There are two themes that recur in my conversations with people working in O&P: the difficulty in getting compliant documentation from the referring physician and concern about increasing costs together with downward pressure on reimbursements. Neither of these are new issues, but they still seem to be the most common things I hear. The good news is that there are strategies that you can use to reduce these challenges’ negative impact on your practice.
Let’s tackle the shrinking margin first. Historically, O&P has enjoyed a higher profit margin than most healthcare practices. Hospitals are among the lowest. Becker’s Hospital Review reported that as of April 2021, the median hospital operating margin was 2 percent. A few years ago private physician-owned practices averaged about 12 percent. A 2021 white paper at the Medical Group Management Association, titled “Our Operating Margin is Fading,” said that according to macro trends as of September 30, 2022, the typical physical therapy practice had an operating margin of about 7 percent. The last time I had access to data from the American Orthotic and Prosthetic Association, O&P practices averaged 15-30 percent margins, based on a number of factors. It is not surprising that our margins are falling in line with norms. If a hospital system can be profitable with a 2 percent margin, why can’t a private practice thrive with 10-15 percent margins?
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