2025 Crystal Ball: What's Next for #PhysicalTherapy?

Annual Prediction Edition

Summary:

1. Many Physical Therapy Schools will lower tuition, sell seats to employers, negotiate specials, and do articulation agreements with schools that do not have a PT program to fuel applications and enrollments.

2. Compensation Shake-Up: More Variable Pay for PTs, aka “eat what you kill models”

3. PT Practices and Patients Opting Out of Low-Paying Contracts will grow tremendously, increasing a form of “cash-based” component in practices

4. AI for Documentation (Yes, We’re Going There) and Innovation

5. The Great Clinician Shortage Marches On

6. Value-Based Care…Still Stuck in Neutral

7. MSK Needs Spike, Thanks in Part to GLP1 Woes

Happy New Year, physical therapy aficionados! It’s your friendly neighborhood PT seer here, gazing into my crystal ball (otherwise known as my overly caffeinated brain) to predict the top trends I see shaping our industry in 2025. Buckle up — this ride might get a little bumpy.

I have been making annual #physicaltherapy predictions for many years. It’s a fun tradition, and I will let others judge my prognostications.

Here is 2024, and I did a mid-year update, which will suffice for an entire year since nothing materially changed after that post. However, I seriously under-predicted medicare backlash and the Ozempic Olympics!

In 2025:

1. Many Physical Therapy Schools will lower tuition, sell seats to employers, negotiate specials, and do articulation agreements with schools that do not have a PT program to fuel applications and enrollments.

I have speculated on physical therapy education for the last several years, and this year will not be an exception! As far as applications, as reported in a prior post, the 2023–24 cycle of PTCAS closed in June with 18,157 applicants submitting 78,984 applications. Compared to the 2022–23 application cycle, this represents a mild increase in the number of applicants (my prediction for 2024 was thus wrong), although a decrease in the volume of applications (where I was right). The lower application volume is due to the applicants applying to fewer total programs. This trend is believed to continue as APTA now publishes a price transparency tool on the application service (this is a very good thing). While APTA has several initiatives to bring the applicant pool back to over 20,000, there is a more significant phenomenon in the market: many PT programs are not filling their seats. As reported recently, Mount Union responded by lowering tuition-something you will see replicated by many struggling programs that have more spots approved by CAPTE but can’t fill them. Generally, higher education has used specialty grad school programs to have a very high margin (see the price variability in MBA programs). Still, the marginal rate of filling a spot vs. not filling has taken precedence for many schools. Other first-time tactics will also be used. Employers ranging from local hospitals to investor-backed physical therapy programs will “lock up” seats by paying or guaranteeing they will be filled. This is a sound strategy as PT schools move to lower their cost of acquiring students through an expensive and easy-to-imitate digital lead generation that is becoming boring and less effective. The pricing for PT schools will also be more dynamic than the listed retail, so advise your friends with kids in PT schools to negotiate! These dynamic pricing techniques might include “border benefits” (states that adjoining not paying out of state at public schools) and private schools (think small liberal arts schools with PT programs) lowering toward public school rates will be normalized along with “scholarships” that are discounted to retail. Remember, this will only apply to a small but growing number of the approximately 300 PT schools, but it is meaningful- if you want to be a PT, there is a school for you, and the programs are highly variable cost-wise. Thankfully, innovators remain with accelerated (e.g., 2 years vs. 3) and/or hybrid alternatives, with graduates having far less student debt. Lastly, another easy-to-predict technique will be articulation agreements whereby a school without a PT program will have designated “slots” for their qualified graduates in the form of a contract with a school that does. This allows the school to recruit undergraduates for “pre-physical therapy,” a good strategy because even students who don’t eventually even want to go to PT school are exemplary students who seek various healthcare-related fields. Many schools, notably smaller liberal arts universities, are hurting in enrollments, so they are, to some extent, “partnering” with one another school to help them grow undergrad numbers.

