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More on Health Funds and Preferred Provider Schemes

This post is the answer to a question from a Profit Club member about price issues and insurance companies involvement in health care – I hope you like it:

Hi Paul – Really enjoying your informative emails, so much so we’ve joined the Profit Club program.

I have two quick questions for you regarding your stance on “preferred provider schemes”.

1) Do you think the majority of your clients (any idea of a % would be interesting) would pay $70+ for physio sessions without private health rebates? (I personally think not).

2) Following on from that do you believe your health practices could be anywhere near as profitable without the assistance of private health insurance? (again negative in my mind).


Hi Ben,

Let me answer your question directly then I will add some extra points for you to ponder:

1)    I would like to think that 100% of our current private patients would still attend our clinics regardless of their private health insurance status – in reality it may be more like 90%.

2)    I actually believe that the input of private health insurance actually NEGATIVELY impacts profits – no different than insurance companies that determine our fees.

Let me expand a little – I hope you are ready for this:

–          As our current fees are already higher than most ( if not all ) of our competitors – our privately insured patients are actually already paying more to see us than they would to see another provider – so the health fund issue does not really matter.

–          You seem to be very focused on “price” – patients don’t care about the price if they are getting great value.

–          People are value sensitive – not price sensitive – give great value and the private health fund rebate is not even an issue.

–          Understand that not all clients are the same – you need to get rid of the patients that are only seeing you because of the private health fund rebate – these are your “D” class clients and are better off at your competitor’s clinics whinging to them – sorry – but it’s the truth.

–          You need to work on the real reason why your clients are seeing you – and it is not to get rid of the pain – it is to play with the kids, go on that holiday, run that marathon – if you can target the patients “significant emotional event” – you quickly move past any price issue.

–          On a similar issue – the enhanced primary care rebate and the medicare rebate for Exercise Physiologists – does nothing more than drive low potential fee paying clients into your business – these are not your ideal clients – again send them to your competitors.

–          I have had massage therapists on my team who have had full appointment books and not be able to get health fund rebates for their massage session – and also some massage therapists who can offer a rebate but their books are empty – it is all about the therapists and the perceived value they deliver.

–          I personally believe that the less you say about any health fund rebates the better – this rebate issue is not your concern – all you should think about is giving excellent care at a fair and reasonable price – but above all giving excellent value to your client for each and every session.

I welcome your comments on this issue.

Paul Wright



8 thoughts on “More on Health Funds and Preferred Provider Schemes

  1. Mohamed Husain

    Hi there,
    I totally agree with what Paul said. I run a small Physiotherapy center in the Kingdom of Bahrain, and it is no different than Australia. We provide the highest qualities of services and our session price is the 2nd highest in the market here (US $52). Patients are attending their sessions and they are more than happy with the price when they notice the immediate results.
    Insurance patients are less than 15% and paying 65% of the original cash price. We are considering to increase our prices with the insurance companies and it is up to them to accept it or cancel the agreement, our business won’t be affected.


  2. Chris Gaughwin

    In the past 12months my Physio practice of 30+years has gotten out of preferred provider arrangements and increased fees by an average of 50%. our number of visits have dropped by 8% but our gross turnover has increased by 25%. my job satisfaction is immeasurably better and my staff are earning over $50 an hour seeing patients they get great results with. We avoid the rebate conversation and observe that an ever increasing number of patients have no extras cover and have no issue paying the full fee. Paul you are exactly right when you say we have no business presuming the financial circumstances of our patients our job is to give the best professional service we can and achieve the best outcome possible. Let’s spread the word service and out come is king or queen fees and rebates have nothing to do with it.
    Thanks Paul
    Chris G Adelaide

  3. cisono

    I think Ben may be correct in thinking that new clients (unless word of mouth is available) generally compare and choose new professionals/service providers based on price (a piece of information that is easy to find out about and compare).

    I often hear about this “give excellent value to clients” – it is difficult to argue that Paul is wrong but how exactly do you give “excellent value”… that is the question. It is almost a “buzz-expression” (similarly to buzzword) that has no meaning to me. Clarifications would be welcome.

  4. mdhpadmin Post author

    HI Cisano,

    Excellent value can be seen by your business providing the following _

    – high quality care
    – clean and neat rooms
    – friendly staff
    – great results from treatment
    – follow up calls and one on one care not given in other health businesses
    – listening more and talking less
    – free pre-screening assessments to reduce the risk for first time patients
    – follow up and maintaining contact
    – convenient opening hours
    – child minding for patients
    – tea and coffee on arrival
    – a money back guarantee
    – free seminars and webinars
    – newsletter and staying in touch
    – returning calls when you say you are going to.
    – going out of your way to get the best outcome
    – calling to see how your patient went at the specialist
    – asking for and acting on feedback from your patients
    – etc etc etc – the list is endless!!!!!

