Competitive Advantages in Physical Therapy

[The following is pure speculative garble. My thinking could be deeply flawed on various levels. I’m sure there are things related to this topic that I haven’t mentioned, thought about, or even considered. If so, then please enlighten me.]

The Affordable Care Act is forcing healthcare changes at a very noticeable rate. Patients now incur greater out-of-pocket expenses in the form of higher deductibles and copays. Localizing this patient expense to the world of physical therapy (at least here in the US) creates new and interesting dynamics. The patient has morphed into an active medical consumer voting for their provider of choice with their money. This is where familiar circles overlap yet again.

Physical therapists now compete with more than the local chiropractors, massage therapists, and athletic trainers. The rub is now within the profession itself. If you, dear PT, haven’t felt it yet, you soon will. The question you will soon have to confront will take the form of “what would make my clinic the patients’ first choice?”

An old guy who goes by the name of Warren Buffet once said, “In business, I look for economic castles protected by unbreachable moats.”

Everyone wants a castle, but what protects their cherished castles? What keeps the competition at bay? What’s your competitive advantage?

According to Pat Dorsey (from The Five Rules for Successful Stock Investing) there are five ways a company can build a sustainable competitive advantage:

1. Real Product Differentiation – via superior technology or features

In PT terms, this would translate into techniques/modalities of treatment and specialty certifications. While this would provide a unique product, the advantage is a race against time. It’s only a matter of time before the latest treatment zeitgeist saturates the neighborhood. The virality of this differentiation will be modulated by provider and patient perception, difficulty in achieving specialized certification, etc. This temporal arbitrage could provide a nice cushion for brand-building.

2. Perceived Product Differentiation – via brand or reputation

Real Product Differentiation provides the first mover with tremendous initial potential. Given the temporal nature of such an advantage, building a brand or reputation to stack the bricks of future progress in a timely fashion is of incredible importance. Given the power of perception in terms of patient outcomes, having a strong brand or reputation will be a formidable moat.

3. Driving costs down – Walmart comes to mind.

This is always a real, but weak threat in the PT business. Retaining or increasing margins via increased volumes will likely decrease job satisfaction, increase stress levels, and result in questionable decision-making resulting in negative outcomes such as burnouts or fraud.

4. Locking in customers – via high switching costs

This was a legitimate moat until a few years ago. PT clinics basked in the bright sunshine of “in-network” status with insurance companies in hopes of greater volume of patients walking in the door. This advantage is quickly (if not already) evaporating as a result of higher and higher out-of-pocket expenses. Now it’s up to the clinic to win over the healthcare consumer. It ain’t what it used to be.

Referrals from MDs/DOs was a major driver of patients into PT clinics. However, this is already changing, and the change will likely accelerate as Direct Access provides healthcare consumers with greater perception of provider choice.

Geography plays a major role here. If travelling to another location requires greater effort, then the path of least resistance will likely be followed. Patient outcomes and experience can erode this advantage.

5. Locking out competition – via high barriers to entry or high barriers to success

I do not believe Physical Therapy clinics have high barriers to entry. This might be supported by evidence of low entry costs, increasing number of new clinics even after the recent recession, and abundance of future PTs looking to start their own practices.

Barriers to success will likely depend on network effects and brand consciousness. Geography and demographics will (and already have) provide a barbelled advantage – cities or rural areas will have inherent benefits. The middle ground (suburbs) will likely turn Darwinian, with the fittest surviving. Cities, while holding high fixed costs, will also have an relatively price-insensitive population pool. Rural regions will likely continue with first-mover advantages as a limited population cannot support many new entrants.

Of course, outsized returns will attract new players into your pond. The question is how will you maintain your competitive advantage? How will you bolster your moat?

[Again, what you just read was pure speculative garble. My thinking could be deeply flawed on various levels. I’m sure there are things related to this topic that I haven’t mentioned, thought about, or even considered. If so, then please enlighten me.]

