# Physical Therapy Clinic Model See how patient demand, therapist capacity, payer mix, and pricing affect a physical therapy business. - Canonical: https://finamodel.com/templates/physical-therapy - Excel download: https://finamodel.com/templates/physical-therapy.xlsx - Category: Healthcare - Model type: Operating model - Difficulty: Intermediate - Audiences: Investors & analysts, Founders & operators, Search-fund and PE buyers, Outpatient rehab operators, Healthcare services investors, Lenders - Tags: physical-therapy, outpatient-rehab, healthcare-services, rollup, dcf ## Overview This model helps you plan a physical therapy clinic or a growing group of clinics. It connects patient visits, therapist capacity, payer mix, wellness memberships, and ancillary sales to the staffing and operating costs behind each location. Use it to evaluate a new clinic, acquisition, or expansion plan. You can test the assumptions that matter most and see their effect on revenue, profitability, cash flow, and value. ## What's included - Clinic inputs: Year-1 clinics, new clinics per year, visits per clinic, therapists per clinic, average net reimbursement - Utilisation: Year-1 utilisation with an annual ramp and a practical ceiling - Payer mix: commercial, Medicare, Medicaid and work-comp-and-self-pay shares, per-payer rate indices and net margins - Ancillary: members per clinic and annual membership fee, bracing and retail spend per visit, price escalation - Cost structure: therapist and support comp and wage with benefits and wage growth, facilities, marketing, technology and SG&A as a percent of gross profit, depreciation, tax - Capital and working capital: maintenance capex, clinic build-out cost per clinic, NWC, base-year revenue - Valuation: WACC, terminal growth, net debt, shares outstanding - Operations sheet: clinic roll-forward, utilisation ramp, visits per clinic, total patient visits, staff headcount, visits per therapist - Revenue sheet: four payer tiers, patient service revenue, wellness memberships, bracing and retail, total revenue - P&L sheet: revenue to net income with clinical supplies and billing cost, labour and overhead, margins, identity check - FCF sheet: NOPAT, depreciation add-back, capex, change in NWC, unlevered FCF, discount factor, PV - Valuation sheet: sum of PV, terminal value, enterprise value, equity value, value per share, implied EV/EBITDA - Dashboard with clinics, visits, utilisation, revenue per clinic and per visit, EBITDA margin, EV, per share, and revenue mix - Cost structure: therapist and support comp and wage with benefits and wage growth; facilities, marketing, technology and SG&A as % of gross profit; depreciation (% of revenue); tax - Capital and working capital: maintenance capex %, clinic build-out cost per clinic, NWC % of revenue growth, base-year revenue ## Physical Therapy Clinic Financial Model: How the Operating Engine Works This physical therapy financial model projects a multi-location outpatient clinic group over seven years. It connects clinic openings, visit volumes, payer mix, membership and retail attach to staffing, overheads, cash flow and an unlevered DCF valuation. The public download is a values-only preview, but the structure shows how each operating assumption flows through to enterprise value. ### Clinic roll-forward and the visit volume ramp The model starts with a clinic roll-forward: opening clinics plus new clinics equal closing clinics. New clinics are set at a fixed number per year and drive build-out capex. - Each clinic has a mature visit capacity, reflecting treatment-table count and therapist capacity. That capacity is multiplied by a utilisation factor, which starts at a Year 1 input and ramps by a fixed number of percentage points annually, capped at a practical ceiling. - This recognises that new or acquired clinics take two to four years to build referral relationships and caseload. Closing clinics times effective visits per clinic gives total patient visits, the single most important volume driver. ### Payer mix and service revenue Patient service revenue is built payer by payer. Total visits are split across commercial, Medicare, Medicaid and work-comp/self-pay shares. - Each payer's share of visits is multiplied by an average net reimbursement and a payer-specific rate index, then escalated at a fee-schedule step-up. Commercial and work-comp visits carry indices above one, while Medicaid sits well below, so the blended revenue per visit falls out of the mix rather than clinical effort. - The cost to deliver patient services is each tier's revenue times one minus its net margin, capturing supplies, billing and write-off costs that differ by payer. This makes the reimbursement spread and its margin consequences explicit. ### Ancillary lines and the cost structure Two ancillary lines layer on top of patient services. Wellness and fitness memberships are driven by closing clinics times members per clinic times an annual fee, escalated. - They are treated as a service add-on with no separate product cost, because delivery labour sits in the clinic cost stack. Bracing, DME