• Degree of Rivalry

 

Industry Concentration

The Physical Therapists industry is highly fragmented and has a low market share concentration, with the top four physical therapist firms accounting for less than 11.0% of industry revenue in 2015. Over the past five years, nonemployers have inundated the industry, thus keeping market share concentration low.

 

Fixed Costs

There is limited investment in fixed assets, which primarily include furniture, equipment and leasehold improvements. As technology is increasingly adopted in the industry, the level of capital investment is expected to rise slightly, but operators will remain heavily dependent on labor to provide rehabilitation services to patients,

 

Industry Growth

  An aging population and greater insurance coverage will boost physical therapy demand.  The Physical Therapists industry will exhibit growth as a result of the burgeoning elderly population and the effects of healthcare reform.

 

Product Differences

Many physical therapists specialize in a specific clinical area because the industry includes a range of knowledge and services. While there are many different types of physical therapy, the American Board of Physical Therapy Specialties lists eight specialist certifications: cardiovascular and pulmonary, clinical electrophysiology, geriatrics, neurology, orthopedics, pediatrics, sports and women’s health. While the majority of practices do not employ certified specialists, most offices focus on one or two types of therapy.

• Buyer Power

 

Buyer’s  Incentive

The 2010 Patient Protection and Affordable Care Act is expected to boost demand for physical therapy services, as an additional 32 million previously uninsured people will gain coverage. The act also increases incentives to use preventative care, including physical therapy rather than surgery.

 

Buying Industries

Life Insurance & Annuities in the US This industry includes third-party payers of industry operators.  Health & Medical Insurance in the US This industry includes third-party payers of industry operators. Property, Casualty and Direct Insurance in the US Auto insurers are payers of industry operators. Workers’ Compensation & Other Insurance Funds in the US Workers’ compensation funds are payers of industry operators. Primary Care Doctors in the US Primary care doctors are a source of referral for industry operators. Specialist Doctors in the US Specialist doctors are a referral source for industry operators. Home Care Providers in the US Home care providers are a referral source for industry operators. Hospitals in the US Hospitals are a referral source for industry operators. Nursing Care Facilities in the US

 

• Threat of New Entrants

 

Barrier Entry

Barriers in this industry are low due to customers’ ability to easily move to an alternative provider, and the low cost in establishing an office. Barriers include requirements for physical therapists to have a master’s degree to practice as a physical therapist, the costs, time, and building relationships.

 

Costs

The Physical Therapists industry is labor intensive. In 2015, for every dollar spent on labor, the industry spends about $0.03 on capital. Each patient requires personalized service, which leads to high labor costs. Furthermore, physical therapists and their assistants are relatively well trained and highly skilled; therefore, labor costs per employee are high for the industry.

As technology is increasingly adopted in the industry, the level of capital investment is expected to rise slightly, but operators will remain heavily dependent on labor to provide rehabilitation services to patients

 

Government Policy

As providers of healthcare services, physical therapists are subject to various regulations from federal, state and local governmental bodies. Government involvement in healthcare has been increasingly in the public eye in recent years, thereby intensifying pressure for new legislation that has the potential to change the industry environment.

 

Economies of Scale

The prevalence of therapist- or physician-owned practices; the tendency for physical therapy offices to be small with limited opportunities to accrue economies of scale.

 

• Supplier Power

 

Supplier Concentration

Addressing the supply of physical therapists, the American Physical Therapy Association suggests that supply and demand are very regional in nature and also are highly affected by rural versus urban settings. It is difficult to recruit in rural settings despite the higher salaries that often are offered as an enticement. If healthcare demand is related to population density, then the majority of industry operators will locate in urban settings, both in general and in niche practices. A niche practice will only work in an urban setting where there is adequate patient volume.

 

Impact of Inputs

Brand Name Pharmaceutical Manufacturing in the US This industry manufactures patented pharmaceutical drugs and medicine for patient treatment. Generic Pharmaceutical Manufacturing in the US This industry manufactures generic drugs and medicine for patient treatment. Medical Instrument & Supply Manufacturing in the US This industry supplies medical and surgical equipment. Glasses & Contact Lens Manufacturing in the US This industry supplies medical and surgical equipment. Primary Care Doctors in the US This industry provides medical services. Specialist Doctors in the US This industry provides medical services. Diagnostic & Medical Laboratories in the US This industry supplies health services; in particular, physical therapists require the services of X-ray clinics.

 

• Threat of Substitutes

 

Price-performance trade-off of substitutes

Individuals with higher incomes tend to spend more on healthcare and are more likely to have private health insurance. Insurance reimbursement can reduce the direct cost to patients of services, and hence boost overall demand. Government health policy can also affect the price and quality of, and demand for, services. For example, referrals from physicians are required in some states. Licensure requirements may increase quality but also may increase costs.

Physical therapists are limited to serving the US market due largely to high levels of regulation of practitioners (i.e. within country borders) and to reimbursement arrangements (designed to aid workers and citizens treated in their respective country)

 

References

Turk, S. (2015, October). Physical Therapists in the U.S. Retrieved January 14, 2016, from ibisworld.com: http://clients1.ibisworld.com/reports/us/industry/default.aspx?entid=1562