Game Changers - Crystal Ball Part 1

Game Changers – “Crystal Ball” Part 1


So far in this series we have identified four Game Changing Trends that are and will continue to impact the health, physical rehabilitation, fitness, and wellness sectors. Now let’s step back and ask the question what impact is it likely to have in those sectors. There are seven important impact points to consider. We'll discuss the first three in this post and the remaining four in the next post.


1. Personal function will be a major factor in the health, welfare, and independence of Americans over the next two decades and beyond. Function will also be an important differentiator within the health community and between professional service providers. A quiet transformation is beginning to take place that will ultimately cut across the health professions. It is a transformation that will not go unnoticed by the payors of health care services. The lines are being drawn today. Those lines will divide levels of participation and opportunity within the provider community in the years ahead.


2. Reimbursement will continue to erode. Providers will be expected to deliver more services to more people for less money per unit of service. This will largely be driven by the growing demographics of seniors and increased survival rates related to medical advances. Physical therapy will be particularly impacted because seniors age 65 and over use twice the services of those who are younger. This is likely to be a difficult challenge for many physical therapy providers whose productivity has remained stagnant for decades.


The insurance industry will continue to compete with healthcare providers financially – insurers currently retain about one third of health care premiums for their own operations. Big-pharma will also compete effectively against healthcare providers for its share of healthcare spending.


Clinical providers will need to become significantly more productive. Not all providers will be able to make the transition to higher productivity, value, and performance.


3. Labor expense will continue to grow in the physical therapy sector. Labor expense will progressively eat into profits unless new business models are implemented. This will be driven by three factors: cost of living, productivity, and labor shortages.


Cost of Living: Over the period of 2000 – 2010 the Consumer Price Index increased at an average annual rate of 2.1% (21% overall). Historical data back to 1921 show similar average annual increases. It is unlikely the next 10 years will be any less, and could be significantly more given a weak dollar and increasing global competition for natural resources.


Productivity: During the past 2 decades overall US labor productivity has increased an average of 2.7% annually or about 50% overall. No such gains were realized in the physical therapy sector. In fact, Physical Therapy has the least favorable payroll to sales ratio (51.5%) amongst for-profit healthcare professional clinics in: optometry (21.9%), chiropractic (28.7%), podiatry (32.2%), all outpatient care centers (36.9%), dentistry (37.6%), mental health clinics (37.8%), speech therapy (38%), ambulatory healthcare (44.5%), physicians (49.6%), home health (50.9%), and physical therapy (51.5%). (US Economic Census) Personal training productivity is also constrained by the dominant use of a one to one service delivery business model similar to physical therapy, although group training options provide opportunity for greatly enhanced payroll to sales ratio.


Labor shortages: The physical therapy industry has been challenged with labor shortages for most of the last 50 years. That situation is almost certain to continue due to a perfect storm brought about by: aging population demographics, reimbursement erosion, low productivity, regulatory restrictions on productivity, educational system capacity, doctoral entry level time and financial investment, return on investment constraints post graduation, and professional specialization.


The personal training industry is also challenged, primary by issues of high turnover related to matters of compensation and career path advancement.


The Bureau of Labor Statistics reports that 10 of the 20 fastest growing occupations are healthcare related. Healthcare will create more jobs over the next 10 years than any other employment sector. Estimates project 30% growth in physical therapist positions and 29% growth in personal trainer positions during the period of 2008-2018.


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Bob


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