Physiotherapy services can offer a cost-effective way to prevent disabilities from becoming chronic conditions and can speed recovery times from surgery, and musculoskeletal and neurological injuries. Ageing of the Australian population, along with an increase in the incidence of chronic diseases, will have beneficial impacts on demand for this industry’s services.
The Physiotherapy Services industry is expected to generate revenue of approximately $1.03 billion in 2010-11, accounting for about 1.0% of health expenditure in Australia. The average operator in the industry is small, with average revenue per firm estimated at just $289,000.
Industry revenue is forecast to grow at an average annualised real rate of 5.5% in the five years through 2010-11. Industry growth will be promoted over this period by the following: growing household incomes and wealth (households with higher incomes spend more on average on industry services, compared with households with lower incomes); an increase in the proportion of the population with private health insurance coverage (health insurance can help to reduce the out-of-pocket cost of physiotherapy services); greater participation in the Medicare system; and an ageing of the Australian population (older people are more likely to suffer conditions that physiotherapists can treat).
Physiotherapists will provide more preventative healthcare services, such as in the areas of incontinence and the reduction in falls by older Australians. However, physiotherapy labour shortages could have a negative effect on industry growth.
Industry revenue is forecast to grow at an average annualised real rate of 4.8% in the five years through 2015-16. Growth will be promoted by favourable demographic trends and mounting acceptance of the benefits of physiotherapy.
Industry outlook
The Physiotherapy Services industry will continue to benefit from favourable demographic trends and mounting acceptance of the benefits of physiotherapy.
Revenue of the Physiotherapy Services industry is forecast to grow at an average annualised real rate of 4.8% in the five years through 2015-16, while GDP is expected to grow at an average annualised real rate of 3.8%.
Growth in the demand for physiotherapy services will be underpinned by the ageing of the Australian population, and the resultant increase in the average number of services per capita. The propensity to consult a physiotherapist is highest among those aged at least 65 years (i.e. when compared with the age cohorts of 0-to-24 years and 25-to-64 years). Based on ABS population forecasts (middle series), the population of persons aged at least 65 years will grow at an average annualised rate of 3.8% in the five years through June 2016, while Australia’s total population will to grow at an average annualised rate of 1.4%. Physiotherapists can help manage a number of conditions that are more likely to occur as adult people age, such as cardiovascular conditions, incontinence, diabetes, arthritis and musculoskeletal conditions.
The status of physiotherapy will continue to grow in the general and medical communities. IBISWorld believes that government health care assistance programs will continue to attach more importance to physiotherapy services.
The APA has provided evidence that physiotherapy interventions for the management of certain conditions, such as female urinary incontinence, are as cost-effective or more cost-effective that many medical and surgical interventions. The APA recommended that, when such effectiveness is proven, new MBS items be introduced for the management of specified conditions by specified practitioners (including physiotherapists). The Commonwealth Government has announced funding to develop and implement a new evidence-based framework for managing the Medicare Benefits Schedule (MBS) into the future – the MBS Quality Framework. The Quality Framework will establish new listing, fee setting and review mechanisms that are aimed to ensure that prospective and already listed items are effective and safe, likely to lead to improved health outcomes for patients and represent value for money.
The industry benefits over the longer term from growth in the economy and, more particularly, from growth in household disposable incomes and consumer spending. The rate of real growth in household disposable incomes is expected remain strong over the next five years, growing at an average annualised real rate of 3.6% in the five years through 2015-16, compared with 3.8% in the five years to 2010-11.
However, potentially high household debt levels could dampen growth in discretionary spending. There is also a risk that housing prices in Australia could fall significantly. Should this scenario play out, consumer spending could grow at a rate that is lower than anticipated. Moreover, any significant increase in oil prices over the next five years would, if realised, divert consumer spending away from non-energy-related goods and services.
In the longer term, higher levels of superannuation savings should contribute to higher levels of income for people in retirement, and this could benefit the physiotherapy industry. Due to a lack of government assistance for physiotherapy services, many people who receive the aged pension find it difficult to afford physiotherapy services.
The Australian Physiotherapists Association (APA) has lobbied government to reduce the gatekeeper role of GPs. More specifically, the APA has stated that third-party payers, such as accident compensation authorities, should not require a GP referral for physiotherapist services before funding such services. The APA has also recommended that physiotherapists be able to refer to medical specialists, including for diagnostic imaging, rather than referring patients back to GPs to obtain referrals to medical specialists.
Growth in industry revenue would be constrained if real prices for physiotherapy services decline. Prices may be held down by the following: competitive factors; any real reduction in benefits paid per service by private health insurers; any decline in the proportion of the population with ancillary health insurance cover; and likely budgetary pressures on government health outlays. On the other hand, any physiotherapy labour shortages would tend to promote the maintenance of, or an increase in, real prices.
Key success factors:
- Access to niche markets: Establishing a reputation as a specialist service is an important key success factor.
- Having a good reputation: It is important that companies establish a reputation for consistent and sound results. A successful practitioner needs to establish their reputation in both medical and community spheres.
- Having a loyal customer base: It is important that companies establish rapport with patients to gain loyalty and referrals.
- Proximity to key markets: The practice should be located in a position that provides maximum visibility and accessibility.
- Membership of an industry organisation: Membership of the Australian Physiotherapy Association can bolster credibility and can provide access to services, such as accreditation.
- Must have licence: Physiotherapists must be registered.
- Having a wide and expanding product range: Physiotherapy firms should offer of a wide range of services. Some firms may provide services in a larger multidisciplinary practise.
- Ensuring pricing policy is appropriate: It is important that companies set fees at a level that maximises profitability while remaining attractive to potential customers.
Barriers to entry
Barriers to entry in this industry are medium and are steady.
Barriers to entry for physiotherapists are moderate and include: intake levels at training institutions (the demand for training places in the industry tends to surpass supply); the length of training required (which amounts to a degree course of four years, plus postgraduate work for specialist physiotherapists); and the existence of existing physiotherapy practices in the area (and the extent to which they have tied up referral sources).
It can be costly to establish a viable practice, due mainly to the time and effort involved in establishing a reputation and a client base. Clients may self-refer on the basis of personal recommendation or convenience of location; or may be recommended to a given practice by other health and medical practitioners. The physiotherapist therefore needs to establish a reputation both in the general community and in the health and medical communities.
(Source: Robert Bryant, IBIS/Smart Company, 10 November 2010)