How to Transition from Contract PT to Business Owner

Nov 27, 2019
13 min read
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Read this article for one PT's journey from being a contract PT to a successful business owner.

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How did you get into contract work?

My first job out of school in 1998 was a travel position about 3 hours from my hometown. It was a 13-week assignment in Alexandria, Louisiana. I spent my morning in the inpatient rehab department upstairs and my afternoons in the outpatient department downstairs. I was mainly interested in outpatient but really found myself enjoying the inpatient rehab setting. The pay was good, with free furnished housing just a few miles from the hospital. I was still close enough to go back to New Orleans a couple of times a month and things were rolling along.

Then, on the Tuesday of my 10th week, I was told that Friday would be my last day . . . WHAT? This was during November of 1998 and the Medicare Cap was ON! The $1500 Cap for PT, OT, and Speech per year was a big shock to a new grad who wasn’t paying attention to this as I was preparing for my boards and soaking up treating patients. The travel industry was done (for the time), the entire industry changed, and the PT staff of the hospital decreased by 50%.

I moved back to my folks’ house and it took 8 months to find a job in California at an HMO clinic owned by a Pain Doctor. The pay was bad but at least I had a job and could start paying back those loans⁠—I was making $20/hour and seeing three patients an hour. I could see each patient for about eight visits max, no matter what the diagnosis was. I worked in this position in Pasadena for two years, saving my vacation time to take an epic month-long trip to Europe in May of 2001. This trip was great to get away from patients, away from LA, and to really focus on what the future had in store for me and my PT career. I gave my two-week notice the first day back to work from my paid vacation.

The next transition

I then transitioned to a job at a Workers Comp mill and it was bad. For five dollars more an hour I was seeing greener pastures in Korea Town, Los Angeles. Guess how many patients a day I was seeing there? I was seeing 45-50 patients a day and they were mostly full of it. Some had three cases going and would show up with the knee brace on Monday for knee day, the neck brace on Wednesday because it was neck day, and the shoulder sling on shoulder Friday . . .

It was crazy and I basically stopped signing my name to charts after the third week when I figured out it was just a big scam. The lawyers showed up on Monday and had free rent and a lobby full of patients to see. They referred the patients to the MDs that showed up on Tuesday and then they were on my schedule the next day for PT evaluation. Every patient had the same story and had been coached by the lawyer and MD on what to say and when to react to my examination. It was BONKERS!!! The kicker in this, my boss had five or six of these “Mills” set up around LA.

When things started to change . . .

So, why am I grateful to have had these jobs? Well, the trip to Europe I have mentioned is the first reason. The job in Korea Town offered me a chance to ride the subway (yes, LA has a subway). I hopped on in North Hollywood, rode over to Wilshire Blvd and made a quick route change to the Normandy Exit and the clinic was right there on the 9th floor. The total commute took about an hour each way and cost me about $2 a day.

Two hours a day allowed me to read and it all started with Rich Dad Poor Dad. A friend gave me this book while camping on the beach in Malibu for a week in between the HMO and Work Comp jobs. After reading it and figuring out how bad of a job I had secured, I started taking action. The transition was happening.

I read the next few books in the series⁠—with titles like “How to incorporate your business” and “Loopholes of the Rich,” they definitely helped guide me through the transition. I then opened my S-Corporation called Dunn Therapy Services, Inc. and convinced my boss to pay me $35 an hour as a 1099 instead of a W-2 employee. I should have asked for way more, but I wanted to get a little cash in the new business so I could get the heck out of that job which had become my first contract . . . I continued this arrangement for 4 months and got out of that situation grateful for the time to read the books and take action on my new business.

Starting my own business

So what was the next transition for my new contract business? I needed a contract. Just down the street was an HMO clinic in Burbank. I reached out to them and found out they had 15 clinics or so. I told them I had a contract company and I could be a fill-in PT for about half of their clinics, the locations I was willing to travel to in a 45-minute radius. We had a few conversations and that led to a contract where I was getting paid $50 for an eval and $40 for any follow-up sessions. This was a busy HMO company and I had 30 min sessions. This allowed me to make $80-100 an hour as a 1099 contractor.

Once I earned their trust, I got busy. They would call me at 7 am and let me know which clinic to go to, based on who called in sick. It was the same system at every clinic and very easy to hop in and out. Then I was at North Hollywood every Tuesday doing 8-10 evals a day. Then Burbank every Friday for more evaluations.

I was making great money and I had a business and all the write-offs that came with a business. I worked four to five days a week and on the days they didn’t call me in, I went to the beach, or hiking, or snowboarding or whatever.

The only negative for me in this situation was that I was not treating as many clients as I was doing evals. I might be at 4 different clinics over the week and a different group the next week and I didn’t get a chance to follow through with the plan of care. The plan of care was led by the full-time staff at each location, typically PTAs.

Every year I would go to Lake Tahoe to snowboard for a week. One day during that trip I would drive around the lake and hand out my resume to every PT clinic. I would attach a cover letter explaining that I had a registry service and I could fill in for them for a week or two for them to take a vacation or just took some time off. This allowed me to write most of the trip off because I was looking for a new contract.