    If you do – even some of these things – your clients will not be concerned about money – it is all about the experiance , the care and the results you deliver.

    I hope you get the idea.

    Best Wishes

    Paul Wright

  5. Libby Jamieson

    I agree, great service is about the little things and doing them really well. And teaching your staff, both at the front desk and on the clinical side to do them really well! It’s about delivering over and above expectations. It’s about wowing your clients at every consultation from the time they make the appointment to when they get home and they get a follow up phone-call. It’s about having the systems in place to make sure the little things get done. And having the monitoring in place to check that the systems are occurring in reality. It’s the little things that enable a business to go from just covering costs to doing really well and continuing it’s ability to grow.

  6. Ben

    Hi Paul and others,

    Thanks for your responses. I should qualify that I’m neither for or against preferred provider schemes per se, my question really is about the right of health insurers to ‘interfere’ in our businesses.

    As i said in my original email i find Paul’s material very informative which is why this particular issue jumped out to me as something that really didn’t add up in my mind. I don’t believe my business is overly price sensitive (we recently increased our fees without any decrease in numbers as I believe we too provide excellent value…..always trying to improve of course!) but at some point price sensitivity plays a role in all patient treatment, as it does in all financial decisions.

    I think for physio this is most important when multiple sessions are required, e.g., if a group of post ACL patients have to fork out $1000 ‘without’ a health rebate over a couple of months versus only $500 thanks to the aid of their rebate then I seriously doubt whether every member of the group will attend every sessions we suggest, even if our service is spectacular (basic opportunity cost argument)! This in turn would impact negatively on revenue and profitability. Paul, you mention in your response that in reality you might retain 90% of your private patients if they received no rebate. If that’s the case than a subsequent 10% drop in revenue would greatly affect your profitability would it not? The experience of NZ in recent years where their government funded physio insurance scheme was scrapped had massive ramifications for the health industry as many locals were unwilling to pay full price resulting in many businesses going bust!

    My point is not to question the business logic of maximising patient fees and revenue more to highlight that our industry is hugely reliant on private insurance. While I don’t necessarily believe we should sign up to preferred provider schemes I respect the right of insurers to ask us to participate in them for the benefit of their patients and don’t think we should be so openly negative about their efforts to do so.

    Paul, we know you run a number of successful businesses, would you consider operating one of them without any private rebates to patients for a couple of months as a little experiment? j/k ; )

    Looking forward to your thoughts,


    1. mdhpadmin Post author

      Hi Ben,

      I do love a good discussion and really value your input.

      You do make some excellent points however I will add the following:

      – if we did lose 10% of our patients (should the rebate drop off) – then my abundance memtality would say that this only frees up more time for the A class clients that we want to attract in the first place and effectively cut the 10% of price sensitive clients from our books – not necessarily a bad thing.

      – you need to look at the costs to your business when you see price sensitive clients – they take up time and resources that may be better directed to higher end and more motivated clients.

      – your comment on ACL rehab makes me think that all post op protocols are the same – so it does not matter who you see – again a mistake – if an exceptional therapist can get great results in half the consults ( and charge more) then everyone wins.

      – the NZ experience is an interesting one – I would assume that the clinics that went bust were “commodity based ” clinics that did not attract the right client in the first place and relied too heavily on rebates to offset service fees – I am sure there are clinics in NZ that thrived and only got busier – when the rebate fell over. All these clinics had the same environment to work in – yet some failed and other did not – so it is not the rebate that sent them under it was the business model that failed.

      – re the run my clinics without rebates – difficult to do as health fund members should be rewarded in some way – but not to the extent that the insurer can set our fees.

      – I speak to many exercise physiologists who were all excited by the epc system when it came in – but many exercise physiologists now think it is a nightmare as it makes their clients rebate and money focused and impacts on the fees they can charge – you will find that many normal Personal trainers will charge more per sessions than exercise physiologists simply due to the epc and referral systems that attract price sensitive clients to the ep over the higher charging PT.

      I appreciate your comments as always.

      Talk soon

      Paul Wright

  7. Michelle Lee

    Hi Paul
    I have a physiotherapy practice that I run remotely in WA while living in NSW.
    I have enjoyed many of your newsletters since I joined your mailing list, thank you.

    I have a question for you. How do you charge your WorkCover and Motor Vehicle clients? Do you charge them the gap of the insurer fee and your fee? Is this “gap” refundable to them?

    Many thanks for your reply.

    Kind regards

    Michelle Lee

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