Physical therapy clinic owners discuss capital expenditures and the factors that influence their purchasing decisions.
By Cassandra Perez
Physical Therapy Products conducted a roundtable discussion with several clinic owners about the capital equipment purchases they recently made that were key in growing their operations, and which purchases they plan to make on the near horizon. These therapists share insights about types of equipment that provide the best return on investment, equipment they plan to purchase that will support any cash-pay services, and factors they consider most important in a final purchase decision. The participants also discuss how changes in patient caseloads influence their purchasing process, and offer ideas about which equipment they would purchase on an unlimited budget.
The participants for this discussion included: Brian Adams, PT, DPT, OCS, CSCS, owner of Adams Sports Medicine & Physical Therapy; Robin Erker, PT, owner of Grayslake Rehabilitation, Physical Therapy & Wellness; Erich Herkloz, MPT, Cert. MDT, CSCS, owner of Strive Physical Therapy & Sports Rehabilitation; and Kent Samuelson, PT, Plainview Rehab.
Physical Therapy Products (PTP): In 2014, were your capital expenditures driven primarily by first-time purchases, upgrades, or replacements—and did you budget for them?
Brian Adams: As a new clinic in the first 2 years of operation, our 2014 capital equipment is strictly budgeted and is driven toward the goal of establishing the practice with specific equipment purchases that appeal to our clinicians and the patients/athletes who we work treat. During the first 5 years, monies are budgeted for upgrades and replacements using a standard depreciation model.
Robin Erker: Preparing for 2014 was considerably different than previous years. Our office moved and expanded in May of 2012, which was the last time we made such purchases. Since then, the budget included maintenance of the equipment. However, I did purchase a cold laser in 2014 that was not in the budget.
Erich Herkloz: In 2014, we went through a period of growth. We added a couple centers and acquired/merged with another practice. This led to a larger amount of first-time purchases, but we did have some replacement purchases at some of our older centers. We ran on an 80/20 ratio (purchased/replacement) for 2014.
Kent Samuelson: We’ve seen demand and opportunities for an aquatic therapy program grow the last few years, and felt 2014 was the right time to tap into this population. We did budget for the pool, as well as the other items you need to support aquatic therapy. For the pool, we are looking at what SwimEx and HydroWorx each has to offer, to name just a couple.
Because of how our facility is designed, we also have to have a pool lift and, just like for the pool, we checked out products from various manufacturers. Aquatic Access and SureHands Lift & Care Systems have several different models, but Aquatic Access offers a model that seems like it will be the best fit for us. We also have to outfit the program with a lot of accessories such as flotation devices, kickboards, and resistance equipment. We’ve found a lot of that type of gear from Sprint Aquatics, but there are several sources we could choose from.
PTP: What equipment traditionally provides you with your best return on investment (ROI)?
Adams: The best equipment ROI (for our clinic) is gauged on the equipment that is: a) used the most frequently, b) the least initial cost, and c) the least annual cost for repair/maintenance. In this case, the equipment that tops our list is as follows: cardio equipment: NuStep, Lemond Revmaster; treatment tables; rubberized flooring; and FreeMotion Cable Cross.
Erker: In the past, I focused on items such as a Vasopneumatic cryotherapy device to evaluate ROI versus what I consider to be essential equipment needed in an outpatient environment. When I opened my facility in 2005, I wanted to equip the office with such things as a low mat table and a NuStep, which were items that set us apart from the typical therapy clinic in our area at that time. I wanted to be able to treat clients that ordinarily shied away from an outpatient facility because they felt the facility was mostly for athletes or they would have difficulty maneuvering on the higher tables that are usually found in the outpatient arena.
Herkloz: As a company, we have a strong background in manual techniques. Without question, our biggest ROI comes from the continuing education courses to which we send our staff. Addressing this question from a strictly equipment standpoint, however, I would have to say either IASTYM tools or our treadmills. However, we are in the process of adding Endless Pools for one of our facilities. Given the demand for some of our referral sources and population, I would expect this to give us the biggest ROI.
PTP: How do changes in patient caseloads influence your purchasing process? Does an increase in those cases make it more likely you will buy equipment to treat them?
Adams: We consider what equipment will best service our entire patient population first. We try to deliver optimum care for our ortho/sports population, and we have added equipment to our facility as our caseload grows. Small, inexpensive items that are sport-specific (hockey sticks, footballs, soccer balls, etc) are an easy choice. We treat a lot of cyclists, runners, and triathletes, so we have a considerable amount of capital equipment in order to treat these athletes (eg, stationary cycles, treadmill, video capture, Shuttle MVP, and other treatment modalities/tables).
Erker: Very little. I try to influence my caseload by the purchases I have made and stay one step ahead of the game. For example, my background was heavy in sports injuries and postop patients. When I decided to go into private practice, I knew it would be difficult to maintain a practice on those clients with the competition of the POPTS in the area that tend to receive those referrals. I made sure there was equipment in the clinic that would be benefit a wider range of clients. Nine years later, our census has grown to include a large variety of clients, including those postop and sports injuries due to the results our therapists achieve.
