Minggu, 15 Juni 2008

Physical Therapy's Economic Moat

Athletic trainers would like to learn techniques from physical therapists and to bill physical therapy (97000 series) codes to Medicare.

The American Physical Therapy Association (APTA) would like to prevent athletic trainers from learning these skills and from billing Medicare.

The National Athletic Trainers Association (NATA) has launched legal action for what it calls 'anti-competitive' behavior on the part of the APTA.

The APTA has responded in kind. Read this post from APTA President R. Scott Ward.

The APTA maintains a page on its website with supporting information on athletic trainers and Medicare.

When the weapons in the competitive landscape are legalistic volleys rather than genuine consumer value I question if physical therapy truly has a sustainable competitive advantage over athletic trainers (or any other competing profession).

Before well-meaning physical therapists respond to that last statement let me show you a quick example of how an economist might 'value' the physical therapy profession.

Morningstar is an investor's information source (website, newsletters, consulting, etc.) that has created several proprietary systems for understanding the social and financial value created by companies and industries.

Morningstar (and Warren Buffet) have created a concept for defining company value called the 'sustainable competitive advantage'.

"The competitive advantage ... is important because it's one of the primary considerations when determining the value of a company."


Mornigstar's model of company valuation can be helpful in understanding the economic future of the physical therapy industry.

Morningstar lists the following four criteria in determining if a business has a sustainable competitive advantage (Morningstar calls this the 'economic moat') :

"First, has the company made it tough for customers to switch from its products to those of the competition?"


Medicare regulation makes it difficult for consumers (patients) to switch from physical therapists to athletic trainers because Medicare will not pay athletic trainers to provide physical therapy services.

"Second, does the firm have lower costs than competitors?"

Athletic trainers median salary, from the US Department of Labor, Bureau of Labor Statistics is as follows:

Percentile wage estimates for... (Athletic Trainers):

Percentile 10% 25% 50%
(Median)
75% 90%
Annual Wage
$23,430$31,060$38,360$47,820$60,180



Percentile wage estimates for... (Physical Therapists):

Percentile 10% 25% 50%
(Median)
75% 90%
Hourly Wage $23.33$27.83$33.54$39.49$48.12
Annual Wage$48,530$57,880$69,760$82,140$100,080


The NATA maintains that athletic trainers can provide physical therapy services at lower cost than physical therapists.

"Third, does the company have an intangible asset that makes it tough for competitors to take its business? Patents, trademarks, and regulatory approvals are the most obvious examples here, but brand names or a tough-to-replicate geographical advantage would also fall in this category."


It is hard to argue that physical therapy has intangible 'assets' that qualify physical therapy over athletic trainers - in the eyes of the patient.

I know some physical therapists might argue that point.

The APTA would argue that patient safety is compromised under the care of an athletic trainer.

I'll leave that discussion for another post (or another blogger).

"Finally, does the company benefit from network economics, in which its service or product becomes more valuable the more users it has?"


The short answer to the forth criteria is no.

In summary, the only sustainable competitive advantage that physical therapy has (from an investors standpoint) over athletic trainers is that Medicare regulations impose high 'switching costs' on patients, thereby preserving the physical therapists' 'economic moat' .

So, physical therapists' appreciation, PAC dollars and volunteer support should go to R. Scott Ward and all the folks at the APTA for helping to preserve for physical therapists the single, solitary advantage (from an economist's perspective) that physical therapists have over athletic trainers.

Or, are there others?

What else can physical therapists provide that athletic trainers can't provide?

What about Physical Therapy Diagnosis?

Physical Therapy's Economic Moat Rating: 4.5 Diposkan Oleh: Elvina dara

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