Can a physical therapy clinic earn enough to fund its cash cycle?

Translate completed care into net revenue

Revenue depends on completed visits and the expected realized amount for each payer. The mix is 30.0% self-pay, 55.0% commercial insurance and 15.0% Medicare. Their respective net assumptions are $145.00, $115.00 and $100.00 per completed visit. The model totals payer and patient receipts together; it does not add copays on top of an already inclusive collected fee.

The blend is $121.75. Gross charges average $183.50 and the illustrative allowed total is $128.75; contractual reductions and expected permanent noncollection explain the difference. An appointment length is not a billable CPT-unit claim. Actual coded services, locality, modifier, medical necessity and contracts must replace these proxies. CMS payment framework

Scheduled fill grows from 42.0% to 95.0% over 12 months, then stays flat. Cancellations are 12.0% of scheduled slots, of which 25.0% are refilled. Fractional visits express expected monthly equivalents; actual patients and appointment slots are whole counts. The model proves no local demand.

Include paid clinical work before calling contribution profit

Visit contribution is $111.75 after $4.00 of consumables, $4.70 of outsourced insured billing and $1.31 of self-pay processing. Salaried clinician work and scheduled admin hours are fixed within this roster. Loaded payroll is $22,318 per month before annual increases. All-in modeled rent is $4,900; software, professional insurance, utilities, cleaning, marketing and support remain paid commitments.

The annual premises policy is paid before opening, amortized monthly and renewed at months 13, 25, 37 and 49. Inventory consumption reduces early cash purchases without removing the supply expense. EBITDA includes paid owner work and policy expense but excludes depreciation and interest. Pre-tax net income deducts both. Cash after debt instead follows received money, paid expenses and principal as well as interest.

Change demand, cancellations, net prices and timing together

The lower case begins at 30.0% scheduled fill and matures at 80.0%, with 20.0% cancellations and 10.0% refills. Expected net fees are multiplied by 92.0%, and insured receipts wait 1 additional month. The roster, premises and funding remain fixed. These assumptions expose an operating loss, rather than promising rescue funding.

The higher case opens at 55.0% fill and reaches 100.0%, with 8.0% cancellations and 50.0% refills. Net fees are multiplied by 106.0%, with insured amounts bounded by their allowed proxies. It adds no therapist, room or overlapping treatment time. Costs rise annually by 3.0% and gross/net prices by 2.0% in all cases; a fee increase is conditional on real contracts.

The lower case reaches $629,227 of unfunded obligations over the horizon. Running through negative cash is a diagnostic forecast of needs; it is not an assumption that the business can keep paying without new funds. Reconsider demand, payer economics, staffing or site scope before treating it as financeable.

Separate operational surplus, debt coverage and recovery

With the year-one fixed roster, annualized fixed costs are $31,073 monthly and scheduled loan payments are $2,159. The collected-cash steady threshold is 297.4 completed visits, or at least 298 whole visits under these exact prices and costs. This calculation assumes receipts have caught up; it does not remove ramp receivables or annual cash spikes. Mature expected volume leaves only 8.3 visits of headroom.

Project recovery compares cumulative unlevered operating cash with every opening use, including the reserve; it does not release that reserve, sell equipment, recover the deposit or liquidate receivables at month 60. Base and lower cases do not recover within the horizon. The higher case reaches project recovery in month 45 and equity recovery in month 35. Equity recovery instead compares cumulative cash after debt with initial paid-in equity. Neither calculation counts owner salary as an investment distribution.

Year-one base cash DSCR is -3.89x: operating cash flow divided by scheduled debt payments, before income taxes and distributions. A different lender definition may adjust owner pay, replacement CAPEX or taxes. No universal underwriting hurdle is asserted.

Read owner compensation without double counting

The owner receives $96,000 of gross economic pay in year one for both treatment and management, with the modeled burden charged to the business. This is distinct from pre-tax company profit and from free cash after debt. The model pays no additional dividends, owner draws or interest on equity. Actual entity and payroll treatment need professional review; the forecast is not a statement of take-home personal income.

A decision to work unpaid can improve reported cash while hiding the cost of replacing the owner. Keep that decision separate from the reference case. The conservative conclusion is that a narrow mature operating surplus does not establish a fully funded launch, and the lower case needs a changed operating plan rather than a larger cosmetic reserve.

Compare the monthly cash path

Download all scenario cash values (CSV). This educational case export is separate from the planned personalized Excel model.