Find me on Twitter @Cinema_Air


9 thoughts on “Competitive Advantages in Physical Therapy

  1. So here’s your Thursday edition of dropping knowledge. This may be some serious Toughlove for some physical therapist out there but I think it’s really important all the same. I’m going to give you the four levels to building a solid Moat. Important noting of these tiers, is that it’s a hard stop at every level.

    First thing you have to do is establish are you really giving quality care. This requires you to look in the mirror and actually have a deep conversation with yourself: do you have a stack of denials on your desk, our patients canceling, are you unable to fill your caseload? If you can’t look yourself squarely in the eye and saying I am delivering top shelf care every time do not go any further, stop reading, put down your iPhone.

    The next level you need to assess is are you really any different from anyone else. I know we all have egos and we all believe that what we’re doing is perfect, yet can we really say that what we’re offering a service is different than anyone else on the strip. Now by different I don’t mean you should go out and take the next course and visceral manipulation by light therapy. What I’m intending to query is our you really offering anything that is substantially different from the therapist is 20 feet down the road. Do you have a new check or are you pushing a specialized program? Most people really not appealed to come to physical therapy. They’re appealing to enter a certain program we’re help them with a specific condition. If you can’t really do any eight yourself from the field why would you expect anyone to pick you out of the phone book.

    The third tier is really important and I think it’s were most therapist who actually do a good job in their day-to-day interactions for flat: can you provide direction? We’ve all heard the stories of the patient that nobody wants or the phone call from the physician that everyone dodges, the question is what do I do with the patient not on the recovery path. No it’s really easy to get frustrated at this point yet I would argue that what I learned from my mentors is not really the skill of physical therapy, yet how I verbalize directions for patients and providers.

    We are really incredibly egocentric and we think it’s all about us. However, every patient is trying to navigate this maze of the new world of insurance regulation and every physician is also trying to figure out what exactly do I need to do with my patient help them get better. At the same time many patients don’t get better, we need to provide direction for how they compensate, return to their daily lives with a different level of performance, and how we assist them in coping mechanisms. What I often learn from my mentors is not an original thought or a novel concept. I learn from them the way to best put my thoughts into action in manners that make sense for my audience. This may be the better way of explaining thing do things the patient for the better way of establishing a relationship with the provider and helping them navigate the system as well. Words matter. Words matter in instruction, words matter in pain care, and words matter in every day life. The better that we are to therapeutic vernacular, the better equipped we are going to be to help provide direction even when it is not an anticipated one. I will bet that most of us don’t have to think about that patient too hard to picture someone who comes in and he compensates in front of you and says what on earth do I do next?

    If you may not answer this question right early and in a concise manner, your castle is about to be breached.

    The final and the pinnacle level of really providing a competitive advantage is a solid assertion that what you’re providing is exceptional always. I’m very fortunate to be coached by the Studer group and the number one lesson I’ve learned from them is start to finish if anyone in the chain let’s down the client,the work of the rest of the team matters not.

    So we can look at all kinds of excuses and all sorts of examples of why we’re not where we want to be, yet I believe these four pillars are what are critical to defending your castle. Thank you for the opportunity to contribute, Brian

  2. This is a phenomenal post. A well matched awareness of clinical savvy and business acumen is required for success in today’s healthcare environment.

    You’re points are right on. I fear the largest barrier we have to attaining critical mass for success remains the task of #brandPT; Movement, (N)MSK, pain, health, wellness, etc. – and – whatever it is… the brand must be identifiable and imaginable as the same in mind’s eye of our consumers for us to brand successfully. This helps points #1 & #2 from an efficient and organic arm of supply side market behaviors.

    To your point: Locking in our consumers will be most interesting – there’s much aspiration to be primary care MSK providers in the PT community. I feel this is an excellent place to explore. This is also the arena that I think will most readily promote point #3 by which consumers will recognize cost effectiveness in coming to PT’s as their preferred MSK provider (strictly from an outpatient sense, of course).

