42:12):
Thank you.
Alliance Physical Therapy (42:15):
This podcast was brought to you by
Alliance Physical TherapyPartners.
Want more expertise andinformation?
Visit our website atallianceptp.com and follow us on
social media.
You can find links below in thedescription.
As always, thank you forlistening.
Alliance Physical Therapy Partners and
Agile Virtual Physical Therapyproudly present Agile and Me, a
physical therapy leadershippodcast devised to help emerging
and experienced therapy leaderslearn more about various topics
relevant to outpatient therapyservices.
Richard Leaver (00:20):
Welcome to PT Leadership Podcast Series.
I'm Richard Lever, and I'mexcited in my usual British
monotone voice to welcome RyanBuckley.
Welcome, Ryan.
Great to have you on the showtoday.
Ryan Buckley (00:32):
It's a pleasure to be here.
Thank you for having me, and Iappreciate all you're doing for
the physical therapy industry.
Richard Leaver (00:38):
Well, thank you.
I'm trying my best.
Ryan, you're a partner atLivingston Healthcare Banking,
and you've specialized in M&Afor many years within
healthcare, I think over 18years, I think, in M&A and
capital raising andrestructuring experience across
all sectors.
But within healthcarespecifically, you've spent a lot
(01:01):
of time specifically in theoutpatient space.
Am I correct in saying that?
Ryan Buckley (01:07):
Yeah, that's correct, Richard.
And maybe it would bebeneficial to give you just a
bit of an overview on our firmand our experience within
physical therapy.
So Livingstone, we're an M&Aand debt advisory firm based in
Chicago.
We have offices in across theglobe.
We're focused on the lower endof the middle market, which we
define as transactions valuedbelow $500 million of
(01:29):
transaction value.
We're predominantly outside M&Ashop representing sellers.
That's about 75% of what we do.
And many of our clients, over60% of them are family owned,
entrepreneurially ownedbusinesses, with the remainder
being private equity ownedportfolio companies and
corporates.
I have the honor of being aco-head of our healthcare
(01:51):
practice.
Our healthcare practice ispredominantly a provider-based
practice.
We have extensive experience ina range of provider-based
businesses, but specificallymusculoskeletal is an area where
we have deep domain expertise.
We've completed manytransactions in orthopedics,
interventional pain management,physiatry, podiatry, and most
(02:13):
specifically physical therapy.
We've been doing physicaltherapy for 20 years now, did
our first physical therapytransaction in 2006, advising
ATI Physical Therapy on theirfirst private equity
recapitalization.
We actually got to know GregSteele, Dylan Bates, and Matt
Kruger, who at the time werelate 20-somethings, early
(02:36):
30-somethings, founded a veryattractive and fast-growing
business, and they had an offerfrom a strategic, and we were
able to convince them to do aprivate equity transaction.
And what that transactionreally represented when we sold
them a year later to KRG, was inmany respects the beginning of
a consolidation wave backed byprivate equity in the physical
(02:58):
therapy industry.
And we've been at the forefrontof that for that time.
We've completed over two dozentransactions involving both
private equity funds andstrategic buyers.
And I would say we've completedtransactions in well over half
of the states.
So we have a pretty uniqueperspective on both the care
models, the state differences,care settings, and that's That
(03:21):
has afforded us the ability tobe a value-added advisor to our
clients.
Richard Leaver (03:26):
Yes, your depth and breadth of experience with
outpatient therapy, I think, isnot necessarily unique, but
certainly unusual.
And the reason why I waslooking forward to chatting with
you today was you recentlypublished an article on LinkedIn
called Physical Therapy BullMarket Has Begun, Signaling
(03:48):
Growth in Healthcare M&A.
and I was surprised a littlebit to see such a title
pleasantly surprised but Iwanted to perhaps pick your
brain a little bit about thisarticle because at the moment I
won't say there's necessarilydoom and gloom but there's
definitely a degree of pessimismas it pertains to the kind of
(04:10):
the economics and financessurrounding outpatient therapy
particularly really since Iwould say COVID if not slightly
before that so are excited totalk through about the article.
Before we dive into the weeds,though, I'd love to perhaps get
your thoughts on kind of whatprompted the article.
Ryan Buckley (04:34):
Well, the title needed to be something bold and
needed something catchy thatpeople would want to read.
But I will say that this issomething that we've been
forecasting for at least thelast six to 12 months that the
physical therapy industry shouldreach a trough at some point in
2025.
