Outpatient Physical Therapy Clinic Acquisition & SBA Underwriting Financial Model

The seller’s pro-forma prices a margin plan the payer mix will not let you run.

Almost every outpatient physical therapy clinic on the market is priced off a pro-forma: trailing earnings plus improvements nobody has made yet. Two of them appear in nearly every deal – shifting visits from a therapist to an assistant, and filling the slots lost to cancellations and no-shows. The first one is not worth the same on every visit. Medicare pays 85% for services furnished in whole or in part by a physical therapist assistant (the CQ modifier, in force since 1 January 2022). In the base case in this model the labour saving on a PTA-delivered visit is $11.88 – and on a Medicare visit the CQ haircut takes $11.68 of it straight back. Net: 20 cents. On a commercial visit the payer does not touch, the clinic keeps the full $11.88. The same management decision is worth 58.5 times more or less, decided only by the payer mix on the schedule.

So the model puts both prices on one screen: the pro-forma price of $693,650 against the cash-flow price of $508,501 – a difference of $185,148, or 26.7% of the ask – and shows that at the pro-forma price the DSCR lands at 1.14x, which fails the 1.25x lender convention and also the 1.15x floor written into the SBA’s own SOP. Declined. This is the model a buyer hands the lender. It is not a startup forecast; it is an acquisition underwrite.

What is inside

Payer-mix revenue engine. Revenue is built from completed visits, not typed in: 8,000 visits a year at 32.0 a day, each payer carrying its own allowed rate per visit (commercial 135% of Medicare, workers’ compensation 138%, Medicaid 65%), a CQ differential line and a net-collection adjustment. A blended allowed rate of $110.37 becomes $846,667 of net collected revenue at $105.83 a visit – within pennies of the two published anchors we could find.
The CQ differential, on its own sheet. The labour saving, the haircut and the net value of a PTA-delivered visit, payer by payer. The improvement plan the seller is charging you for is worth $33,261 on his arithmetic and $23,322 on yours: a capture rate of 70.1% on this payer mix, and only 47.9% on a Medicare-heavy book.
DSCR true versus naive. 3.28x on the seller’s SDE with the owner’s clinical work counted at zero; 1.483x once you hire the therapist who replaces the owner at the chair ($113,832). The gap is not a rounding difference. It is a job.
The schedule you already pay for. A 12% cancellation and no-show rate is 1,091 lost visits a year, $115,464 of allowed revenue at almost no incremental cost, equal to 51.1% of SDE. Break-even is 31.4 visits a day against 32.0 actual – a cushion of 0.61 visits.
A dated, published down-case. Five consecutive years of Medicare conversion-factor cuts, with 2027 proposed at minus 1.68%, plus commercial rate pressure and a 4% wage step, drive the DSCR to 0.84x. Operating leverage 5.70x. Two documented mechanisms, not a recession back-test, and the model says so.
SBA 7(a) capital stack. Buyer equity, a seller note (full-standby versus amortizing as a DSCR lever) and the loan: $463,135 at 76.6% leverage, ten years at 8.50%, with a real amortisation schedule, a 24.2% debt yield, and working capital sized properly – in an asset sale the seller keeps the receivables, so you fund about 35 days of payroll before the first cheque arrives.
Three profiles, and the toggle is the payer mix. Medicare-Heavy Suburban (2.00x, $103.13 a visit, DSCR 1.32x, plan capture 47.9%), Balanced Commercial (2.25x, 1.48x, 70.1%), Workers’ Comp and Cash-Forward (2.60x, $117.66, 1.44x, 84.9%) – the last with an explicit flag on referral concentration, since workers’ compensation rates run from 64% to 207% of Medicare depending on the state.

Honest by design. The payer mix, the Medicaid and self-pay rates, the share of units carrying the CQ modifier, commercial adoption of it, the current and planned PTA share and the net-collection adjustment are declared model inputs with reference bands, not statistics dressed up as facts. The published evidence on cancellation and no-show rates conflicts and the model says so on the face of the sheet instead of picking a number quietly. The base adjusted-EBITDA margin of 13.25% is deliberately below what a listed multi-clinic platform reports, because a single clinic does not have that scale or contract leverage. There is no IRR anywhere in the workbook, by design: on a single small acquisition it is fragile. You get cash-on-cash by year, average cash-on-cash, a five-year MOIC flagged as leverage-amplified, and a payback period. This is the first acquisition-underwriting model for an outpatient PT clinic – not the first physical therapy model; operating and startup forecasts already exist and are good at what they do. Educational planning tool, not financial, lending, legal or medical advice.

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