Why the Business of Rehabilitation and Physical Therapy Looks Promising?

Why the Business of Rehabilitation and Physical Therapy Looks Promising?


The number of people developing the chronic disease is ever-increasing, and so is the morbidity associated with it. This increase in disability implies an increase in demand for rehabilitative and physical therapy. With the market value more than $35 billion, the business opportunities are worth exploring. There are not many prerequisites for getting into the business- an infrastructure, an office with competent staff and EMR-compliant operations, and a good network of referral physician and agencies may do the trick. 


Rehabilitation; Physical Therapy; Occupational Therapy; Reimbursement; Insurance

At a Glance

  1. Types of rehabilitation therapies
  2. Classification of rehabilitation services
  3. Insurance for rehabilitation services
  4. Translating health care opportunities into business
  5. Six steps for setting up rehabilitation business
  6. The take away

Why the Business of Rehabilitation and Physical Therapy Looks Promising?

A large number of people around the globe are either physically, mentally, emotionally, or developmentally impaired. Nearly 15% of the world’s population has some form of disability. With the rise in the population affected by chronic diseases, the number of physically-challenged people is also increasing. Moreover, age is also a contributor to this impairment. Disability hampers the reach of the population to health care facilities, thereby resulting in the severity of the suffering.

Rehabilitation services aim to provide functional independence, prevent further loss of function, and improve the quality of life of patients with physical illnesses or other chronic disease conditions. Rehabilitation therapy emphasizes on –

  • Physical therapy that helps improve strength, mobility, and fitness
  • Occupational therapy that aids in daily activities
  • Speech-language therapy  that helps with speaking, understanding, reading, writing and swallowing
  • Treatment of pain

Types of rehabilitation therapies

The type of rehabilitation therapy depends on the patient’s suffering.

Medicine and physical health – This can be categorized into:

1. “Physical medicine and rehabilitation” (PM&R), also known as physiatry, is a branch of medicine that intends to improve and restore the functional ability and quality of life of the patient’s having physical impairment.

2. “Physical therapy”, also known as physical rehabilitation or physiotherapy, deals with the treatment options and exercises required for alleviating physical disability by promoting mobility, which results in enhanced functional ability and improved quality of life.

3. “Aquatic therapy” uses water during the treatment and also during exercises. This type of therapy is used for relaxation, fitness, physical rehabilitation, and other therapeutic benefits.

4. “Medical nutrition therapy” (MNT) involves restricting the patient to a specific diet program to achieve the desired outcomes.

5. “Physical activity” aims to enhance or maintain physical conditioning and boosts the overall health and wellness of the individual.

6. “Sports medicine” focuses on physical fitness, treatment, and prevention of injuries related to sports and exercise.

7. Athletic training, exercises and regimes to uplift the performance and ability of the individual to participate in athletic activities.

8. “Vision rehabilitation” is a form of rehabilitation service to the visually impaired, aiming to impart facilities that assist in restoring functional ability and improving the quality of life and independence.

Mental health

Rehabilitation services for the mentally challenged include –

1. Drug Rehabilitation/Medical/Psychotherapeutic treatment: This form of rehabilitation service is offered to an individual who is dependent on alcohol, prescription drugs, and street drugs.

2. Rehabilitation for an individual with charges of a criminal offence (Penology).

3. Rehabilitation services for individuals with alterations in neurocognitive function caused due to a disease or an injury (Neuropsychology).

4.  Psychiatric rehabilitation intends to restore mental health in individuals with mental illness.

*Rehabilitation facilities use robots to enhance rehabilitation. Another revolution in this segment is the introduction of “telerehabilitation”, which uses telecommunication or/and internet to render rehabilitation services.

Classification of Rehabilitation Services

1. Inpatient Rehabilitation Services: These services refer to those that are offered to an individual during his/her stay in the hospital or a rehabilitation center.The inpatient rehabilitation may last for weeks to months. Once the patient is out of the inpatient rehabilitation, he/she is discharged from the hospital with adequate training on self-management for the present as well as in the future.  

2. Outpatient Rehabilitation Services: This type of rehabilitation service is associated with performing all the daily activities by staying at home and offering frequent visits to the rehabilitation center for treatment, as and when required.

3. Residential Rehabilitation Services: This type of rehabilitation program requires housing of the individual during the entire course of treatment and lasts for 28 days. The participation of the individuals in this type of program is voluntary, and obligatory, unless and until ordered by a court. Residential rehabilitation programs differ in the extent of restraining the patient to the house. Like, locked-door programs require complete restraint of the individual to the house/facility, whereas others do not require restraint and also prohibit the return of the individual.

4. Executive/Luxury Rehabilitation Services: In today’s world, everyone is too occupied to look after anyone. So, when one wants to look after someone, but cannot, centers like executive rehabilitation centers can be a great option. These centers provide the individual with all the luxuries that one would get to staying in a multi-star hotel, ranging from the gym, massage, to appetizing food. So, if one couldn’t afford the time to care for a patient with substance abuse or behavioral addiction, executive rehabilitation services could be a significant alternative.   