And the premise to that is theindustry has really taken it on
(04:56):
the chin for the As we all know,a lot of commercial payer
contracts are linked to thoseMedicare rates.
And so we've been in thisperiod of declining
reimbursement at a time wherewe've all been experiencing
inflation in our costs.
(05:17):
Labor availability has been achallenge across many
industries, particularly thephysical therapy industry.
The industry has way moredemand than it has therapists to
meet that supply.
And so, yes, it's been achallenging market for the last
four or five years.
But many physical therapyoperators have taken that
(05:38):
opportunity to improve theiroperations, become more
productive, more efficient,encourage therapists to see more
visits, negotiate andrenegotiate payer contracts, cut
costs at the admin level whereneeded.
So a variety of different taskswere taken and initiatives were
taken by physical therapyoperators to weather the storm
(06:04):
that that was decliningreimbursements for the last half
decade.
We're now to the point where weshould see at least stable to
rising rates in 2026 at a timewhere cost structures are very
efficient and we have far moredemand still than we have
therapists to meet that supply.
And that, from our perspective,sets the stage for a very
(06:26):
strong industry heading into2026 and beyond.
Richard Leaver (06:31):
Lots of great points.
Definitely been a storm.
So essentially, I see fourprimary issues that you've just
mentioned.
First off is what seems to bealmost continual Medicare
reductions.
And even if you look at it inthe longer term, the value of
(06:55):
the reimbursement has gone down.
I think Medicare approximately30% over the last 10 years.
I think that was a number thatI kind of hear banded around.
But certainly the more recentcuts have all being well
subsided.
I won't necessarily say it'sover, but certainly subsided.
And then staffing shortages,that's been prevalent for a long
(07:20):
time, but exacerbated by COVID,wasn't it, as it pertains to
not only structural issues withthe numbers that are being
trained aren't sufficient, butthose leaving the workforce
around COVID and not all ofthose coming back.
And then inflationarypressures, as you say, and
obviously the primary cost toexpenses is labor, but certainly
(07:42):
all facets of the business haveexperienced inflationary
pressures.
And then the demand supply forcare itself.
What I...
think about the currentsituation is perhaps not so much
that these issues havestabilized or even reversed, but
(08:05):
the idea that with problemscome opportunities.
And I believe that perhaps themore effective, efficient,
better outpatient providers havestarted to be able to identify
(08:26):
and more importantly implementsolutions for some of these
issues.
Do you feel that perhaps istrue?
Ryan Buckley (08:37):
Absolutely.
And one of the things that wealso didn't mention is during
this period of time, you alsosaw rate increases, interest
rate increases that started inMarch of 22 and peaked in August
of 2023.
And when you have those rateincreases, what that, you know,
in many respects, you know,forces an operator to focus on
(08:59):
is the internal low-hangingfruit within the practice.
And what could that be?
That could be, you know, youknow, virtual kiosks at the, you
know, at the front desk.
It could be, you know, workingon productivity in terms of the
number of patients per therapistper day.
That's a huge element that wework a lot with our clients on
(09:22):
because it is one of the biggestlow hanging fruit.
If you've got a therapistthat's seeing eight or nine
patients a day, just seeing thatextra one or two to try to get
to something that looks morelike 12 patients per therapist
per day.
And it depends a lot on themarketplace.
But that, that incrementalvisit or two per day can have
profound impacts on theclinic-level productivity of the
(09:44):
practice.
We talk a lot about how do you,as opposed to opening up a new
de novo, do you have physicalspace or can you create physical
space within your clinic to addthat extra therapist or two?
Given the fixed cost structureof a physical therapy clinic,
that incremental therapist candramatically increase your
(10:05):
clinic-level profitability.
And it's these types of movesthat are required when you have
the situation where you havedeclining reimbursement and
rising costs.
By necessity, you have to getmore efficient, more productive.
Alliance Physical Therapy Pa (10:21):
At Alliance, we believe that
partnership means creatingsomething greater than the sum
of its parts.
Our focus is finding physicaltherapy practices with a strong
culture and thriving communityand providing them with
additional tools, resources, andexpertise to take their
practice to the next level.
To learn more about joining ournationwide community of
(10:42):
outpatient physical therapypractices, visit our website at
allianceptp.com.
Richard Leaver (10:50):
Yeah, lots of great points with regards to
perhaps ways or tactics orstrategies for perhaps digging
out of the hole or the trough.
