IBX payment cuts are creating pain for small physical therapy practices in Southeastern Pa.

Physical therapists Katherine Dixon and Kristen Wilson have spent five yeas seeking higher rates from Independence Blue Cross for their four clinics in Southeastern Pennsylvania.

They’ve gotten nowhere, they say. They believe their business, Action Potential LLC, is too small to sway the Philadelphia region’s largest insurer. Independence accounts for 20% of Action Potential’s business.

Last December brought more frustration. Independence changed how it pays for sessions, effectively cutting the average reimbursement for 40 minutes of physical therapy by 17%, co-owner Kristen Wilson said. That’s significantly less than Action Potential’s rate through the government-funded Medicare program.

“We’re taking a loss every single Independence Blue Cross patient,” she said. That leaves Action Potential weighing whether to leave the Independence network. (Wilson declined to share actual rates for fear of violating Action Potential’s agreement with the insurer.)

Action Potential and other small physical therapy practices say they are suffering financially because Independence and other insurers don’t negotiate rates with the thousands of independent physicians and other clinicians in their networks. Instead, they use standard fee schedules to streamline benefits administration.

The approach leaves small practices with little clout, and is among the forces leading many to join bigger companies. Nationally, the number of private-equity deals in physical therapy surged to 175 in 2023 from four in 2010, according to a study published last year.

“You wonder why consolidation is happening,” Wilson said. “It’s almost impossible to run a business.”

Local independent physical therapists are pushing for better reimbursement as Independence also faces demands from major health systems for substantially higher rates and pressure from employers to slow healthcare spending growth.

Independence says its follows industry standards and pays physical therapy providers competitive rates that don’t vary based on the size of the organization, unless additional services are included. Providers can contact the company through a special portal or by phone if they’d like special consideration, the company says.

Contracts with hospital systems command attention from insurers because they have emergency departments and provide care not available elsewhere. They also employ hundreds or thousands of physicians needed for insurers to have adequate networks for the people they cover.

By contrast, when a small physical therapy center or physician office opens and wants to accept patients from Blue Cross or another insurers, it first must gain acceptance into the insurer’s network. That’s not guaranteed. Sometimes insurers say they already have enough providers.

If the practice is approved as an in-network provider and its clinicians credentialed, it is given a “boilerplate contract” and a schedule of fees. That’s always been a take-it-or-leave-it proposition, according to three owners or managers of physical therapy companies who talked with The Inquirer in recent weeks.

Independence says it attempts to pay competitive rates. Those reimbursement rates go up or down along with Medicare rates and as demand changes, said Richard Snyder, Independence’s chief operating officer.

Fees for doctors, physical therapists, and other clinicians don’t vary for the same service based on the size of the company they work for, Snyder said. They might be different if “you’re giving some other services along with it, or there’s a bundling of services,” he said.

When Kinetic Physical Therapy started two decades ago, Kinetic had a representative at Independence to contact about billing issues, said chief operating officer Cyndi Hill James. “We had a name, and I could call that person any time and ask questions,” she said.

The practice has grown to 10 locations in Philadelphia’s western suburbs and employs 23 physical therapists.

Over the years, the relationship between Independence and Kinetic dwindled. It now has no specific contact to call or email. “We have no one to talk to, to say, let us explain why we should be able to renegotiate,” Hill James said.

Snyder said Independence is willing to talk to providers about issues, acknowledging delays credentialing providers. By next month, Independence should be back to an efficient turnaround of 30 days, he said.

In September, Action Potential led a group bid for Independence’s attention. Wilson organized six local physical therapy practices, including Kinetic, to send a joint letter to Independence asking for a meeting within 30 days to discuss their problems.

Wilson received a written response dated Nov. 3 that reinforced the company’s policy decisions, though the insurer did agree to have a virtual meeting with the practices on Nov. 18, she said. The CEO of the American Physical Therapy Association, Justin Moore, is scheduled to participate, Wilson said.

Independence’s change in the way it pays for physical therapy was among a series of policy changes in the past year affecting many healthcare organizations, as the insurer seeks to reduce costs for its employer customers.

For hospitals, it no longer pays for readmissions within 30 days of discharge under certain conditions and is pushing to move surgeries that don’t require an overnight hospital stay into lower-cost surgery centers.

Jefferson Health has sued Independence over those and other changes.

Under the policy change dealing a financial blow to physical therapy, Independence only pays full price for one type of treatment during a physical therapy session. Sessions typically include three of four activities that last 10 to 15 minutes each. Examples are therapeutic exercise, neuromuscular reeducation, and gait training.

As of last Dec. 1, Independence only pays the full price for one of the activities, and 75% for the others. For example, if a therapy center bills three activities at $30 each, it would be paid $75. That’s $15, or 17%, less than the full price of $90.

Snyder said Independence is a relatively late adopter among its competitors of what is called multiple procedure payment reduction for physical therapy. Some costs for each part of a therapy session are shared and should not be reimbursed more than once, Snyder said.

The change cost Elite Therapy Solutions $10 or $12 for every Independence session, said Patrick Kinzeler, an owner and director of administration at Elite, which has 10 Philadelphia-area locations and more in South Carolina and Louisiana.

“Our reimbursement keeps getting squeezed,” he said.

Meanwhile, rent, supplies, electricity costs increase 8% to 10% a year. Plus, Elite and other practices have seen even steeper increases in healthcare costs for their own employees.

Elite works hard to be efficient, “but we’re not making any headway,” Kinzeler said.