A large population of the U.S. needs rehabilitation services. The top 10 rehabilitation centers in the USA are:

  • Rehabilitation Institute of Chicago in Chicago, IL
  • Kessler Institute for Rehabilitation in West Orange, NJ
  • TIRR Memorial Hermann in Houston, TX
  • Mayo Clinic in Rochester, MN
  • University of Washington Medical Center in Seattle, WA
  • Spaulding Rehabilitation Hospital-Massachusetts General Hospital in Boston, MA
  • Craig Hospital in Englewood, CO
  • MossRehab in Elkins Park, PA
  • Rusk Rehabilitation at NYU Langone Medical Center in New York, NY
  • Shepherd Center in Atlanta, GA

Insurance for Rehabilitation Services

Insurance coverage for rehab is the biggest concern that pulls back patients from opting for these services. However, the Barack Obama’s Healthcare law incorporates substance abuse and mental health disorders, opening up services such as alcohol and drug detox or addiction therapy to many Americans who once couldn’t afford them. The healthcare law also allows young adults to stay on their parents’ insurance plans until age 26. This offers coverage to many youth scuffling with drug abuse and eating disorders.

The insurance coverage for different types of rehabilitation therapies is as follows –

(a) Reimbursement for Physical Therapy:

The majority of the insurance plans offer physical therapy that are deemed necessary by the physician, either directly provided or performed under his/her supervision. Moreover, nearly all the insurance plans, except Medicare and many HMOs empowers its consumers to enjoy ‘out of network’ health care services, which means the patient can take services from a physical therapist who is not a participating provider with the insurance company he/she is covered. In that case, the patient has to pay the differential amount than that provided by the insurer. Some physical therapists provide services that are not covered by the insurance plans. However, the additional treatments suggested by the physical therapists may seem to be of mighty importance, that the patients undertake them willingly by spending out of their pocket. 

Examples of such physical therapies include fitness and wellness programs, sports performance enhancement, health education classes, and some prevention programs.

Framework of Reimbursement

The reimbursement prospects have been fair enough even during the late economic recession. This is believed to be due to the effectiveness of outpatient rehabilitation and cost savings. The regulatory framework includes-

  • Reimbursement at a ‘usual and customary’ rate on a per service basis by the commercial payers.
  • The Medicare Physician Fee Schedule governs the Medicare/Medicaid reimbursements.
  • The 50% MPPR policy will reduce overall provider payments by approximately 6-7%, which will be partially offset by a 4% increase, that resulted from CMS’s use of new survey data of practice expenses.
  • The sequester imposed 2% payment cut across the board for all the Medicare physician providers from April 1, 2013, which resulted in approximately 1.6% additional cut to the provider payments.
  • Workers’ compensation attributes to higher reimbursement level than the commercial or governmental payers.

Figure 1- Reimbursement for Rehabilitation and Physical Therapy

(b) Insurance for Addiction Rehabilitation

The insurance firms have now correctly interpreted the problem of addiction and learned that it is a medical condition and is treatable. The acceptance of the fact by the insurers and its ill effects on the individual such as physical or psychiatric effects has driven reform. The public and private health insurances now remunerate a specific portion of their total inpatient/outpatient expenditure for every type of addiction, thereby allowing the health care providers to assume behaviorally or substance rehabilitation as a precautionary medical concern.

(c) Public Insurance

Not all the insurance plans cover behavioral/substance addiction treatment therapies. Therefore, in that case, the patient can opt for public insurance, which would make the treatment affordable. However, only a few treatment facilities are partially or completely sponsored by the Government, and these organizations bear the medical insurance plans for either full or partial payment of services. Therefore, the patient should scan if they are investing in the correct insurance program, which includes addiction rehabilitation.

(d) Private Insurance

Private insurance refers to any health insurance plan that is reimbursed by an employer or an individual and is not subsidized by the federal government or any of its agencies. Definitely, private insurance would cost more as compared to public insurance. Nevertheless, the range of treatment options available is always greater than that allocated by a government-supported insurance plan. However, it is advantageous in cases where the life of a family member/s is terribly affected by substance abuse.

(e) Group Insurance

Various group insurance packages provide addiction rehabilitation services. However, very few utilize this because of guilt or fear of losing their job.

The Mental Health Parity and Addiction Equity Act of 2008 decrees the health insurance companies to balance the alcohol and drug treatment for group plans as a prerequisite for standard medical rehab for these kinds of situations. The law also extends treatment coverage to approximately 100 million employees, provided that the group plans contain current terms for psychological health benefits

Translating health care opportunities into business

Many private equity firms and healthcare companies are keen in evolving the market of addiction into a business world. According to a report, the addition rehabilitation services has grown to $35 billion in 2014 from $21 billion in 2003. These numbers show promising growth in this sector.

Market trends

The rehabilitation therapy industry of the U.S. is greatly shattered. The top 50 companies in the health care resort to less than 25% of the revenue. Not even a single participant shares 5% of the total market revenue. Small scale health care centers contribute to approximately 45% of the physical therapy clinics.

