Guides
Physical Therapy Startup: Four Decisions That Fix the Model
Physical therapy startup: the four decisions that set your practice model, how the therapist calendar defines capacity, and where new practices lose revenue.
A physical therapy startup runs on therapist time sold in fixed slots. Four decisions fix what those slots are worth, and the therapist calendar decides how many of them you can sell.
What to take away
- A physical therapy practice is a calendar business. Every plan you write eventually resolves into how many visit slots a licensed therapist can deliver in a week and what each slot brings in.
- Four decisions fix the model before anything else matterswho refers patients to you, who pays for the visit, who is allowed to deliver it, and where it happens.
- The plan of care, not the single visit, is the unit of revenue. A patient who stops at visit four of twelve is a clinical event and a revenue event at the same time.
- Insurance authorization sits between the referral and the schedule. Where it applies, it is a gate on capacity, and a practice that ignores the gate books visits it cannot bill.
- No national answer exists for pricing, staffing ratios or payer mix. The state physical therapy board, each payer's own policy and a compliance adviser answer the regulated questions; this guide answers the business ones.
The decision you are actually making
Most people who open a practice are clinicians first. They know what a good evaluation looks like and how a plan of care should progress. What they have not usually done is treat the calendar as the product.
The calendar is the product
- Choose model: how slots get filled
- Set capacity: how many slots exist
- Write policies: filled slots into money
The guide asks for this shift. A practice sells therapist time in fixed slots. Each slot is filled or not.
If filled, it bills at the payer's allowed rate or is a cash visit at your set fee. If not filled, the therapist, room, and front desk costs were spent anyway.
Everything below follows from that. The model you choose decides how slots get filled, the capacity decides how many slots exist, and the policies decide how many filled slots turn into money.
Four questions that fix the model
Answer these in writing before you look at a lease.
- Who refers patients to you?A physician or a surgeon, a school, an employer, a former patient who tells a friend. Name the sources you can realistically reach in your first six months, not the ones you hope for.
- Who pays for the visit?The patient in cash, a commercial payer, Medicare, a workers' compensation carrier, or an employer. The payer sets the allowed amount, the visit limits and the paperwork.
- Who is allowed to deliver the care?A licensed physical therapist, a physical therapist assistant working under supervision, or an aide. State law and each payer define the boundaries.
- Where does it happen?A leased clinic, a shared space, the patient's home, or an employer's site. The answer sets rent, travel time, and how many slots fit into a day.
Four questions before the lease
- Who sends patients?
- Who pays?
- Who delivers the visit?
- Where does it happen?
The SBA business guide is organized around plan, launch, manage and grow, and it is a sensible skeleton for the paperwork side. It does not know anything about physical therapy. The four questions above are what make it specific.
Practice models compared
How slots get filled
- In-network clinic
- Physician referrals plus payer directories
- Cash-based clinic
- Direct inquiry, word of mouth, niche reputation
- Hybrid
- Both of the above
- Mobile or home visit
- Referrals from discharge planners, direct inquiry
- Employer or on-site contract
- One contract
What sets capacity
- In-network clinic
- Therapist hours, authorization turnaround
- Cash-based clinic
- Therapist hours only
- Hybrid
- Therapist hours, plus the split you allow between payer and cash slots
- Mobile or home visit
- Travel time between visits, not room count
- Employer or on-site contract
- The contract's stated hours
The risk you carry
- In-network clinic
- Allowed amounts you do not control; documentation time per visit
- Cash-based clinic
- Demand is entirely yours to generate; no directory sends anyone
- Hybrid
- Two fee logics on one calendar confuse the front desk unless the policy is written
- Mobile or home visit
- Unpaid drive time; the day holds fewer visits than a clinic day
- Employer or on-site contract
- Concentration: one lost contract empties the calendar
The right column is the honest one. Pick the model whose risk you would rather manage, not the one whose revenue story sounds best.
Practice models and the risk you carry
In-network clinic
- How slots fill
- Physician referrals
- What sets capacity
- Therapist hours
- Risk you carry
- Allowed amounts
Cash-based clinic
- How slots fill
- Direct inquiry
- What sets capacity
- Therapist hours
- Risk you carry
- Demand is yours
Mobile or home visit
- How slots fill
- Discharge planners
- What sets capacity
- Travel time
- Risk you carry
- Unpaid drive time
Capacity is the therapist's calendar
Write the week as a grid. Rows are the therapists you will actually have on day one, columns are the slots. Then remove from the grid everything that is not treatment: the evaluation slots, which run longer; the documentation time, which is unpaid unless you build it into the fee; the lunch; the gap you leave for a late runner.
From working day to sellable slots
Working day
- Evaluations
- Counted as hours
- Documentation
- Counted as hours
- Lunch and gaps
- Counted as hours
Sellable capacity
- Evaluations
- Longer slots
- Documentation
- Unpaid time
- Lunch and gaps
- Removed
What is left is your sellable capacity. Most first-year plans overstate it by counting every hour of the working day as a treatment hour.