    Again, excellent post. These topics can be conversed many times over and will constantly evolve as the landscape of the marketplace evolves. An open eye and an active mind will be required for success. Bravo! Keep up the great work!

  3. Hey, I meant to respond a long while ago, sorry. I was sick, then we had some crazy snow days another sickness and the ArtcicBlast Icestorm that knocked out power for 3 days here in NC.

    This is a very relevant post, not just in terms of the pending changing landscape cause by the ACA.
    I’m not sure “physical therapy” or “rehabilitation” is really going to be a true benefit anymore. Yes, people have 25 visits at $50 co-pay, like I do, but with an in-network deductible of $5000, i’ll likely not get there if I just see a physical therapist 25 times. Maybe if someone has a total knee or hip replacement they will reach their deductible and get a perceived “benefit” of physical therapy for $50 a visit 3 times a week. And at 3x/week it still better be darn good PT because that’s $150 a week for 4-6 weeks! I hope the therapist is not just standing around writing down exercises. When I was applying to PT school I observed a therapist perform hands-on time with the patient, I nicknamed it “hands-on clipboard” time.

    Real product differentiation = all physical therapy is not the same.
    Perceived product differentiation = the public thinks PT is hot packs, ultrasound and leg lifts for post surgical rehab.
    to address both of those, we need to market directly to the consumer of our services, the patient, because they are becoming better consumers of health care services and this is a huge untapped market for every clinic. Stop buying “doctors” lunches, start engaging your physician colleagues, providing them with referrals and targeting marketing dollars and time towards reaching potential patients.
    Driving costs down – we shouldn’t, it’s already a bargain considering what we as PT’s can do for people
    Locking in Customers – create patients for life with exceptional services and actively asking patients to refer family friends and co-workers
    Locking out competition – create a service that no one else in town can offer or does offer and you will not have competition!

    thanks for the stimulating thoughts and opportunity to share.

  4. Really enjoyed the post. The only piece that I’d contend is the overarching idea that each PT clinic needs to differentiate from each other. I really believe that we need to start looking at competition from a broader prospective.

    Significant musculoskeletal issues (defined as lasting more than 3 months) affect over 100M people annually in the USA alone. The PT profession as a whole sees a very small slice of that pie (about 9M people), while the other ~90M are cared for elsewhere or not at all. I’d contend that instead of fighting your PT clinic neighbor for patients, we need to be identifying segments of this much larger slice of the pie and targeting them.

    Even if you are successful in an effort to differentiate yourself from the other PT clinics in your area, you are effectively weakening the overarching physical therapy brand. As an example, it would make zero business sense for the CVS in the center of town to try to differentiate itself from the CVS a mile away. It would create confusion amongst consumers, and create a rift in the CVS brand.

    In the end, the more people that go to a CVS instead of Walgreens- REGARDLESS OF WHICH CVS, the stronger the CVS brand becomes. And, the stronger the CVS brand, the more likely that CVS in the center of town will see an uptick in visitors.

    I’d argue that we need to stop trying to differentiate from our PT neighbors, and instead come to a consensus and start sending the same message to consumers. If every PT clinic in the USA had the same overarching message, that is the definition of a strong, unified brand.

    Let’s be honest, the overarching goal of PT (regardless of the advanced degrees or specialties) is pretty similar throughout the profession. This overarching goal is our brand. The means that we utilize to reach that goal (whether it be dry needling, or manual therapy, Graston) is simple the “How”. It is not the “Why”, and as Simon Sinek says the “Why” is all that matters.

    Let’s stop fighting over the 10% of patients that are already in our system. I really think this faux-competition is cannibalistic in nature. Let’s focus on the 90% that need a service such as ours, but are choosing to see a chiro, orthopedic surgeon, or not seeking treatment at all. The more people who go to see a PT, the better off you’re going to be in the long run.

    1. Ryan, thanks for your feedback! It added to my perspective a bit.

      I think you are on point with the importance of creating & promoting a unified image of PT. I’ll use your (clever) CVS metaphor to highlight 2 factors.

