Recession & Outlook for the Chiropractic Industry

So, let’s get the bad news out of the way. The current economic recession has eliminated 6.8 million jobs since it began in December 2007. Households’ disposable income (money people can spend freely) and savings have shrunk, generally forcing everyone to spend less. On top of that, leaders in the U.S. government are strongly pushing for healthcare reform…who knows what outcome that will have for the already strained chiropractic industry?

Need more bad news? While it’s hard to get a roomful of economists to agree, more and more are warning of a double-dip recession, a brief period of recovery and growth, followed immediately by another recession such as we have now. Just one argument for the double-dipper…Fitch Ratings expects adjustable-rate mortgages (the ones with the low teaser rates for the first few years, then the rates increase to match market rates each year) totaling about $96 billion to suffer increasing interest rates in 2009 and 2010-the average home’s monthly payment will increase 63%. The question is – how will the homeowners be able to make their higher monthly payments? They’ll definitely reduce other spending, causing lower revenues and more layoffs, perpetuating the vicious cycle in the U.S.

We have all seen, whether you’re reading it in the news or seeing it firsthand in your practice, that people are spending less. According to IBIS World, Inc, the economic outlook for the chiropractic industry isn’t very good.

IBIS’ predictions:
• Revenue drop of 2% for 2009 and less than 1% annual growth per year for 2010 through 2014. In fact, we won’t even be back to the 2007 industry revenue figure of $13.3 billion until at least 2015.
• Profitability will fall due to the drop in revenue and increased competition. IBIS expects DCs to cut fees to lure patients, forcing others to do the same.
• Wages and employment opportunities follow revenue. Wages, payroll taxes, and benefits costs, like health insurance, make up the largest slice of a chiropractic practice’s expenses.

You probably already know that the American Chiropractic Association has reported that some managed care networks are restricting or denying care. Not good news when you consider that about 43% of chiropractic patients pay for treatment using their employer-provided insurance. Premiums employers are paying increase by double-digit percentages each year. In fact, Commonwealth Fund, a non-partisan, non-profit group survey released in August 2009 found that the amounts employers pay for family coverage increased by 119% from 1999 to 2008. Employees typically pay in about 30% of those premiums, so our costs are skyrocketing. We are paying more for the same coverage each year – but is it the same?

You’re probably asking, “Does she have any good news?” Well, we’re getting older. The Census Bureau predicts that we will have about 10 million more Americans in the 45+ age group in 2013. Very good news since the National Board of Chiropractic Examiners’ recent survey says 34% of chiropractic patients are at least 51 years old. Thought you’d love to help people prevent back pain and other issues when they’re older, the fact is, most wait ‘til the pain is a daily occurrence.

A growing number of American patients are trying medical alternatives to drugs and surgery. With rising costs and the advent of high-deductible and other expensive health plans, who wouldn’t be?

You can significantly improve your own outlook by educating the public, especially patients, and leveraging new technology that will improve their experience. DCs have to make the most of every opportunity to demonstrate highly specialized knowledge and training, build relationships with patients, and ask for referrals. You can’t compete for very long with price cutting. There isn’t going to be a government bailout. Wall Street isn’t going to ride to the rescue. DCs have to do the little things right every day and provide the best care, including education, to patients. They have to clearly see the value you provide every day!

Tune in next month…bank loans are harder to get but leases aren’t. We’ll talk about leasing versus buying and the different types of bank loans.

Jennifer Birtz, CPA, CIA, CFE, is a Senior Manager at Habif, Arogeti & Wynne, LLP, a fully integrated financial services firm in Atlanta, GA. She can be reached at Jennifer.Birtz@hawcpa.com.