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Why we need to address patient leakage in physical therapy

September 24, 2021
Business Affairs
Palak Shah
By Palak Shah

When a patient goes to the hospital, there's a certain pattern that we as healthcare leaders want them to follow.

Ultimately, our patients should receive quality treatment, get discharged, and be able to continue on their care journey in a straightforward, seamless way. Some patients may require short-term or long-term physical therapy following a procedure, but nobody wants to see them fall through the cracks and face additional issues down the line.

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Unfortunately, provider organizations are finding themselves increasingly vulnerable to the financial perils associated with patient leakage.

Every year, healthcare organizations operating on already compressed margins continue to hemorrhage patients and revenue due to unresolved leakage issues. Patient leakage stems from several different factors across the broader healthcare industry, but recent research indicates that rehabilitation referrals are the largest driver of leakage in health systems.

Each leaked patient represents several thousand dollars of lost revenue, and some providers have stated that leakage costs at least 10% of their annual revenues.

As it relates to the physical therapy market, more than half of patients referred to health system physical therapy clinics end up seeking care at third-party clinics or pursuing other options. Most systems have leakage rates of more than 50%, and in some cases, nearly 80% of an organization's referrals will go outside of the system, resulting in a $2.5 billion problem industry-wide.

A major contributor to those rehabilitation leakage trends is proximity to treatment. Simply put, patients are unwilling to travel more than a few miles to an affiliated clinic if they can receive treatment somewhere closer to them.

Beyond the financial impact, patient leakage also disrupts the clinical process. Directives from a doctor can be interrupted if a patient goes outside the organization to continue care, at which point standardization can become difficult or nearly impossible.

Patient leakage is not an issue unique to only one sector of the industry, it afflicts all types of provider organizations, including some of the largest and most efficient hospitals and health systems in the nation. Every organization has room for improvement and the ability to capture significant upside from what is typically a low- to mid- margin service line.

In the face of these lingering challenges, provider executives may ask themselves several questions about what can be done about patient leakage and how to get on the right track.

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