But before we focus a littlemore on those, my gut feel is a
lot of the number of the reasonswhy entities are perhaps
(11:10):
struggling are self-inflicted.
And let me perhaps explain thata little bit more.
Up until relatively recently,as you say, interest rates were
low.
Whilst reimbursement washeading in the wrong direction,
reimbursement overall wasreasonably robust or sufficient,
(11:32):
shall I say.
not so much the inflationarypressures.
And I think a lot of providers,be that mom and pop shots or
even larger entities, kind ofgot over their skis somewhat.
And one of the things I feelhappened was people grew perhaps
(11:52):
too quickly or became kind offat and lazy, metaphorically fat
and lazy.
And over the last two, threeyears, they've suffered
indigestion as a result of that.
So obviously there's a lot ofexternal factors that have
changed and certainly notnegating or trying to
(12:13):
underestimate those significantchanges.
But I think there has certainlybeen a number of internal
factors for certain entities aswell that haven't helped.
Would you agree with that?
Ryan Buckley (12:27):
I think you're describing it in a very good
way.
And certainly I'm not going totalk about specifics within the
industry, but I think that youhit the Certainly impacted a
(13:05):
number of operators.
I think the other side as wellis the importance of culture
within a practice.
When you start to get to acertain scale and a certain size
culture, being able to continueto disseminate the culture that
made it successful when it wasa small practice is critically
important.
And there's no right or singleway to disseminate that culture.
(13:30):
You kind of know it when yousee it, but at the same time,
When you get to a point ofcertain large operators
maintaining that culture acrossthe country and or across
multiple regions can be tricky.
And it is something that needsto be focused on.
The pandemic certainly didn'thelp by limiting the amount of
in-person travel.
(13:52):
But that is that has been anarea that I think a lot of the
successful operators havefocused heavily on in the last
handful of years is continuingto maintain that culture.
And why is thatimportant? It's because the
therapistsare in such high demand
that they are capable of moving toanother operator,
with the perception of a - and maybe the reality - of a better culture. And that is, when you have an industry that has hadsome turnover, you want to be able to limit that, given the fact that you're not able to replace those therapists as efficiently as you might once have.
(14:19):
Yeah. I always think that it's easyto run a business when you've
got virtually no inflation,interest rates that are through
(14:41):
the floor, basically money'sfree, and reasonable supply of
healthcare workers andreasonable reimbursement.
It's difficult to really losemoney, isn't it, in that
environment?
And I think many companies werelulled into a false sense of
(15:02):
security for so long.
And, you know, they've had tohave a significant wake up call,
haven't they?
And for some, it's been a realshock.
And for others that perhapsoperated more conservatively
prior to to these challengeshave had have fared better.
You know, when I look at USPHand you reference them, they
(15:25):
they've seemed to have weatheredvery well the storm.
And I feel that that's in partbecause they've always operated
in a more conservative way.
manner and position themselvesslightly different with regards
to their M&A strategy and justhow they operate generally.
Would you agree with that kindof thought process?
(15:47):
Certainly would.
And having had the pleasure oftransacting with U.S.
Physical Therapy last year, youknow, we saw firsthand, you
know, they provide theirpartners a great deal of
autonomy and it allows them inmany respects to have, you know,
many CEOs, if you will, and indifferent markets all around the
country.
And that local ownership, thatlocal model, you know, is one
(16:09):
that allows them to continue tomaintain that culture that we
were talking about earlier.
There's a point that I thoughtyou were actually going to go
down when you talked about, youknow, the struggles that the
industry has faced over the lastfive years.
And I want to sort of come backto this.
And I don't mean to be doom andgloom around like the
depression back in the 1930s.
(16:29):
But what the depression of the1930s created was some of the
best innovation ever experiencedwithin our country.
And that happens out of tryingtimes over the last four or five
years, despite the headwindsthat we've been talking about.
Again, physical therapyoperators have been able to
(16:49):
adapt and they've gotten better.
They've gotten more efficient.
And from our perspective, thatis why we have such strong
conviction that this industry iscreating that bull market over
the next three, five, sevenyears.
Richard Leaver (17:03):
Yes, Following up on that point, there's
definitely some, I believe,technology innovations or
implementation.
I don't necessarily think it'sinnovation because I think the
technology has been there forquite a while in one form or
another, but certainly thechallenges have been a catalyst
for change.
There is a saying, isn't there?
(17:26):
You never let a good, you know.
