Is the $261 hourly rate discussed in the Nous Group’s report, Review of the 2024–25 APR with respect to physiotherapy, enough? Maybe. It’s a great start.

The report highlights the fact that, according to the Nous Group’s independent research, the current compensable and NDIS rates are unsustainable for running private physiotherapy practices. 

A rate of at least $261 per hour should currently be the minimum rate, with experienced practitioners charging $300 per hour and specialist physiotherapists up to $365 per hour.

However, some members of the public (and compensable bodies) struggle to see the value of physiotherapy at this rate. Why?

Public perception

One issue is that the public sees us as ‘all the same’. In most practices, there are only two types of physiotherapy services:
•    initial consultation
•    standard or follow-up consultation.

From a public perception point of view, all the services between different clinics therefore look the same. Based on service descriptions, they are very similar. 

Often the only differentiating factor is the amount of time the practitioner will spend with a patient (20 minutes versus 30 minutes) and whether the patient feels they will get value for money.

There is also very little perceived difference between similar allied health services, such as chiropractic, osteopathy, myotherapy and exercise physiology. 

All these professions (except exercise physiology) tend to provide pain-relieving services involving hands-on treatment and/or exercise therapy.

From a business analysis point of view:
•    it is quite easy for a patient to change from one practitioner or clinic to another (low switching costs)
•    it is often difficult for the public to perceive the difference between a well-equipped and established clinic and a single room in a medical centre (low entry and exit barriers)
•    having so many choices for the public (and compensable bodies) between types of practitioner drives competitive forces, putting further pressure on pricing.

It is not difficult to see why the industry is struggling with pricing and with adequate remuneration for sustainable and profitable practices.

What can we change?

Outcome-based pricing and packaging A patient comes to see a physiotherapist to achieve an outcome—they want to get back to work, to be able to go trekking the Inca Trail or to have more mobility to look after their grandkids. 

How we produce that outcome for the patient is up to us as practitioners (the black box of our care). 

Outcome-based pricing and packaging gives us the scope and ability to differentiate our service based on our knowledge and skills rather than just ‘be better’ in the 30-minute consultation.

This can be seen very clearly in the dental and surgical industries. 

If we require a dental crown or implant, we are not charged for the time taken to perform the procedure but for the total outcome.

Similarly, an orthopaedic surgeon does not charge for the minutes required to perform a hip replacement but for the overall outcome of the surgery. 

MD Health's Michael Dermansky.

This removes time from the equation as much as possible and ensures that the increased skill that practitioners achieve through experience and specialisation is seen in the quality and outcome of their work rather than the demand for a higher hourly rate.

In our practice, we encourage patients to focus on outcome-based pricing rather than the cost of a one-off consultation.

Our minimum recommendation for a strengthening program is usually 13 weeks, in line with the expected timeframe and volume required for neurological adaptation and muscle hypertrophy. 

You don’t go to the gym for 5.6 consultations and expect to immediately get stronger; why should this change when the same patient is in a physiotherapy setting?

This has allowed our practitioners to continue to improve their skills according to outcome-based measures rather than just working faster within the boundaries of the consultation, reducing the pressure of time. 

Although this is not a perfect solution, it is one step we have taken to move towards outcome-based pricing and packaging.

Economies of scale

One-on-one consultations require a fixed amount of a practitioner’s time. The only way to increase the economic value for both the practitioner and the clinic is to increase the price of the consultation.

Because of the competitive pressures discussed previously, it is difficult to raise prices to the levels required to pay practitioners the amount they would like.

The other option is to aim for economies of scale. 

Seeing a larger number of patients at one time (two to three patients) reduces the cost burden for each patient and allows for a higher hourly rate for the practitioner and the clinic. 

However, this needs to be done with care and investment in technology.

It is extremely important to maintain (and improve) quality of care. 

This means creating systems to facilitate seeing multiple clients and having a physical infrastructure that allows the practitioner to maintain contact with multiple patients without compromising quality.

In our practice, after multiple economic analyses of our business operations, it was clear that it was going to be almost impossible to be economically viable while only seeing patients on a one-on-one basis.

As a result, we spent time and money on building systems and IT software to maintain excellent patient care while seeing multiple patients. 

The set-up of the clinic is deliberately designed so that practitioners can still have close contact with patients; no-one’s face-to-face time and safety are compromised.

Again, this is not a perfect solution and we have found our ‘sweet spot’—we can maintain excellent care at a three-to-one
ratio but greater numbers compromise our ability to customise care for the patient.

However, it has allowed us to increase our hourly billing rate without putting excessive financial pressure on our patients.

A reduction in non-essential costs

The most significant cost burden in a practice is staff wages. Overhead costs may therefore only moderately affect the
bottom line of the practice. 

However, there are options to consider. One is clinical specialisation—being known for one thing in particular. This reduces the need for the practice to invest in everything else. 

Buying and maintaining equipment and supplies for one specific purpose reduces the overall cost burden of the practice. 

Clinical specialisation also reduces your marketing costs, giving you a narrower target market and a specific client base. 

You can pinpoint your marketing and not waste money where your patients will not be looking.

In our clinic, there is a major focus on strengthening and long-term rehabilitation for patients over 50. 

Although this means we ‘miss out’ on the sports market (I think I remember taping one ankle this year), our assets and spending are concentrated on the strengthening and rehabilitation market. 

We don’t have unnecessary supplies, unnecessary equipment or unnecessary marketing that doesn’t reach our target audience.

>> Michael Dermansky APAM is the managing director and senior physiotherapist at MD Health, operating since 2003. Michael is always studying and looking for ways to improve physiotherapy services, including ideas from the fitness industry and great customer service companies.