Should Your Physical Therapy Practice Buy That New Equipment or Keep the Cash?

By ProfitWise - a Visa Business Plans company

A physical therapy practice owner recently told us he was considering buying a new piece of rehabilitation equipment.

He had been looking at it for months. His therapists liked it; it would allow the practice to offer additional treatment options, and he believed patients would benefit from its availability.

The price was significant, but there was enough money in the practice’s bank account to pay for it.

“So I can afford it, right?”

Maybe. But that’s not really the question we would ask.

In a physical therapy practice, equipment purchases can be particularly tempting because there’s usually a good clinical reason behind them. A new treatment table, rehabilitation system, strength-testing device, or piece of recovery equipment may genuinely improve what therapists can offer their patients.

Still, a good clinical investment must also make sense financially.

So we started talking about how the equipment would actually be used.

Would it allow the practice to treat more patients, or would the same patients simply use it during sessions they were already receiving? Would it support a new service the practice could charge for? Would insurance reimburse for that service, or would it need to be offered on a cash-pay basis? And, perhaps most importantly, how often would the equipment realistically be used once the excitement of having something new wore off?

Those answers started changing the conversation.

We also looked at what else the practice expected to need over the next several months. Payroll wasn’t going anywhere. Neither was rent. The owner was considering hiring another physical therapist, and there was a possibility that one of the existing therapists would reduce her schedule later in the year.

Suddenly, the cash sitting in the bank didn’t look quite as available as it had at the beginning of the conversation.

This is something we see with practice owners frequently. Having enough cash to buy something and being able to comfortably afford it are two different things.

At ProfitWise, when a client is considering a significant purchase, we like to look beyond the price tag. We consider how much cash the practice needs to operate comfortably, what expenses are coming, and what the investment is realistically expected to contribute to the business.

With physical therapy equipment, that last part deserves particular attention.

If a $40,000 piece of equipment allows the practice to introduce a service patients are willing to pay for, the numbers may make a compelling case. If it primarily replaces something the therapists are already doing effectively with existing equipment, the financial benefit may be harder to justify.

Then there’s another option that sometimes gets overlooked: financing.

Paying cash may save on interest, but keeping some of that money in the practice can also be valuable. Depending on the terms, financing the equipment may leave the practice with more flexibility for payroll, hiring, an unexpected repair, or another opportunity that comes along six months later.

There isn’t one answer that’s right for every physical therapy practice. That’s why we don’t think these decisions should start with “Do we have $40,000 in the bank?”

They should start with understanding what you’re buying, what you expect it to do for the practice, and what you’re giving up financially by putting that money into the equipment.

The newest machine in the clinic may look impressive.

The better investment is the one that still makes sense after you do the math.

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