Right, so it's got to waste.
That's exactly.
And I think that's probablysomewhat the case here, isn't
it?
So you've mentioned it already,you know, virtual front desk,
for instance.
I think There's definitely amovement towards optimizing
labor and also nearshoring,offshoring where appropriate as
(17:51):
well in order to try and reduceoverall cost.
And I think for the first timethat I've seen in my career in
the U.S., I think these thingsare actually gaining some
traction or significanttraction.
And certainly when you look atU.S.
PHAs, focus, one of their areasis expense control.
(18:12):
And I think in the past, thatside has perhaps been less
focused than revenue generation.
Ryan Buckley (18:20):
Yeah, I think that that's well said.
We have had certain clientsthat have outsourced certain
functions like RCM to lower costlocations.
They've been able to do thatwithout impact on the business,
which is always a criticalcomponent to evaluate such a
move.
I think one of the other areasmaybe to talk about would just
(18:40):
be around how do you improveyour net reimbursement rates in
an environment where you'reseeing declining rates.
And I think that you can lookat that in a few different ways.
You can try to augment yourpayer mix a bit, focus on some
of those payers that havehigher, higher reimbursing and
suggest that being, you know,workers' compensation, maybe
(19:01):
certain areas like personalinjury, focusing on those payers
that truly do value what theindustry and the profession are
delivering.
So scheduling for success,certain other areas to drive
demand.
Many therapists are utilizingLuna in the evening,
moonlighting and picking up ashift or two to augment some of
(19:23):
the costs that they had fromeducation.
And we've seen physical therapyoperators start to look at home
care as a potential way todifferentiate for their
therapists to provide them suchthat they don't have to use
something like a Luna.
So there's, you know, again,going back to the let no crisis
go to waste, there are areaswhere the savvy PT operator is
(19:47):
looking for improvement.
Richard Leaver (19:49):
The reimbursement component is
really interesting.
This is one of the five areasyou talk about in your article,
isn't it?
It's Up until relativelyrecently, I did question, wonder
whether there was any value inpayer relations because
historically a lot of payershave just had a very shut-door
(20:14):
mentality with regards to, youknow, it's difficult to get them
to move at all.
But I feel that there has beensome movement, I won't say it's
dramatic movement by payers, butsome movement more recently
from to just abusive rates bysome of them.
But there has been a littlemovement, and I think that's
(20:36):
multifactorial perhaps, and I'dlike your thoughts on this.
But I think in part it'sbecause there is this supply and
demand mismatch, and certainproviders have become
comfortable with walking away,including Alliance PT partners.
The irony is because of theshortage of outpatient
(20:58):
therapists, Many clinics have anissue with actually excessive
demand for the first time sinceI've been in the States for the
last 20 years.
So then that creates theopportunity to actually push
back against the payers.
And for those that aren'tprepared, willing to reimburse
(21:19):
at a rate that even meets theactual costs, we're able to
actually say enough is enough.
but certainly gives leverage tothe providers, which hasn't
been there in the past.
And I think that's one of thefactors that I believe has
perhaps contributed to yourthinking as it pertains to
(21:42):
botting it out and coming out tothe other side, yes?
Ryan Buckley (21:47):
Correct.
I mean, I think if you look at,if we were to look back at our
proprietary index of clients andothers, generally speaking,
actually net reimbursement haseither stayed roughly stable or
slightly increased over the lastcouple of years, which is
counterintuitive when you thinkabout it in the context of the
Medicare rate cuts and then someof the other rate cuts.
(22:07):
And I think a lot of that isbecause, to your point, if you
have more demand than you cansupply in a day, that enables
you to get more aggressive withlower reimbursing payers than
the industry previously was everwilling to do.
And to the industry's point,every patient is the same and
(22:29):
needs that treatment.
But at the same time, there'sthe practical element that comes
into it that if you have apayer that wants to pay $60, $70
a visit, it's just impractical.
You're losing money on thosevisits.
Richard Leaver (22:45):
Yes, I did some back of the napkin analysis a
while ago to try and justify toa certain payer why they should
reimburse higher.
And I calculated that if aclinic was seeing visits at an
average net revenue per visit of$70, the average clinic would
(23:05):
actually have a margin ofnegative 22%.
So there is definitely a needto address the lower payers
because Because financially,it's just no longer viable
whether we like it or not.
It's nothing to do with ethicsor morality.
It's just the ability to keepone door open, isn't it?
