Physician ownership of physical therapy services. Effects on charges, utilization, profits, and service characteristics.

OBJECTIVE: To evaluate the effects of physician ownership of freestanding physical therapy and rehabilitation facilities on utilization, charges, profits, and three measures of service characteristics for physical therapy treatments.
DESIGN: Statistical comparison by physician joint venture ownership status of freestanding physical therapy and comprehensive rehabilitation facilities providing physical therapy treatments in Florida. PARTICIPANTS: A total of 118 outpatient physical therapy facilities and 63 outpatient comprehensive rehabilitation facilities providing services in Florida during 1989. The data from the facilities were collected under a legislative mandate. MAIN OUTCOME MEASURES: Visits per patient, average revenue per patient, percent operating income, percent markup, profits per patient, licensed therapist time per visit, and licensed and nonlicensed medical worker time per visit.
RESULTS: Visits per patient were 39% to 45% higher in joint venture facilities. Both gross and net revenue per patient were 30% to 40% higher in facilities owned by referring physicians. Percent operating income and percent markup were significantly higher in joint venture physical therapy and rehabilitation facilities. Licensed physical therapists and licensed therapist assistants employed in non-joint venture facilities spend about 60% more time per visit treating physical therapy patients than licensed therapists and licensed therapist assistants working in joint venture facilities. Joint ventures also generate more of their revenues from patients with well-paying insurance.
CONCLUSION: Our results indicate that utilization, charges per patient, and profits are higher when physical therapy and rehabilitation facilities are owned by referring physicians. With respect to service characteristics, joint venture firms employ proportionately fewer licensed therapists and licensed therapist assistants to perform physical therapy, so that licensed professionals employed in joint venture businesses spend significantly less time per visit treating patients. These results should be of interest to the medical profession, third-party payers, and policymakers, all of whom are concerned about the consequences of physician self-referral arrangements.