E789 | Why Hybrid Clinics Are Becoming So Popular

The Hybrid Transition: Why More Clinics Are Dropping Insurance

For years, physical therapy clinics have operated within the confines of insurance reimbursement, navigating shrinking payments, increasing administrative burdens, and unpredictable cash flow. But in the last six to twelve months, a growing trend has emerged—more and more insurance-based clinics are shifting toward hybrid models or going fully cash-based.

At PT Biz, we’ve seen this shift firsthand. More clinic owners are reaching out, realizing that the traditional insurance model is unsustainable unless they operate at massive volume or secure high-leverage contracts. For smaller clinics and performance-based PTs, staying in-network has become a financial and operational struggle.

Why the Shift Away from Insurance?

The writing has been on the wall for a long time. Reimbursement rates continue to drop, making it harder to maintain a high-quality, one-on-one care model without sacrificing profitability. A recent example is a clinic owner who dropped all insurance except Medicare after realizing they were receiving only $75–$85 per visit from Blue Cross. This forced them into a high-volume model they didn’t want, leading to long hours and potential burnout. By eliminating low-paying insurance contracts, they increased profit margins and maintained their preferred patient care structure.

The reality is that many insurance-based clinics are facing a dilemma:

• Increase patient volume to compensate for low reimbursements, which often means less time with each patient.
• Negotiate better contracts, which is nearly impossible for small clinics without major leverage.
• Drop poor-paying insurance contracts and integrate cash-based services.

Why Now? The Changing Landscape of Healthcare

A decade ago, the decision to drop insurance was riskier. But today, patient behavior and financial responsibilities have changed. Deductibles have skyrocketed, making patients more discerning about where they spend their money. If they’re paying out-of-pocket anyway, they want the best care possible.

Consider this: A patient with a high-deductible plan is likely to pay $200 per session at an in-network clinic where they are one of two or three patients seen per hour. But for the same price, they could see a specialist one-on-one in a setting that focuses on their specific needs. This levels the playing field for cash-based clinics and makes hybrid models more appealing than ever.

The Hybrid Model: A Sustainable Middle Ground

For clinics hesitant to go fully cash-based, the hybrid model provides a strong alternative. By strategically phasing out low-reimbursing insurance contracts while integrating cash-based services, clinic owners can stabilize cash flow and reduce financial uncertainty.

A key factor in this transition is recurring revenue. Whether it’s through memberships, wellness programs, or long-term care plans, cash services that generate ongoing income create a more predictable and sustainable business model. Even if just 30% of revenue comes from recurring services, it significantly reduces volatility.

How to Start the Transition

If you’re considering shifting away from insurance dependency, start with these steps:

✅ Evaluate your current contracts. Identify the worst-performing ones and begin phasing them out.
✅ Introduce cash-based services. Whether it’s a performance program, wellness package, or specialized service, create an offering that patients see value in.
✅ Educate your patients. Many assume they must use insurance. Help them understand their options and why direct-pay may be the better choice.
✅ Optimize your business model. Focus on creating a sustainable structure with clear pricing, streamlined operations, and strong patient retention strategies.

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Podcast Transcript

 Danny: Hey, real quick, if you're serious about starting or growing your cash based practice, I want to formally invite you to go to Facebook and join our PT entrepreneurs Facebook group. This is a group of over 6, 000 providers all over the country. And it's a pretty amazing place to start to get involved in the conversation.

Hope to see you there soon. Hey, are you a physical therapist looking to leverage your skillset in a way that helps you create time and financial freedom for yourself and your family? If so, you're in the right spot. My name is Danny Matta. Over the last 15 years, I've done pretty much everything you can in the profession.

I've been a staff PT. I've been an active duty military officer, physical therapist. I've started my own cash practice. I've sold that cash practice. And today, my company, Physical Therapy Biz, has helped over a thousand clinicians start, grow, and scale their own cash practices. So, if this sounds like something you want to do, listen up, because I'm here to help you.

Hey, what's going on? Dr. Danny here with the PT Outdoor Podcast. And today, I wanted to share something that is a consistent trend that we're seeing at PT Biz. And for those of you that don't know, PT Biz, um, is the education company that I started about seven years ago to help primarily cash based, uh, clinicians.

Understand how to be good business owners, right? Like how to, how to develop business skills, how to learn, how to market, sell, hire people, create processes and operations. Um, you know, understand finance. Uh, so, so not just be a great clinician, but be a great business owner as well. Uh, with whatever the ultimate goal of their business being, whether it's just a, you know, lifestyle practice or they want to grow it to a point where they can really take a step back.

And it'd be this sort of passive income vehicle, or they want to grow it really big and sell it one day. Right. Uh, so either way, it's the foundational. Um, elements of that, that we have now been working with, with clinicians on for, uh, for, for seven years. And I will say one thing that is, uh, interesting to see that I've noticed more of a trend in particular the last six to 12 months.

Is how many, um, insurance practices we have reached out to us that are looking to, if not transitioned fully away from insurance, definitely, um, decreased dependency on insurance. This is something that's not new, uh, but something that is. I said in the last six, 12, six to 12 months, far more common for our advisors and our coaches to be, uh, you know, working with people on and the writing has been on the wall for a long time, right?

If you're listening to this and you have an insurance based clinic, you've probably been thinking about this for a while. If you haven't started to make some adjustments to your business model, um. You know, you could be in a bad spot unless you're just massive, right? If you're massive and you can have leverage over contracts or, you know, develop some sort of hospital partnership, um, you're, you're kind of in a tough spot if you're on, if you have a smaller business.