2. Compensation Shake-Up: More Variable Pay for PTs, aka “eat what you kill models”

In health services, 2023 and 2024 generally showed margin erosion for at least five interrelated phenomena: higher labor costs, shortages, inflation, declining reimbursement-particularly Medicare and Medicare Advantage, and higher turnover. Some of these have stabilized, and others are somewhat perpetual. Compensation for PTs, though, is relatively unique in the healthcare sector as they are almost always salary, with some offering bonuses in the form of a sign-on or variable for incentives, including meeting budget or financial goals. Unrelated, but related and reported previously, the “business” of physical therapy has also done itself a grave disservice unwittingly regarding salaries; that is, PT’s salaries often get elevated in a bureaucratic way unrelated to clinical production but based on “experience”. The therapist is then taken out of the clinic and put in management and paid at a higher level, often in part or whole, without any direct clinical revenue generation. Unfortunately, as a profession, this “overhead” is more complex and harder to absorb in a declining margin business. This seldom occurs in any other physician practice management (PPM) models (imagine an orthopedic surgeon being a regional director of orthopedic practices). On a PT FTE basis, only a minority of current licensed PTs are “clinical,” which many are shocked to learn, but the data is unequivocal. One of the easy cures is to convert PTs to highly variable pay and make clinicians the highest paid in a PT organization, absent of almost all middle management, and I predict this trend will gain traction in 2025. This can be in the form of a salary guarantee until their practice is built up, and then it converts to a percentage (e.g., 25–35%) of what they generate net revenue-wise plus conventional benefits. There is definitely a cultural and historical element to overcome this, and many have already converted to some form of this model (base plus productivity). There is even a cool company (OnusOne) that helps practices with a form of this, although I believe that a true “eat what you kill model” is worth a try after a therapist has been under mentoring and guidance for at least six months post-licensure.

The conversation about this methodology might contribute to ongoing high turnover in the short term, but let’s not forget that we are in a profession already where the vast majority of PTs stay on their first job for less than one year. In addition, physical therapy employers tend to be either “copycats” in the form of compensation or try to “one-up” other employers with short-term tactics like above-normal sign-on bonuses in return for indentured servitude. The point is that if a few start adopting this style, look out; others will follow and keep in mind that this is now close to the norm in most medical and dental practices. For many employers, it could get their compensation percentage of revenues more stable and in line with a business model that is rational and long-term sustainable without overly pressuring new grads to see more patients or produce more units or having a highly paid middle manager coddle them. I believe 2025 will be the year where a compensation approach along these lines will be accelerated along with a shift in labor allocation.

3. PT Practices and Patients Opting Out of Low-Paying Contracts will grow tremendously, increasing a form of “cash-based” component in practices

In 2024, I predicted an unprecedented Medicare Advantage backlash that would occur in spades. For 2025, that will continue, but the bigger issue will be a greater trend of opting out of low-paying contracts and Medicare Advantage plans altogether, which often pay less than Medicare (I didn’t know that was possible, right?) yet contain all of the stifling rules that prevent PTs from practicing at their highest level and being productive. Add in mountains of admin work, and you’ve got a raw deal. Patient demand for physical therapy continues to rise (thankfully), and those with low-paying insurance will also opt out and pay a form of discounted retail (virtually nobody pays retail in healthcare), but a rate that is far greater than their insurance reimbursement, which clinics will no longer take. Given what consumers pay at places that stretch them out, cold plunges, doggy daycare, and toddler tumbling, PT is seen as a relative bargain, and this “cash-based” alternative will grow by leaps and bounds. So, in 2025, watch for more practices to say, “Thanks, but no thanks,” and opt-out, but also more patients demanding PT and opting out of their own insurance. Will Medicare Advantage opt-out limit some patients’ choices? Maybe. But it also might spur payors to step up their game. (We can dream, can’t we?)

4. AI for Documentation (Yes, We’re Going There) and Innovation

Last year’s prediction was heavy in AI, and as we addressed mid-term, much of the adoption was back office scheduling, RCM, pre-cert, and credentialing with minimal gains in documentation, and this changes in 2025. Many companies are producing great work in AI (Prediction Health and Yoomi are 2; there are many) who have seemingly solved the “mapping” problem of the note to the EMR. There will be widespread adoption in 2025, although don’t expect it to increase physical therapist productivity much, which is much more a reflection of the growing influence of Medicare as a payor and their superimposed rules, which in part lessened productivity for PTs (and reflected in WebPT’s State of Rehab 2024 report). These relatively first-stage AI products will be replaced in time, but you have to start somewhere. There are already products in working stages that take video (vs. all the current ones using audio) to convert to notes. Most of the current gains are in the initial evaluation encounter, but in the future, we will see almost zero need to spend time on EMR for the ongoing visits. Yes, this will help curb but not cure burnout, particularly by reducing the need to take notes home!