However, their growth is limited due to-

  • Underdeveloped referral sources and infrastructure
  • Well-established organizations with  happening alliances

Figure 2- Competitive Analysis

The outpatient rehabilitation centers contribute $29.6 billion, that is presumed to grow by 7% every year till 2018. Physical therapy alone accounts for $26.6 billion, i.e. approximately 90% of the outpatient rehabilitation expenditure.

Factors suggesting long-term growth

  • Aging U.S. population
  • Growth in employment
  • Unhealthy lifestyle among youth
  • Increasing penetration of physical therapy services
  • New government regulations (e.g., the PPACA) increasing patient access to physical therapy
  • Outpatient rehabilitation is significantly less costly than surgery or hospitalization, but with similar clinical effectiveness

Figure 3- U.S. Outpatient Rehabilitation Expenditures

Figure 4- Outpatient Rehabilitation Spending by Segment

Physician-owned physical therapy practices (POPT) from 10-15% of all physical therapy clinics and represent an ultimate market opportunity. They provide an excellent opportunity to the physicians to serve their patients better with greater convenience, enhanced results, and continuity of care by serving them in the office setting.

Six steps for setting up rehabilitation business

To begin, one should reach the state in charge who certifies mental health services and programs and should meet the criteria to obtain the license required for initiating drug and alcohol rehabilitation programs, outpatient mental health programs, and psychiatric rehabilitation services.

1. Partnership Vs Solo- Decide on the kind of business ownership

In any business, the first thing to decide is the ownership. Partnership and solo ownership have their own advantages and disadvantages. You need to weigh your strengths and weaknesses to determine which type would best fit you. If you like to take you own decisions, and are confident about your business sense, solo ownership may appeal to you. But if you think that two heads are better than one, then you may seek a partner. Partnerships in business may help to fill gaps in terms of funding, knowledge about industry, network, and business acumen.

2. Choose a compensation model

Compensation for rehabilitation services, including physical therapy can be cash-based or insurance-based. The latter requires you to enter into a contract with insurance companies to provide services at an agreed-upon reimbursement rate. The documentation and billing practices need to be meticulous and in sync with the insurers to receive timely payments. You may need to prepare a list of networks that you would like to contract with, and their respective terms.

The cash-based compensation model is gradually being considered more practicable, with the reimbursement rates decreasing. In this model, the patients pay for the services that they receive. These payments are later reimbursed by the insurance companies. For this model to be workable, good documentation and accurate billing practices are crucial. It is important to decide upon a fee which is competitive and affordable to the patients. 

3. Location of the facility

The location of the rehabilitation facility is very crucial in determining its utilization. Your office should be easily accessible by all modes of transport. It is good to prepare to put a signboard that may be visible from nearby streets. The demography is very important- the number of people living around, their age, the common health ailments prevalent in the area. You may also like to know the referral providers in the area, and of course your competitors, and what kind of services they provide.

Following this initial groundwork, you may start looking for real estate, directly or through an agent.

4. Choosing a niche area

Choose a specialty area based on the demography of the area and most importantly your experience.  The specialty area you choose should be the one that provides you an edge over your competitors, and should be something that you enjoy doing. You also need to find out if anyone else in vicinity offers the same services as you plan to offer. However, the most important factor should be to consider the potential and actual need of the specialty services. It’s useless to provide high-end and advanced therapies with no takers. 

5. Buying equipment and devices

Based on the specialty chosen, you need to find out the type and number of equipment that you would need. Large equipment may occupy your precious office space, so you should prefer relatively small and simple equipment which can be used for multiple purposes. The equipment must be simple enough for the patients to use; most patients may get scared of the complex and huge equipment. For physical therapy, exercise can be done using simple props; these props can be mimicked by household equipment at home.

6. Choosing the right software for your practice

The right software, can go a long way in cutting down costs, at various levels. EMR, incorporated into the office operations, may make patient documentation, billing, and reimbursement process uncomplicated. EMR also facilitates implementation of ICD-10 codes accurate diagnosis and reimbursement of the services provided. Choosing a web-based EMR can help you in keeping your patient’s data safe and secure. 

A remarkable advantage of using EMR is tracking the referrals. It helps you know from where you get the most referrals, and who needs your time for better relationship building.

The Take Away

In spite of the recession that hit the U.S. market, the rehabilitation business remained intact due to the fact that, the rehabilitation centers draw its revenue from the Medicare reimbursements. The growth of rehabilitation centers is expected to rise and the profits are presumed to be high, as the physical therapists are interested in associating their treatment strategies with physicians and chiropractors. The aging population is the key factor driving the revenues high in the near future.

Besides this, the enactment of the healthcare reform is anticipated to make private health insurance more easy-going, which would allow more people to receive rehabilitation therapies; therefore, augmenting the revenue. Additionally, transformation of the current healthcare into a low-cost and high-quality one, presents itself with an investment opportunity for both the existing ones and the beginners.


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