and retail are visit-driven and carry their own resale product cost, since they are physical goods rather than payer-billed services. - On the cost side, therapist and assistant/front-office labour are headcount-driven, loaded for benefits and escalated at wage growth. These labour lines sit in operating expense, not cost of revenue, so gross margin runs high and EBITDA margin is the meaningful profitability measure. Overheads such as facilities, marketing, technology and corporate SG&A are set as a percentage of gross profit, acknowledging that operating scale is better proxied by gross profit than revenue. ### Cash flow, valuation and practical use The model derives unlevered free cash flow by taking EBIT, applying unlevered tax to get NOPAT, adding back depreciation, and subtracting maintenance capex, clinic build-out capex for new clinics, and the change in working capital. Working capital is a moderate drag because third-party insurance receivables run 30 to 50 days. - Free cash flows are discounted at WACC, and a Gordon-growth terminal value is added to the present value of explicit cash flows to reach enterprise value. Net debt is subtracted for equity value and value per share. - A dashboard summarises clinics, visits, utilisation, revenue per clinic, revenue per visit, revenue, EBITDA, EBITDA margin, enterprise value and value per share. The model is useful for evaluating new clinic economics, acquisition scenarios or expansion plans by flexing volume, payer mix, membership attach and cost assumptions. ## Payer mix drives revenue per visit Revenue is the product of a clinic estate, the visits it fills, and the payer mix of those visits. The model makes clinic count, visits per clinic, a utilisation ramp, and a four-tier payer mix explicit, so total patient visits and revenue per visit are transparent operating metrics an analyst can flex against the cost stack rather than a top-down growth rate. ## Designed for one-edit responsiveness Every input, the clinic pipeline, visits per clinic, the utilisation ramp, the payer mix, the average net reimbursement, the full cost stack, capex, working capital, and the WACC, is a named-range cell. Edit one and the operations build, revenue, P&L, free-cash-flow bridge, valuation, and dashboard all recompute. No formula rewrites are needed to test a reimbursement, mix, or expansion scenario. ## An unlevered DCF, not an EBITDA shortcut A therapy group builds out each clinic and carries a month or more of insurance receivables, so the model bridges to unlevered free cash flow and discounts it at a WACC with a Gordon-growth terminal value. Enterprise value bridges through net debt to equity value and a per-share figure, and the implied EV/EBITDA falls out as a sanity check against where outpatient-therapy platforms change hands. ## Workbook structure ### Cover Workbook overview, sheet legend, units, and tab-colour key. - Title and scope framing - Sheet-by-sheet purpose summary - Units and tab-colour legend ### Assumptions Every driver in one sheet: clinics, utilisation, payer mix, costs, capital, valuation. - Year-1 clinics, new clinics per year, visits per clinic, therapists per clinic, average net reimbursement - Utilisation with an annual ramp and a practical ceiling - Payer-tier shares, rate indices and net margins, membership and bracing inputs, price escalation - Therapist and support comp and wage, the percent-of-gross-profit overhead lines, depreciation, tax - Maintenance capex, build-out cost per clinic, NWC, base-year revenue - WACC, terminal growth, net debt, shares ### Operations Clinics, visits, utilisation, and staff. - Opening plus new clinics equals closing clinics - Utilisation ramps from a Year-1 input, capped at a ceiling - Visits per clinic equal mature visits times utilisation - Total patient visits equal closing clinics times visits per clinic - Therapist and support headcount equal closing clinics times per-clinic FTE - Visits per therapist as a productivity metric ### Revenue Revenue by payer tier and ancillary. - Each tier equals total visits times payer share times average net reimbursement times rate index times escalation - Patient service revenue subtotal - Wellness memberships equal closing clinics times members times annual fee - Bracing, DME and retail equal total visits times retail spend per visit - Total revenue ### P&L Revenue to net income. - Revenue from the Revenue sheet - Clinical supplies and billing cost as the inverse of the per-payer net margin - Gross profit and gross margin - Therapist and support labour by headcount, the percent-of-gross-profit overhead stack - EBITDA, depreciation, EBIT, tax on positive EBIT, net income, margins, identity check ### FCF Unlevered free cash flow bridge. - EBIT and unlevered tax from the P&L - NOPAT equals EBIT less unlevered tax - Add back depreciation - Maintenance capex on revenue and build-out capex on new clinics - Change in net working capital on revenue growth - Unlevered free cash flow - Discount factor and PV of UFCF ### Valuation Discounted cash flow. - Sum of PV of explicit UFCF - Gordon-growth