The occupational outlook page from the Bureau of Labor Statistics on physical therapists describes the work as evaluation, plan of care, hands-on treatment and record keeping. All four take clock time. Only some is billed.
Two consequences:
- An evaluation slot and a treatment slot are different products. They take different time, they are often reimbursed differently, and one of them starts a plan of care that fills the calendar for weeks. Price and schedule them separately.
- A therapist's capacity is the practice's ceiling until you hire. Revenue does not grow by working harder within the grid. It grows by filling empty slots, then by adding rows.
The plan of care is the unit
A referral or an evaluation does not produce one visit. It produces a plan: some number of visits over some number of weeks, set by the therapist's clinical judgment and, where a payer is involved, subject to that payer's rules on visit limits and re-certification.
Protect the plan of care
- Book the whole plan at once
- Explain cancellation policy at first visit
- Keep a short, current waitlist
- Let front desk fill gaps
Treat the plan as the thing you sell and the thing you protect. Three things follow.
First, a mid-plan cancellation is not a lost slot. It breaks a sequence the therapist designed, and often means the patient will not return.
Your cancellation and no-show policy is a clinical safeguard as much as a financial one. Explain it in those terms at the first visit.
Second, the front desk should book the whole plan at once where the patient's schedule allows it, not one visit at a time. A patient who leaves with the next six appointments in hand completes more of them than one who is told to call.
Third, the waitlist is the buffer that turns a cancellation back into a filled slot. Keep it current, keep it short, and give the front desk authority to fill a gap without asking.
Authorization and the referral relationship
Where a payer requires authorization before treatment, the authorization gates the calendar. A visit booked before it arrives may go unpaid.
Authorization gates the calendar
- Referral received
- Eligibility and authorization check
- Book the visit
- Visit delivered and billed
Sequence: referral, then eligibility and authorization check, then booking. If your software cannot show the front desk whether a patient's next visit is covered, the front desk will guess.
Who sets the rules is not you. The Medicare rules for therapy coding and billing live on the CMS therapy services page and change on their own schedule; commercial payers publish their own. Read the actual policy for each payer you contract with, and write down the date you read it.
The referral relationship is the other half. A referring physician or surgeon is not a marketing channel, but a colleague who needs to trust their patient will be seen promptly, treated within the plan, and reported back on.
Prompt scheduling of new referrals and a short, regular progress note back to the referrer do more for referral volume than any advertisement.
Where the money leaks
The leaks in a new practice are rarely dramatic. They are structural.
Where the money leaks
- Documentation time is unsellable capacity
- No-shows and late cancellations
- Authorization gaps
- Claims denied for documentation
- Documentation time. If a therapist spends part of every hour on notes, that part is capacity you cannot sell. Decide whether documentation happens inside the slot, in a block at the end of the day, or through a template that shortens it. Do not leave it to happen after hours and call the problem solved.
- No-shows and late cancellations. Each one is an unsold slot that could not be re-sold in time. The policy that prevents them is written, explained at intake, and enforced consistently by the front desk.
- Authorization gaps. Visits delivered outside an authorization window are visits the payer has already declined.
- Claims denied for documentation reasons. The therapist's notes are the evidence the payer audits. Documentation standards are a revenue control.
None of these appear in a spreadsheet of startup costs. All of them decide whether the first year works.
What to hand to a professional
- Entity choice, tax registration and the employer identification number: the IRS page on starting a business lists the federal steps, and an accountant who works with medical practices should confirm the state ones.
- Licensure, supervision, delegation and whether patients can be seen without a referral: the state physical therapy board, in writing.
- Privacy and security of patient recordsthe HHS guidance on health information privacy, and a compliance adviser who has set up a small practice before.
- Payer contracts and credentialinga credentialing specialist, because the lead time between application and approval is a gate on your opening date.
- Billing and codinga certified coder or a billing service that specializes in outpatient therapy, at least for the first year.
The owner's job is to know which questions exist and to hold the answers in one file with a date on each.
Common questions
Should I open in-network or cash-based?
Nobody can tell you that from a page. The question to answer is which risk you would rather carry: the allowed amount you do not set, or demand you must generate yourself. Write both calendars for the first six months and look at which one you believe.
How many therapists do I need to open?
The number that fills the calendar you can realistically feed from day one. A second therapist with an empty column costs a full salary and earns nothing. Add rows when the waitlist is consistently longer than the gaps.
What lead time should I allow before the first patient?
Long enough for state licensure of the location if required, payer credentialing where you plan to bill insurance, and the software to be running with the schedule template loaded. Ask each payer for its current credentialing timeline in writing; it is the slowest item on most opening plans.
Is a home-visit model cheaper to start?
Cheaper in rent, more expensive in time. The day holds fewer visits because travel sits between them, and that travel is usually unpaid. Model the visits per day honestly before assuming the saving.
