Guides
The four profit levers in a physical therapy practice
Physical therapy pricing is three decisions, not one: the allowed amount, the cash fee and the patient share, plus the four levers behind a profitable week.
What to take away
- A physical therapy practice does not set one price. It lives with three: the allowed amount a payer sets, which you accept or refuse by contract; the cash fee you set yourself; and the patient's share, which you must collect whoever set it.
- Profit is decided on the calendar, not on the fee schedule. A full week that collects late, writes off patient balances and pushes notes into unpaid hours can lose money at any fee.
- Four levers move profithow many slots are delivered, how much of each is collected, how many therapist minutes each takes, and what each costs to deliver. Every pricing decision should be traced to one of them.
- Your cash fee and margin come from your own records. The public figures that bound them, the Medicare patient share and deductible and the median therapist wage, are given below.
The three prices
Most owners think about pricing as a cash-fee question. In this trade it is three separate questions.
The allowed amount. When you contract with a payer, you accept its fee schedule for covered services. You do not set it; you decide whether to sign. The decision to join or leave a network is the biggest pricing decision the practice makes. It is made once per contract, with the contract in hand, not in a monthly review.
The cash fee. You set the fee for self-pay evaluations, treatment for patients who choose not to use insurance, and any program a payer does not cover.
You control only this price, and it still has limits. What the market will bear, what your payer contracts say about charging their members, and what the FTC advertising guidance for small business says about how a price may be presented.
The patient's share. Copays, coinsurance and deductibles are set by the patient's plan, and the payer expects you to collect them. Uncollected patient share is one of the quietest leaks in a practice. Collecting it at the visit rather than by invoice afterwards is a pricing policy as much as a billing one.
For Medicare patients the share is fixed by the program. Under Medicare coverage of physical therapy, Part B helps pay for medically necessary outpatient physical therapy: after the Part B deductible, the patient pays 20% of the Medicare-approved amount, and there is no limit on how much Medicare pays for medically necessary outpatient therapy in one calendar year. The Part B deductible is $283 before Original Medicare starts to pay, and the patient pays it once each year.
Cash fee structures compared
Where it fits
- Per visit, by visit type
- Evaluations and treatment for self-pay patients
- Per episode
- A defined program with a known number of sessions
- Package of sessions
- Self-pay programs sold in advance
- Membership
- Ongoing maintenance or wellness after discharge
- Time-based
- Long or variable sessions
- Reduced fee by circumstance
- Patients who cannot pay the standard fee
What it hides
- Per visit, by visit type
- The evaluation is priced alone but starts a plan; underpricing it is common
- Per episode
- Early stopping, and what is refunded
- Package of sessions
- A prepaid liability; stopping rules; whether it may be sold to insured patients
- Membership
- Members who use more than the fee covers; the board's view of ongoing care outside a plan
- Time-based
- The patient watches the clock; documentation time is invisible
- Reduced fee by circumstance
- Must be a written policy with criteria, or it becomes an argument at the desk and a compliance question with payers
Choose the structure by the service, not by preference. A practice can run two or three structures if the front desk can quote each without hesitation.
The four levers
Write profit for a month as what was collected minus what it cost, and then ask which lever each pricing decision pulls.
- Slots delivered. Capacity, fill rate, and the no-show and late-cancellation rate. A cancellation policy is a pricing decision: it decides how many of the slots you priced are actually sold.
- Collected per slot. Allowed amounts by payer, the cash fee, the patient share collection rate, and the share of claims paid without rework. A denied claim is a slot sold at zero until it is resubmitted.
- Therapist minutes per slot. The slot length, the documentation time, and the supervision minutes when an assistant delivers. Unpaid documentation is capacity spent at a price of zero.
- Cost per slot. Supplies, billing cost, and the fixed cost spread over delivered slots. Fixed cost per slot falls as slots delivered rises, which is why lever one matters more than most owners' spreadsheets suggest.
The occupational outlook page from the Bureau of Labor Statistics on physical therapists describes the work as evaluation, plan of care, treatment and documentation. Levers one and three are about how much of that day is sold; levers two and four are about what each sold minute brings in.
The therapist's time is the input every slot shares. The BLS Occupational Outlook Handbook on physical therapists puts the median annual wage for physical therapists at $102,760 in May 2025, which is the number to test your own payroll cost per slot against.
Where profit disappears
The losses are rarely in the fee schedule. They are in the gaps between it and the bank.
- Patient share not collected at the visit and never collected afterwards.
- Claims denied for documentation and never resubmitted.
- Visits delivered outside an authorization.
- Documentation done after hours, which is either unpaid work or an employment question, and either way is capacity that earned nothing.
- Discounts given at the desk without a policy.
- Slots held for a referrer's patients who never arrive.
Each of these has an owner and a report. The services and packages guide covers how the mix of service lines affects the first two levers.
Records that pricing depends on
Three reports are required: schedule by visit type and outcome, collections by payer and visit type, and time by visit type including documentation. If your software cannot produce them, make that your first pricing project.
The IRS guidance on which records to keep expects a business to show its income and what produced it. The same records let an owner see whether a price is working.
Presenting a price
A posted cash fee, a "starting at" figure, or a package price is advertising, and the FTC guidance above asks that it be truthful and not misleading. A cash fee quoted lower than what an insured patient would owe raises a contract question with the payer.
For some programs it raises a compliance question too. Ask a compliance adviser before advertising a cash rate below the patient share your contracts produce. The state physical therapy board may also have rules on fee advertising; in New York, the Office of the Professions prohibits unsubstantiated price claims and permits fixed prices, or a stated range of prices, for routine services when the advertisement states the period the prices are in effect. The licensing and compliance guide lists where to ask.
Reviewing prices
Cash fees are reviewed on a schedule, not when cash is short. Once a year is common. An earlier review is triggered by a payer contract change, a change in what the slot costs to deliver, or a service line whose collected-per-slot falls below what the slot would earn from referred patients.
Contract decisions are reviewed at renewal, with last year's collections by payer in front of you.
The SBA business guide has a general section on managing a small business's finances. Read it for the discipline of a review cycle. It does not cover allowed amounts or patient share, which is why this guide exists.
Whether the practice should grow before or after the prices are right is a question for the startup and market guide.
What to hand to a professional
- Payer contracts, and what they permit you to charge their members for covered and non-covered services: a health-law attorney or a compliance adviser.
- Cash fee advertising and any reduced-fee policya compliance adviser, with the FTC guidance and the board's rules in hand.
- Revenue recognition for prepaid packages and memberships: an accountant.
- The reports themselvesthe software vendor, and a billing service if you use one.
Common questions
What should I charge for a cash evaluation?
No public schedule sets it; you do. Derive the floor from what the slot costs to deliver, look at what the market posts, check what your payer contracts say, and set it in writing.
Should I leave a payer whose allowed amounts are low?
Compare what that payer's visits collect per therapist hour, after denials and patient share collection, with what the same slots would collect otherwise. If the slots would otherwise be empty, a low allowed amount is still more than nothing. If they would be filled by better-paying work, the contract is costing you.
Is a membership model allowed?
The state board decides whether ongoing sessions outside a plan of care are within scope and who may deliver them, and the payers decide whether their members may be sold one. Ask both before designing it.
How often should the patient share be collected?
At every visit, before or at check-in, with the amount confirmed by an eligibility check that morning. Invoicing afterwards turns a pricing decision into a collections problem.