Ryan Buckley (23:26):
I would maybe look at it a slightly different way.
I mean, at $90 a visit, if youhave three therapists in your
clinic and they're seeing onaverage 11 patients a day, that
clinic is likely generatingabout a 27.5% clinic-level
EBITDA margin before rev cycle.
And so when you think about thecorporate overhead that's
(23:48):
required plus the rev cycle, andthat approximates about 15%,
you get to something that lookslike about a 12% post-corporate
EBITDA margin.
If you look at other areas ofhealthcare, home care and
others, that is not, anythingless than $90 a visit starts to
then get to the point ofunsustainable from our
(24:11):
standpoint.
Now, this is obviously, we'retalking, you know, across the
board or across the country onan average basis.
It costs a lot less in upstateNew York to deliver care than it
does in New York City.
But at the end of the day, thatin my mind is a framework that
some can look at to what is sortof a livable wage within
physical therapy.
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Richard Leaver (25:15):
Yes, it brings us on to the point of staffing a
little bit and tying intoreimbursement.
What amazes me is theshort-term nature thinking of
payers.
So bear with me one minute withthis.
If payers are reimbursing at arate that is just not
sustainable, what we are seeingas a result of that is weight
(25:41):
pressure, essentially.
And In conjunction with that,the costs of education have gone
up immensely, where I think theaverage debt for a PT student
now is about $150,000.
So you're ending up with asituation where, because the
wages of therapists is, I wouldcertainly say, less than other
(26:04):
perhaps healthcare professionsof similar education, the
incentive and the debt is ashigh, if not higher, than those
other healthcare professions.
entities or professions.
You're ending up with asituation, we're seeing this,
where the amount of peopleattracted to the profession is
(26:25):
declining or certainly notincreasing at the rate in which
we need it to meet demand.
And then those are actuallyalready in the workforce and
certainly recently have exitedthe workforce.
So in a way, you're reducingoverall supply further while
which will then actually createa situation where the providers
(26:50):
will continue to cherry pick orcontinue to go out of network
with those payers that pay less.
So the circle finishes offwhere the payers are only
actually hurting themselveseventually.
Now that's a very long-termview, but that's in my mind how
(27:11):
I see things occurring unlessthere is a substantial increase
in reimbursement, which thentranslates into higher wages
eventually.
Ryan Buckley (27:22):
You're like, no, no, I would agree.
I think the silver tsunami orhowever you want to kind of
characterize, you know, the babyboomer generation, you know, is
just going to furtherexasperate the issue that we
have on our hands here from toomuch demand and not enough
supply.
Set aside the amount of hip andknee procedures, which many in
(27:46):
most cases will requireoutpatient physical therapy.
You're also talking about thebenefits of therapy for, you
know, other issues, balanceissues.
These are ongoing issues that,you know, if treated
appropriately, can reduce costsdownstream from falls and other
challenges.
And so there's just atremendous amount of demand on
(28:08):
one side of the, you know, callit the Medicare population, at
the same time that we have, youknow, an ever more active
population that's requiring thetherapy.
And so it's a challenge thatthe industry has to figure out.
There are multiple ways that itcan figure that out.
Reimbursement, therefore,allowing physical therapy
(28:29):
operators to pay a higher wageto encourage more to enter the
profession.
The other way to look at it isutilizing tax, utilizing PTAs in
a way that it is on astate-by-state basis.
But there are certain statesthat have a little bit more of a
liberal usage of tax, whichallow the physical therapy
(28:51):
operators in those markets toincrease the amount of access,
patient access that they have,treating more patients per day
because they're utilizingextenders in a way that is
prohibited in other marketsaround the country.
So, you know, of course, rateis one of the key drivers, but
there are other ways to try toattack the access issue that is
(29:13):
facing this country.
Richard Leaver (29:15):
Yes, I think the silver lining from staffing is
with the reduction in supply andthe change in network, in
network, out of network, it'sactually, as you said earlier,
really, it's really supportingnet revenue per visit or
actually increasing it, whichthen in turn actually will
actually translate into beingable to provide therapists with
(29:37):
higher salaries.
So it's kind of helpingindirectly.
about labor as well.
I feel I have a similar kind ofperception to you with regards
to the bottoming out.
With regards to labor, thepost-COVID hangover which you
mentioned seems to be at lastover.
(29:59):
Certainly from a non-clinicalperspective, I would say in the
last six, 12 months, there'sbeen a transformation with
regards to the ability toattract and retain non-clinical
healthcare staff.
