U.S. Physical Therapy Bets on Hospital Alliances to Drive Visits, Reimbursement

U.S. Physical Therapy is pursuing growth through clinic openings, acquisitions and a newer hospital-alliance strategy that Chief Executive Officer Chris Reading said could expand patient volumes and improve reimbursement. Speaking at an investor event, Reading said the company operates in 45 states with just under 800 locations focused primarily on orthopedic and musculoskeletal care, including treatment for sprains, fractures, dislocations, joint replacements and post-surgical rehabilitation. About one-third of its business comes from Medicare, while most of the remaining revenue comes from commercial payers. Workers’ compensation represents roughly 10% of revenue, he said. Reading characterized the outpatient physical therapy market as highly fragmented, with many competitors operating only one to three clinics. The company typically opens 25 to 30 clinics organically each year and acquires an additional 30 to 70 clinics annually, according to Reading. He said its acquisitions generally are completed at single-digit multiples of trailing 12-month EBITDA.

Unlike some larger, private-equity-backed competitors, U.S. Physical Therapy operates through local partnerships, Reading said. The company has approximately 120 partnerships across its clinic base, and local partners retain ownership stakes while managing daily operations. In a recently completed acquisition of 10 to 12 clinics in the central U.S., for example, the local partners retained a 35% equity interest, he said. Reading said the company provides centralized support for functions including payer contracting, technology, regulatory compliance, billing oversight and other administrative needs, while care delivery remains locally managed. The approach is intended to allow clinician-owners to devote more time to growth, recruiting and local operations. The company generally retains local brands after acquisitions rather than converting them to the U.S. Physical Therapy name. Reading said the strategy is designed to avoid disruption and preserve employees and patient relationships. Billing and collection operations may remain local initially, although the company can provide centralized billing support where needed.

Reading said the company’s blended average net reimbursement was $107.59 per visit in the most recent quarter. Visits per clinic per day have increased sequentially in 14 of the past 16 quarters, he said, while noting that the business typically experiences seasonal variation, with the first quarter generally slower and the second quarter among its busiest periods.

Reading highlighted a 10-year relationship with NYU Langone as a major component of the company’s hospital-alliance initiative. U.S. Physical Therapy entered the New York market more than a year ago and has expanded to 60 locations in the region through a large partnership, he said. Under the NYU Langone arrangement, the clinics have been incorporated into the hospital system’s ambulatory network. Reading said U.S. Physical Therapy acts as a contracted provider, using its employees and facilities while receiving a flat per-visit payment from NYU Langone regardless of payer type. “We’re able to bill at their rate,” Reading said in response to an analyst question, adding that the facilities effectively become contracted clinics under the NYU Langone network. He said the arrangement provides higher reimbursement, protection against clinical employee-cost escalation and reimbursement for clinical staff costs. It is also exclusive, according to Reading, with future growth under the arrangement expected to occur with NYU Langone during the agreement term. Reading said NYU Langone had limited outpatient physical...