One day I got a call from a clinic owner and he asked me if I had any Pilates experience? I had never heard the word and I said no. He politely said thanks and hung up the phone. WHAT! I asked my girlfriend, Cheryl (who is now my wife and business partner)⁠—”what’s Pilates?” She told me it was an exercise system and knew about the mat work. This was 2002 and a few weeks later I found an ad in the LA Times looking for a PT and it said Pilates experience was a plus. After an interview, I secured a contract to work for them two days a week at the same per-patient rates as my other contract. My girlfriend and I enrolled in a Pilates Certification Program and a year later we were certified. This contract was great as I could practice using the Pilates equipment with my clients and really dive into the Pilates world. The problem with this contract was the clinic location. It was in Brentwood and the six-mile commute took over an hour; I was spending all my free time driving on the 405 instead of reading business books.

Becoming a clinic owner

The next transition was to go to the owner of the HMO clinics with a business proposal. I was done bouncing around and going to multiple clinics. I wanted to evaluate and deliver the plan of care with patients and actually progress them to their goals. I promised to build a Pilates program at the Burbank clinic two miles from my apartment. They had a break room with a TV and boxes of junk stored everywhere. I worked out a deal for a per-patient rate but I would also get a percentage of income that I generated.

The difference, I was not seeing HMO clients⁠—I was seeing the first PPO clients they had ever seen. Spending an hour with patients and marketing PPO doctors instead of HMO networks led to a new revenue source for this company. I purchased the Pilates equipment and Cheryl and I both started working out of the break room that had transitioned to the Pilates room.

After six-to-eight months of growth, I had a full schedule of PPO clients and Cheryl was working after hours and during her lunch on the side from her full-time job. This was such a change and I loved getting to provide the entire plan of care and seeing the positive outcomes I was getting from combining manual therapy and Pilates.

As I got busier my check got bigger. I was starting to make $5k, $7k, and eventually $10k per invoice. I figured the more I made the happier my business partner would be because he was asking half the money. But that was not the case and his fear led us to quickly cut ties. I knew mindset was important and that we were not on the same wavelength.

Starting on my own

It was time to transition from contract business owner to a brick and mortar clinic owner. It was time to do it all on our own. A travel job to Sonoma got us out of LA and allowed us to plan the next step. After a year in Northern California and one last snowboard season in Tahoe, we moved to Austin to set up CORE Therapy & Pilates.

Treating patients in California provided great experience with great results for my patients combining manual therapy and Pilates and I knew it was time to build the clinic of my dreams. I took everything I loved about the previous jobs and contracts and most importantly I avoided everything I hated to create my studio. We opened in 2005 and contracted with a few PPO plans. We were in-network with BCBS and Humana and out of network with other private insurance; we never took WC or Medicare/Medicaid. After a decade of declining reimbursement, increasing paperwork demands, and a rising cost of doing business, it was time to transition to a cash-based, non-contracted model.

In Texas, there was also a shift from PPOs to HMOs for private insurance unless you had a group plan. Many of my self employed lawyers and real estate folks all of the sudden couldn’t get a group PPO plan. January first, 2016 was my first day of my new cash model. It was a bit scary at first and most told me that it was impossible to not take insurance and survive. My response was it was no longer possible for me to survive as a business taking insurance and that it was sink or swim time in the Cash PT world.

Reflecting on the transition

In summary, as a contract business owner, I had little overhead. It was similar to a modern mobile PT model but I went to a different clinic every day instead of patient homes.

It allowed me to charge higher fees than when I was a W-2 employee. I made good money but did not have the reward of taking patients through the plan of care and helping them reach their goals. I was helping the companies I contracted for more than my actual patients. I had random days off but made enough money while working that I was able to enjoy those days instead of stressing about it.

It was a great learning experience about running a business, negotiating with other business owners, and learning the game of writing off business expenses. It was an overall positive in preparing me to transition to a brick-and-mortar clinic owner.

As a clinic owner, my expenses are significantly higher. I keep all the money I generate and do not share it with another clinic owner. However, with building a team at my studio I now share money with them as they bring value to the business. All of my Pilates Instructors that work for me are Independent Contractors and I am happy to see their checks growing. If they are making more money every week, so is my business. This is the mindset that was lacking with the owner of the HMO clinics.

Our cash model is thriving and the transition away from insurance was one of the best decisions I made for my business. Our niche has allowed us to introduce Pilates to patients in PT and progress them to our Pilates wellness program. This keeps some of the patients around the studio for years in our private or group Pilates sessions. My schedule is now full and I couldn’t be happier!

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About Stephen Dunn MPT, COMT, PMA®-CPT

Stephen graduated with a Masters in Physical Therapy in 1998 from LSUMC in New Orleans. Immediately interested in hands-on therapy, he began to study manual therapy and became certified in the Maitland Australian Approach in 2003. Stephen completed a comprehensive Pilates training in Santa Monica at retroFit Pilates in 2002 and is Certified through The Pilates Method Alliance. The combined treatment of manual therapy with mind body awareness exercises using Pilates concepts was the start of his whole body treatment approach. Stephen and the team at CORE Therapy & Pilates have been serving Austin, Tx since 2005. The founder of Pilates for PTs, Stephen helps PT’s incorporate Pilates into their practice. To reach out, send a DM through https://www.facebook.com/pilatesforpts or email sdunn@therapyandpilates.com


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