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Physical Therapy Billing | Compound factors in charge computation

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compound factors in physical therapy billingHow to compute the impact on your physical therapy billing charges due to reduction in patient visits, service units, or charge per unit

One of my favorite Physical Therapy clients recently voiced a concern about his billing. I asked if he has seen any other changes in his physical therapy practice, such as patient visits, units per visit, or charges per unit?

Yes, he said, there were minor changes in all three parameters but, since the changes were so small, he expected the changes in collections to be small too. I realized that he had trouble understanding the compounding impact of multiple changes. If you have a similar problem of shrinking collections while seeing small shrinkage in your visits, units per visit, and charges per unit, read on.

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Let’s say, you see 1,000 patient visits a month. Suppose you average 4 units per visit and charge $25 per unit. That means that your average monthly charges are $100,000.

Suppose your practice suffers a 2%, 3%, and 4% reduction in each of these parameters respectively. What is the overall reduction in your charges?

The answer is that overall your practice will suffer almost 9% reduction in charges! Here is the computation to illustrate the effect of compounded reductions:

  1. Your reduced number of visits is $980.
  2. Your reduced number of units per visit is 3.88
  3. Your reduced number of charges per unit is $24.

 

Your total charges have changed from $100,000 down to $91,257.60 for a total of 8.74% reduction

Next, you may ask, which of the three parameters has the largest impact on your bottom line? Should you focus on increasing patient visits, units per visit, or charges per unit?

To make an educated decision, you would simulate a change in one parameter alone while keeping the other two parameters fixed. Here is the computation to illustrate the effect of compounded reductions when one of the parameters drops down 10% while the others are kept at their previous change rates:

  1. 10% change in visits results in $83,808 for a 16.19% reduction
  2. 10% change in units per visit results in $84,672 for 15.33% reduction
  3. 10% change charges per unit results in $85,554 or 14.45% reduction

In other words, the impacts of the changes are comparable, so it’s important to work on all three parameters simultaneously, by improving your marketing, by educating your clinicians, and by selecting only the payers that pay your minimum fees.