I have written on AI in the past (3 linked posts HERE), and I am going to predict a far more exciting trend in healthcare AI. While we are adapting well to large language models (LLMs, think ChatGPT), entry into healthcare will be through small language models (SLMs), which are a leaner, more intelligent alternative. These models, trained on hundreds of millions to a few billion parameters, represent a significant shift in how generative Al is built and deployed. Unlike LLMs, which require enormous computational power and massive datasets, SLMs focus on high-quality, targeted training data. This allows them to achieve faster training cycles, lower costs, and greater efficiency. And while LLMs excel as generalists, SLMs thrive in specialized applications, where precision matters most. For example, an SLM trained in medical terminology outperforms an LLM when generating diagnostic reports or analyzing clinical data. Gartner forecasts that domain-specific Al models like these will grow from just 1% of enterprise Al usage in 2023 to over 50% by 2027. For documentation like physical therapy, an SML can quickly access the thousands of low-back pain patients that you have seen clinically and, to a great level, predict the documentation and treatment plan that would only need editing-likely done through another SML application that has been “seeing” you perform with the patient!

I see 2025 as the beginning of this adaption of SMLs both in physical therapy clinical documentation and academic (residency/fellowship) teaching (and research), including the reality check of aligning clinical day-to-day with best-in-class Clinical Practice Guidelines (CPGs). There isn’t a physical therapy “Up to Date” analog, but there should be-SML’s give us a chance to do this quickly and I believe early entrants will do this in 2025 to the betterment of our profession.

5. The Great Clinician Shortage Marches On

If you’ve been following my Substack, you know only 19% of licensed PTs are active full-time clinicians (source and referenced earlier). The rest are either in management, academia, digital health, or sipping piña coladas on the beach (maybe). The bottom line: We’re already short on PTs, and that’s not going to fix itself in 2025 magically. Expect more retirements, more job alternatives, more burnout, and fewer new grads signing on for the 9-to-5 (or 7-to-7) life. The crisis continues, folks-sorry. To add to the shortage, right or wrong millennials value far more work autonomy, fewer work days, and hybrid work environments, which are often not aligned with a service profession. In this supply and demand world, expect to see salaries, particularly in tough markets and settings, escalate (unless, of course, by that time, prediction 2 is already occurring!).

6. Value-Based Care…Still Stuck in Neutral

We’ve been buzzing about value-based care for years, but it’s still crawling along at a snail’s pace in physical therapy. We’re still not seeing widespread adoption or reimbursement structures that reward outcomes vs. volume, and in the primary care world, many of the recent advocates are going broke or divesting! Why? Because insurers are busy fiddling with a million other things (like paying us less…did I mention that yet?). So, while some pockets of the country might have cool pilot projects, the mainstream PT world is still mostly old-school fee-for-service and will continue to be unless the cousin of Value-Based emerges, which is alternative payment modes (and that I remain probably overly optimistic). Yes, there will be outlier PT clinics or companies that brag at conferences about some exclusive contract that is “value-based” that pays twenty cents on the dollar but is considered innovative, all the while their competitors forge with traditional fees for service and opt-outs and do much better (see prediction #3).

7. MSK Needs Spike, Thanks in Part to GLP1 Woes

In 2025, more Americans than ever will deal with musculoskeletal issues, and that’s partly due to ongoing inactivity, leftover COVID habits, plus a fun new twist: GLP1 weight loss drugs. It turns out those miracle injections might leave folks with muscle weakness and decreased bone density (because losing weight fast can come with side effects). Bottom line: Physical therapy has never been more needed. That’s good for demand, but we have to have a business model that aligns.

7.5 Virtual PT Care Gets Reset

This commentary gets its own forthcoming post-stay tuned!

Looking Forward (or Is It Backward?)

So there you have it, my 2025 predictions for #physicaltherapy. We’ll see more schools cut tuition (hallelujah!), more creative funding strategies, more cash-only outliers, and, ironically, more demand for PT than ever before. But we’ll also see payors continue their race to the bottom on rates, meaning a significant shift in compensation models — and some good old-fashioned burnout if we’re not careful. AI will be one of the more interesting things to watch!

Stay tuned, stay agile, and keep fighting the good fight. Here’s to a joyous, (hopefully) profitable and fulfilling 2025 for all of us in physical therapy. Thanks for reading, and I’ll see you in the new year!

Cheers,

@physicaltherapy

For prior years’ predictions, simply type in “predictions” in the search bar on my substack-you can get over 15 years’ worth!