terminal value and its PV - Enterprise value - Less net debt to equity value - Shares outstanding and value per share - Implied EV/EBITDA ### Dashboard Headline metrics and revenue mix. - Clinics, visits, utilisation, revenue per clinic and per visit - Revenue and EBITDA - EBITDA margin - Enterprise value and value per share - Revenue mix across patient service, memberships, and bracing ## Features - **Payer mix drives revenue per visit:** Revenue is the product of a clinic estate, the visits it fills, and the payer mix of those visits. The model makes clinic count, visits per clinic, a utilisation ramp, and a four-tier payer mix explicit, so total patient visits and revenue per visit are transparent operating metrics rather than a top-down growth rate, and the commercial-versus-Medicare-versus-Medicaid reimbursement spread is visible in the blend. - **Labour is the cost, and it is modelled as headcount:** Outpatient PT is a people-intensive, licence-gated business, so physical-therapist and assistant/front-office pay is the largest operating line and is built bottom-up from FTEs per clinic, wage, benefits and wage inflation. Because clinician labour sits in operating expense rather than cost of revenue, the gross margin runs high and the EBITDA margin is the meaningful profitability line, and the remaining overhead is geared to gross profit the way a real multi-site operator would expect. - **An unlevered DCF, not an EBITDA shortcut:** A therapy group builds out each clinic and carries a month or more of third-party insurance receivables, so EBITDA overstates cash. The model bridges EBITDA to cash through NOPAT, depreciation, maintenance and build-out capex, and the change in working capital, then discounts the unlevered free-cash-flow stream at a WACC with a Gordon-growth terminal value to a defensible enterprise and equity value. ## Use cases - **Intrinsic valuation:** Set the clinic pipeline, utilisation ramp, payer mix, the cost stack, and a WACC, and read the enterprise value, equity value, value per share, and implied EV/EBITDA. Sense-check the multiple against where outpatient-therapy platforms change hands. - **Roll-up and pipeline planning:** Flex new clinics per year and the build-out cost per clinic to see how the de novo and tuck-in pipeline consumes cash and lifts visit volume, and watch revenue per clinic and the EBITDA margin respond as the group scales. - **Reimbursement and payer-mix stress test:** Shift the payer mix toward Medicare and Medicaid, or compress the per-payer net margins, to model fee-schedule and rate pressure, and read the revenue-per-visit, gross-margin, EBITDA-margin and valuation impact. ## Frequently asked questions ### What is a physical therapy financial model? A physical therapy financial model captures the seven-year operating economics and intrinsic value of a multi-location outpatient physical therapy group that runs rehabilitation care alongside cash-pay wellness memberships and a bracing and DME retail attach. It rolls a clinic count forward, converts a capacity-utilisation ramp into total patient visits, prices visits across a four-tier payer mix at a blended average net reimbursement and rate index, runs the high-gross-margin therapist-heavy cost stack to EBITDA, and discounts an unlevered free-cash-flow stream to enterprise value, equity value, and value per share. ### How is physical therapy revenue built? Revenue is driven by the clinic estate and its utilisation: total patient visits equal closing clinics times visits per clinic times a utilisation factor that ramps to a ceiling, and patient service revenue splits those visits across a commercial, Medicare, Medicaid and work-comp-and-self-pay mix, each priced at a blended average net reimbursement times a per-payer rate index. Clinic-driven wellness memberships and visit-driven bracing and retail layer on to total revenue. ### Why is the payer mix so important? The same visit, delivered by the same therapist, is reimbursed very differently depending on who pays, a commercial or work-comp plan above the blended average and a state Medicaid plan well below it, so the realised revenue per visit falls out of the payer mix rather than the clinical work. The model makes the per-payer rate indices and net margins explicit so an analyst can flex the mix and reimbursement and watch revenue per visit, gross profit and EBITDA move together. ### Why an unlevered DCF instead of an EBITDA multiple? A therapy group still builds out each clinic and carries a month or more of insurance receivables, so EBITDA overstates cash. The model bridges to unlevered free cash flow, NOPAT plus depreciation, less maintenance and build-out capex, less the change in working capital, and discounts it at a WACC, then adds a Gordon-growth terminal value. The implied EV/EBITDA falls out as a sanity check rather than as the valuation input. ## Related templates - [Urgent Care Model](https://finamodel.com/templates/urgent-care) - [Dental Practice](https://finamodel.com/templates/dental-practice) - [Hospital Operating Model](https://finamodel.com/templates/hospital-model)