      One, CVS purposely choreographs locations to reduce the odds of cannibalization. It’s a corporate top-down initiative that makes complete sense from all angles. Convincing independent players to follow suit might be another story. An “invisible hand” might be at play…

      This leads to a second factor: geography & demographics. I’m sure you have a good idea of where I’m about to go with this. Population density might be one “invisible hand” in our topic of discussion. There’s a reason NY has more PT clinics per square mile than Montana. Your perspective fits nicely in the Montanas of our beautiful nation; overlap is inevitable in denser regions.

      Add increasing out-of-pocket expenses into this mix, and now it gets a bit more dynamic. Consumer-driven healthcare is inevitable. This might be a big reason why Walgreens (& others) have expanded the scope of their clinical practice into the front lawns of PT. Consumers value their work; they have Direct Access; and are well branded. Given the density of PT clinics in parts of the country, I think some elbow-rubbing is inevitable.

      However, I agree 100% with your statement of untapped populations that can benefit from PT. Public Accessibility & Awareness probably play a role here. And, trumping Walgreens will require unity on legal & political fronts.

      1. This may end up being a stream-of-consciousness reply… mostly because your response has my wheels spinning (which I thank you for).

        In order to regiment my thoughts, I’d like to make a distinction between the PT Brand (how we are perceived by the consumer public), and PT Practice (Our practice act, the legal restrictions of our practice).

        I think we should have opposite goals when dealing with these two subsections:

        1) We should be doing everything in our power to maintain and expand PT Practice: We need to defend our current scope of practice from the Walgreens of the world, and work to expand our ability to deliver high quality care. Our practice act will always describe the means that we utilize to do what we do (dry needling, manipulation, etc).

        2) We should be doing everything in our power to contract the PT Brand: One of the laws of branding is that the power of a brand is inversely proportional to its scope. I believe that our biggest problem as a profession is that we are incredibly fragmented. We are not only fragmented in our practice (no company makes up more than 1% of the PT market), but also in our ideals/messaging. This fragmentation means that the ~16,000 outpatient PT clinics in the USA are sending out thousands of different messages. This leads to consumer confusion.

        In my opinion, fragmentation s the single largest threat to the future of our profession. We have thousands of voices, we are not unified. I admire the APTA’s efforts, but the vast majority of PTs are not members, and the majority of members are passive in their membership.

        Now, where the ‘invisible hand’ comes into play: I think a more business-savvy owner can rise above the PT competition by focusing on the what you do & the outcome you can achieve (and the patient experience) rather than the means (clinical specialty). Yes, go ahead and say you have top-of-the-line clinicians with advanced degrees. But, I fundamentally believe that the majority of patients don’t necessarily care about your clinical specialty, and instead care about whether or not your can help them. If there is a strong global PT brand, and you can more effectively deliver that brand promise to the consumer, you will be able to differentiate from the competition.

        The problem is that we have a very weak global brand. So we don’t have the capacity to take a larger slice of the overall pie. Instead, we are content with fighting for scraps. I believe a single voice consistently trumpeting a simple message is our path to success… especially with the inevitable shift toward consumer-driven healthcare.

      2. We’re mostly on the same page: yes, we need a more cohesive PT brand. And yes, we need to solidify & grow our scope of practice.

        “Fighting over scraps” depends on (as I alluded to before) population density; and, by default, density of clinics or accessible providers. This scramble over patients reached such ridiculous proportion in Detroit that the amount of Medicare fraud monies became absurd. I personally knew PTs who waived co-pays (illegal?) just to entice the “scraps”. Hard to ignore the possibility of elbow-rubbing and toe-stepping when the consumer decides where to spend their healthcare dollar. Again, progress on legal fronts are Incredibly powerful and have sweeping effects.

        APTA members contribute via membership dues. I wouldn’t deride any passiveness of members, but I see what you’re saying. It’s the non-members we need to get on-board.

        Thanks again for your insights.

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