But I would say probably in thelast six, six months this year,
there has been, I won't saynecessarily a complete easing,
(30:23):
but it's slightly better as itpertains to recruitment.
Certainly retention, I think,has improved across the board as
well.
The great resignation seems tobe over.
So I think that turmoil as itpertains to staffing, labor has
certainly settled.
And with that comes somestability, which then will
(30:45):
then translateinto all being well-better financial
performance, yes?
Ryan Buckley (30:48):
Yeah, I think that's right.
I think certainly you'refinding that, you know, in a lot
of our clients, for example,for a period of time, they were
utilizing travelers, therapisttravelers at great expense, you
know, basically almost likebreak even type of visits when
you have to utilize those, butyou do it to ensure that you can
treat the patients in yourmarket and treat those referring
(31:11):
physicians as they expect to betreated.
The other side here could alsobe those that exited the
industry over the last three orfour years.
Did they exit the industrybecause of burnout or because of
other factors?
And one thing that will beinteresting over the next couple
(31:32):
of years, if we're on theprecipice of a recession or some
type of economic weakness, doyou start seeing therapists who
exited the industry come back?
And maybe that might not befull time.
Maybe that's more on apart-time basis, at least
initially.
But that could be a portion ofwhat helps solve some of the
(31:55):
short-term demand and supplyissues here.
Richard Leaver (31:59):
Yeah, I completely agree.
Whilst nobody wants perhaps tohave a recession, it certainly
may help as it pertains tosupply because there are a lot
of therapists that are eithercurrently out of the workforce
or only partially within itbeing PRN per diem in status.
(32:22):
And oftentimes the therapist isa second income.
And when the economy takes abit of a dive, then the need for
that second income may increaseand could actually add
significantly to supply,couldn't it?
So I couldn't agree more.
(32:44):
Other component that I thinkyou touched on that I'd love to
explore perhaps a little bitmore, I always say that there
are two key differentiators inhealthcare.
One is labor, and thensecondly, technology.
I think the majority of otherfactors are fairly ubiquitous or
(33:06):
can be difficult to achieve adifferentiator.
But certainly, I thinktechnology can be a factor And
there's certainly a lot that'sbeing done from a technology
perspective, both from aclinical and more so at the
moment from a non-clinicalperspective, I believe.
What are you seeing inoutpatient therapy companies as
(33:29):
it pertains to kind of theperception and use of technology
generally?
Ryan Buckley (33:36):
Yeah, I think we're going to continue to see
more, you know, note-taking, youknow, usage through AI, which
should, one, save time, alsoimprove, ideally, or reduce
maybe the human element and, youknow, improve the note-taking
capacity.
We talked earlier about theself-check-in kiosks.
(33:57):
You know, there have beenoperators that have tried to,
you know, go with a leaner staffat the front desk, expecting
the therapist previously to thenpick up those, you know, that
check-in process.
And it's just more to put onthe therapists who are already,
you know, really need to beprepared.
So there's a variety ofdifferent ways to do that.
(34:41):
ways to try to implement thattechnology.
You know, I would say also backto the Luna example that we
talked about earlier.
I mean, in certain markets, theuse of home care is a way to
try to increase, you know, theproductivity of your clinician
base, given that they otherwiseare already probably doing that.
(35:02):
And so you've got to implementsome technology within your
business to figure out how doyou, how would you, you know,
capture, you know, what at theend of the day are probably 10%
of referrals are for home carethat most outpatient PT
operators don't.
don't utilize, but is a realpotential growth avenue that has
been overlooked for years.
Richard Leaver (35:20):
The last thing I'd like to perhaps touch on is
the larger providers haveperhaps, shall I say, entrenched
themselves the last two, threeyears, or they're currently
still entrenching.
(35:41):
So basically taking a harderlook at the business than they
perhaps ever done with regardsto looking at what is
profitable, what is notprofitable, and focusing on the
core, which is usually samestore growth as well.
So for instance, I keepreferring to USPH, but they
(36:02):
actually do a very good job inmany, many ways.
One of the key measures theyhave is actually visit volume in
the same store.
And many entities have divestedor just closed clinic locations
in the last two, three yearsand continue to look at their
portfolio clinics and adjustaccordingly based on financial
(36:27):
performance or even justgeographical presence from a
strategic perspective.