Herkloz: An increase in a particular patient population will definitely adjust our purchasing needs. For instance, we are beginning to roll out a new program (LVST – Loud and Big), and we have purchased some equipment for this program. As a company, we need to make sure we have all the necessary tools and equipment to allow our patients to achieve the highest level of customer satisfaction and functional outcomes. However, we also don’t buy every new product to hit the market. We have to see a significant clinical advantage to using any product compared to other similar products or equipment.
PTP: Practice business models are trending toward offering cash-pay services. In 2015, what percentage of your business are you anticipating to be cash-pay, and what equipment do you plan to purchase to support those services or treatment?
Adams: In 2013, approximately 35% of our practice was cash-based physical therapy and sports medicine services. For 2014, our budget/goal is closer to 40%. With industry changes and our specific niche practice, compounded by the change in health care (reform) reimbursement, we will continue to drive our practice to >50% cash-based facility.
Specific equipment to support this process is already in place, but the ability to offer cash-based “Transitional Rehab/Return To Sport” programs takes skilled/qualified personal and time within the clinic, which does not require capital equipment purchases, but rather additional payroll.
Erker: I have been implementing a cash-based side of the business since 2012, but it has not gained momentum until the last 6 months. Currently, the cash services are 8% of the business. I would like to see it become 25% in 2015. The largest purchase I made was a pool with two underwater treadmills to be utilized by many different populations from elite runners to bariatric clients. The cold laser I purchased in 2014 was specifically made for the cash-based client.
Herkloz: In our profession, there is a strong trend toward cash-pay services. However, this is currently not a large aspect of our business model. It is slowly growing in our company, and I would estimate approximately 10% of our business is cash-pay. There are a couple cash-pay programs we are beginning to investigate, but we want to make sure we can implement these programs without impacting our physical therapy product line. We need to make sure we have a very strong operational model in place prior to jumping into any change or adjustment in business philosophy.
PTP: If you had an open unlimited budget, what equipment purchase would you most want to make—and why?
Adams: As any clinic would, we have our “Dream List.” These items would be geared toward our cash-based athletes and optimization of sports performance. Some of these would be considered “über equipment” and luxury items that would replace more simplistic equipment already in place. This short list includes: Retül sizing system; DartFish Software/analysis; MCT Hi-Speed capture video cameras; AlterG treadmill; and Fit-Mate Pro (or similar VO2 capture).
Erker: I have been researching grants for this very reason. I would like to purchase more equipment to support our medical fitness center to allow our patients to exercise and follow up with their home program while under our watchful eye. I emphatically believe that a model such as this will decrease the overall cost of care. As patients progress, their scheduled visits with the therapist decreases as their independent program increases. I believe providing a safe environment that allows access to their providers and has a “social” element will increase compliance, outcomes, and decrease the cost of an episode of care.
Herkloz: Either an Endless Pool for all my facilities or an AlterG treadmill. We find the underwater treadmill a tremendous asset for our center, but there is a large expense to this product. You need to make sure you have the volume to support such a purchase. The AlterG is the same thought process. It is a great tool from a rehab perspective, but you have the make sure you have the volume to support the equipment.
Samuelson: The biggest thing we’re seeing right now is an uptick in patients recovering from stroke. We’d love to get some body weight support equipment like a Hocoma Lokomat or the ZeroG (Aretech LLC). For those types of things, though, since they’re so big, we’d have to consider more than just the device purchase. We’d have to add floor space as well. And, as long as the budget is unlimited, it might be interesting to work with something like a Tibion bionic leg for the neuro population.
PTP: Other than price, what factors do you consider in your final purchase decision?
Adams: We focus on buying high value, reliable equipment that is tried-and-true. A considerable amount of time is spent researching products, asking questions of product representatives, reading articles and social media posts on products, and identifying the equipment that large companies, universities, and researchers are utilizing. We feel that this time is well spent, as with any major purchase. Nothing is worse than regretting your signature on a large check! Spending more for products that are reliable, have proven their worth, and have the potential to maximize the ROI is money well spent!
Erker: Uniqueness. I want to know if this item is something that will drive people in the door and is it something unique to our facility. At this stage of the game, we have the equipment we feel is critical for patient care. I want equipment that will build the cash services. If an item can benefit both sides of the business—the wellness side and the therapy side—then it’s a no-brainer.
Herkloz: There are several vital factors to consider besides price. Therefore, we always ask the following questions. First, we want to know who the manufacturer is. Second, we ask whether this piece of equipment truly make a difference in our ability to provide the highest level of care possible. Occasionally, we find that our staff may become enamored of what they consider “the latest and greatest” technologies, but we have to question whether there is research to support viable use of that technology, and whether it will fit with our business.
The third question we ask is relative to the size of the purchase. If it is a major purchase, what is the potential ROI on the product and what is the marketing strategy (target audience) to achieve this goal?
Samuelson: It’s easy to get caught up in the single-purchase price, but really, you have to look at where the best potential for growth might be, and bite the bullet and make the expenditure to capitalize on that growth. Ability to adapt to a growing population is a huge consideration for us, and one we consider at least as much as price alone. Adding the pool is not inexpensive, but having that equipment in place and the ability to use things like an underwater treadmill opens up the door to a much broader range of clients. PTP