So the options that we see for a lot of these people are a, they either. Skyrocket volume because they have to they're only going to get a certain amount back like even recently Uh, I was talking to a clinic owner who dropped um Who only has medicare left and had recently dropped a couple insurances The last one being blue cross and they just couldn't make it work.

You know, they were getting on average like 75 to 85 a visit. Uh, they're trying to see these people, you know, for 45 minutes to an hour. Um, the type of model that they, that they have, which is more sort of like performance driven, a lot of sports med stuff. Uh, they just needed, they need more time. People didn't want to sacrifice that by having two people in there per hour.

Which is what a lot of clinic clinics have to do, you know, because they have to meet the revenue needs of the clinic. And the way they can do that is via volume with, uh, these contracts. So, uh, they dropped it. And now all they have is Medicare and Medicare reimburses better than, um, what they were getting from blue cross.

They want to work with that population, which is cool, but they've been able to drastically increase, increase their profit by dropping some of these very low paying insurance companies. When we look at the options people have, it's either they move completely to a sort of a niche focus cash clinic, uh, which may or may not make sense for them.

Or they look to, uh, prune insurance contracts down and really focus on the ones that are going to make the most sense for their business, which there's a lot of factors that go into that, um, in different areas. Uh, but, but if, but if the. If the reimbursement is just too low or the headache of getting reimbursed is too high and you have all these crazy accounts receivable and, and your cashflow is getting messed up.

Um, then for many people, it makes sense to transition over to, uh, less and less insurance. And, and for a lot of people, the playing field is far more level. So you gotta keep in mind. People's deductibles have gone up dramatically, uh, in particular over the last 10 years since we started our practice. And as deductibles have gone up, people have skin in the game no matter what, whatever choice they have.

And now they're, they're more informed consumers because they know that. If they're going to have to spend 200 for somebody to go see them, you think they want to spend 200 for somebody to go see them while they're now working with two people at the same time, uh, in a clinic that maybe doesn't focus specifically on the type of You know, niche that they're in, or are they going to go to somebody?

They're going to pay 200 an hour or two that does focus on those things. And it's just them and that other person. So the value proposition for this sort of, uh, more cash based approach, um, the playing field is much more level now. So, so the ability for hybrid practices to, uh, to exist, I think is better than ever.

And it's the reason why we're seeing so many more people go that direction. And we, we see a huge increase of interest with potential clients that we're having conversations with that fall into this category. And I think. The other thing that many of these clinics are running into is they're understanding that they need recurring services.

They need revenue that is recurring in order to stabilize, uh, their cash flow, and also it improves the value of the business. Um, it's businesses that have recurring revenue of some sort, even if it's, let's say 30 percent of the revenue of the business are so much, uh, less turbulent to run, and that is something that with cash services, which is nice.

In a hybrid clinic in particular, and then we do this with our cash clinics, I mean, from the get go is to create something that's going to be a recurring or reoccurring offer that allows people to increase lifetime value, uh, increase impact over a long period of time with our patients and have stability and revenue.

So with, with these hybrid clinics, one of the easiest sort of things that, that, um, can be implemented or, or things that can be restructured is to. Not necessarily get rid of all your insurance, uh, clients, but to really look at like, what are the worst contracts start to thin those out and start to add cash services, especially that are reoccurring or recurring in some capacity to the clinic that helped to then stabilize your cashflow because cashflow with hybrid and insurance clinics with accounts receivable can be wildly different every single month.

Um, it just, it just depends. Something can go wrong with. With, uh, you know, the claim, uh, it gets kicked back and next thing you know, you're two months later, you still have this massive accounts receivable bill. And that can mess up your ability for, for you to pay your overhead or, um, you know, your own self or distribution, lots of things.

And that is a, uh, a real challenging business model to run versus a cash, um, service where. They pay you, you fulfill on this thing and then that's it. Right. That's, that's the end of it. It's very clean. It's very fast. And even, uh, uh, you know, a small portion of the business that is run that way in comparison to how traditional insurance based clinics are run can really level out.

Uh, the business can, can, can make it, uh, far less turbulent. And, um, You know, and, and less stressful for the business owner to run. So this is something that we're seeing, um, really, really grow quite a bit. The interest in this has grown quite a bit. I don't see any reason why this stops anytime soon. This is just something that has been trending this way for a while.

I think if you're going to be an in network clinic, you're going to have to be really big and you're going to have to, uh, really, you know, throw your weight around. And if you're going to, um, want to take insurance, you're going to have to look at some sort of hybrid variation. I just don't really see another way for people to do that.

I think it's something that's been obviously like turning that direction for a long time. Um, and, uh, and, and, you know, it's, it is a good compliment, honestly, I think the two work well together. Um, you know, you can, you can have this sort of lower. Barrett entry, uh, you can have more post op volume if you want to take certain insurance contracts, things like that, but then you can have these, uh, more stable cash services.

Um, you can decrease some of the volume that you're having to see. So it doesn't bring your staff out as much. It's, it's a very nice sort of, uh, you know, compliment to one another and a compromise from a business standpoint, without having to completely get rid of all of your insurance. So just a trend to keep an eye on.

I've seen a ton of this, the hybrid transition is in full force, uh, and I fully expect that to continue going forward.

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