And I think that has alsohelped with improving margin
and, again, another indicatorthat perhaps we bottomed out and
trimmed a lot of the perhapsfat off the business.
Ryan Buckley (36:52):
Yes, I would say from the strategic standpoint,
the large strategics, that thereis most likely an ongoing
review of which markets shouldwe be in and which areas maybe
have smaller clinics.
We talked a little bit earlierabout the type of clinic-level
(37:13):
performance you should generateas a three, four, five therapist
location.
But when you look at one, twotherapist locations, when you
ended up having...
of the turnover and the GreatRecession that we ended up
having, it really exposed forthe industry what happens to
clinic-level profitability ifsomeone's out with COVID or
whatever forces them to not beable to be in the clinic
(37:35):
practicing.
And so I think that that's areview that many of the
operators are looking at.
They're also looking at, youknow, are there markets that we
got into that maybe we shouldn'tbe?
Because what the private equityuniverse truly values is market
density and leader in thoseregions.
And if you're the fourth,fifth, sixth largest player in a
(37:56):
market, maybe that's not amarket that we should be
spending significant dollars onfrom a corporate overhead
perspective to support.
Maybe there is an operator thatactually is better suited to
manage and oversee and reallydrive those clinics.
Yes.
Richard Leaver (38:14):
So a lot of work being done to improve operator
operations operationalefficiencies internally and
externally as well I thinkthere's definitely signs of
light as it pertains toreimbursement improvement
certainly not going down anyfurther and possibly some upside
(38:40):
for the foreseeable futureinflation well and interest
rates who knows we'll see whathappens tomorrow as it pertains
to that but certainly I thinkcertainly from the inflation
perspective, nowhere near as badas it was, you know, 12, 24
months ago.
And interest rates, you know,people tend to be of the general
(39:02):
opinion that they will go downquite when we're not sure that
we go down.
So there seems to be a lot morestability generally combined
with some operationalimprovements to kind of give
this perception or the realitythat we've bottomed out on the
way up.
So to really finish with, I'dlove to get your thoughts with
(39:23):
regards to perhaps the type oftimeframe that it's going to
take.
You know, is this, do you thinka kind of a J curve or do you
think this is just going to be akind of a long hard log or, you
know, who knows?
Ryan Buckley (39:43):
Well, I'm a glass half full kind of guy, so I'm
hoping maybe more for that Jcurve as opposed to the long,
hard slog, given that that'swhere we've been for the last
five, seven years.
I think that when you look atthe physical therapy platforms
that are in private equityfunds' hands, there were a
(40:05):
number of platforms that wereinitially created in the late
2015 through 2017 times.
There were a number of othersthat were, let's just call them
the COVID babies, if you will.
And, you know, certainly forthose that those platforms that,
you know, that traded tofinancial sponsors during COVID,
(40:25):
there was probably a year ortwo of lost, you know, kind of
time because of COVID and thelate all of the factors that
we've been talking about here.
So those those businesses arelikely, you know, still to
continue to benefit from, youknow, this rebound.
We do anticipate that some ofthose longer vintage performance
And in really doing so, weanticipate with the tailwinds
(40:55):
that are supporting that weexpect to support the industry
in 2026.
Richard Leaver (41:01):
For those private practice owners that may
want to reach out to you, Ryan,and talk further in regards to
possible M&A in the future, howmight they get hold of you?
Ryan Buckley (41:15):
Certainly via the website, livingstonepartners.com
or my email address, buckley atlivingstonepartners.com.
We take a very long-term viewon the physical therapy
industry.
We want to be a resource tooperators, both small and wide.
I love talking about physicaltherapy and where we think the
(41:36):
industry is going.
So again, I very muchappreciate what you've done here
for the industry and having metoday.
Richard Leaver (41:43):
Thank you so much for your time Hopefully
it's been fairly enlighteningfor our listeners.
And as I say, when you're inthe trenches as a provider every
day, it's fairly easy to slipinto the glass half empty.
So it's refreshing to actuallyspeak with somebody that is a
glass half full and certainlyfocusing more on the positives
(42:05):
than perhaps on the strugglesthat we've experienced the last
first few years.
So thank you so much, Ryan.
Ryan Buckley (42:12):
Thank you.
Alliance Physical Therapy (42:15):
This podcast was brought to you by
Alliance Physical TherapyPartners.
Want more expertise andinformation?
Visit our website atallianceptp.com and follow us on
social media.
You can find links below in thedescription.
As always, thank you forlistening.
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