The One Big Beautiful Bill Act
& Physical Therapy Practices
On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (OBBBA) into law — a sweeping budget reconciliation package that represents the most significant restructuring of federal healthcare funding in decades. For physical therapy practice owners, the legislation carries a dual-edged impact: a modest, temporary Medicare reimbursement increase for 2026 coupled with structural changes to Medicaid and the ACA marketplace that will measurably reduce the insured patient population. Compounding this, the 2026 CMS Physician Fee Schedule introduces its own suite of reimbursement adjustments — some favorable, others not — that operate independently of the OBBBA. Understanding both forces simultaneously is essential for accurate financial modeling, operational planning, and informed exit strategy decisions.
What Is the One Big Beautiful Bill Act?
The One Big Beautiful Bill Act (OBBBA), formally H.R. 1 and now Public Law 119-21, was passed by the House on May 22, 2025, by a 215–214 vote, passed the Senate on July 1 with a 51–50 vote (with the Vice President casting the tie-breaking vote), returned to the House for a final vote on July 3 — where it passed 218–214 after the Senate's amendments — and was signed into law on July 4, 2025. The legislation was advanced through the budget reconciliation process, which allowed it to pass with a simple majority rather than the 60-vote threshold ordinarily required to overcome a Senate filibuster.
The law's primary fiscal mechanism is the extension and expansion of the 2017 Tax Cuts and Jobs Act, funded in significant part by reductions in federal spending on social safety-net programs. The Congressional Budget Office (CBO) estimates the law will reduce federal healthcare spending by over $1 trillion over the ten-year window from 2025 to 2034 — the largest rollback of federal health program support in American history.
For healthcare providers — including outpatient physical therapy practices — the law's implications operate on multiple levels: directly through Medicare payment adjustments, and indirectly through the erosion of Medicaid and ACA marketplace coverage that drives patient volumes and payer mix.
Medicare Reimbursement: What Changed and What Didn't
The most direct OBBBA provision affecting physical therapy practices is its modification of the Medicare Physician Fee Schedule (PFS) conversion factor. The conversion factor is the dollar multiplier applied to relative value units (RVUs) to calculate Medicare payment for virtually all outpatient services.
OBBBA provides a temporary, one-year 2.5% increase to the Medicare Physician Fee Schedule conversion factor for all services furnished between January 1, 2026 and January 1, 2027. This replaced the original House bill provision that called for a 75% MEI inflation-indexed update in 2026 followed by an annual 10% MEI increase in subsequent years — a change that would have been far more structurally meaningful. The enacted version is a single-year relief measure, not a permanent fix.
OBBBA does not provide any permanent, inflation-adjusted Medicare payment reform. Beginning January 1, 2027, the 2.5% supplement disappears entirely. Without separate Congressional action, practices face the prospect of a reversion to the pre-OBBBA baseline — effectively a payment cut relative to 2026 levels — amid a landscape of persistent inflation in labor, supply, and occupancy costs.
The 2026 Conversion Factor in Practice
The 2026 Medicare PFS conversion factor — inclusive of both the CMS final rule increase and the OBBBA supplement — lands at $33.40 for the vast majority of outpatient PT practices (those classified as non-Qualifying APM Participants, or non-QPs). This is up from $32.35 in 2025, representing a nominal 3.26% increase. However, this headline number overstates the net financial benefit.
| Factor | Detail | Net Impact on PT Revenue |
|---|---|---|
| Conversion Factor | $33.40 (non-QP) vs. $33.57 (QP/APM participants) | +3.26% nominal |
| RVU Efficiency Adjustment | Permanent 2.5% work RVU reduction on non-time-based services; eval codes 97161–97164 affected | Negative offset |
| Net Medicare Revenue Impact | CMS-estimated blended effect for PT practices | –1% net |
| Dual Conversion Factor | First-ever split CF: QP vs. non-QP track | Structural change |
| OBBBA Supplement | +2.5% for CY 2026 only; expires January 1, 2027 | Temporary relief |
"The majority of the 2026 conversion factor increase is attributable to a one-time Congressional supplement — it will not renew in 2027, meaning another potential cut is on the horizon for practices that do not take proactive steps."
KX Modifier Threshold Update
Separately from OBBBA, the CMS 2026 Physician Fee Schedule raises the KX modifier threshold from $2,410 to $2,480 for the combined physical therapy and speech-language pathology benefit (indexed annually to the Medicare Economic Index). Occupational therapy receives the same $2,480 threshold. This modifier must be appended to claims for services exceeding this amount to certify continued medical necessity — claims without it are denied. A secondary Targeted Medical Review threshold of $3,000 triggers focused audits requiring complete documentation support.
Update EMR billing alerts from $2,410 to $2,480 immediately. Flag patients approaching $2,200 in accumulated charges for a documentation review before the threshold is crossed. All claims above $3,000 should be treated as audit-ready regardless of payer source.
2026 CMS Rule Changes Affecting PT Practices
Separate from OBBBA, the 2026 CMS Physician Fee Schedule Final Rule introduces a range of coding, billing, and payment changes that directly affect outpatient PT operations. These are not OBBBA provisions — they are annual regulatory updates that take effect January 1, 2026 and operate in parallel with the legislative changes.
| Change | Detail | Impact |
|---|---|---|
| Dual Conversion Factor (First Year in Effect) | QP track: $33.57 | Non-QP track: $33.40. Most PT practices fall under non-QP. Mandated by MACRA, this structure took effect for the first time in CY 2026. | Structural |
| Efficiency Adjustment on Eval Codes | Permanent 2.5% work RVU reduction on non-time-based services. Eval codes 97161–97164 are affected. Treatment codes 97110, 97140, 97113 are exempt. | Negative |
| Advocacy Wins: Codes Removed from Adjustment List | APTA/APTQI advocacy removed 97032, 97033, 97034, 97035, 97036, 97113, 97124, 97140, and 97533 from efficiency adjustment. 97140 (manual therapy) and 97113 (aquatic therapy) now net positive year-over-year. | Positive |
| New RTM CPT Codes | Three new Remote Therapeutic Monitoring codes added, including codes for 2–15 days of transmitted data. Existing codes 98976–98978 now apply to 16–30 days. Time threshold lowered from 20 to 11–20 minutes for initial billing. | Revenue opportunity |
| Caregiver Training Codes | CMS caregiver training CPT codes (introduced 2024) continue in 2026. Most PT practices are still not billing these consistently — a persistent revenue leakage point. | Under-utilized |
| MPPR on Same-Day Multiple Services | 50% practice expense reduction on second and subsequent therapy services on the same day. No change from prior year — persists as structural headwind. | Ongoing drag |
| Telehealth Eligibility — PT/OT/SLP | Flexibilities lapsed twice in a four-month span: first on September 30, 2025, then again January 31, 2026. Both lapses were resolved retroactively. Congress passed H.R. 7148 (Consolidated Appropriations Act, 2026) on February 3, 2026, extending PT/OT/SLP Medicare telehealth eligibility through December 31, 2027, with full retroactive coverage for all services rendered during either lapse period. | Resolved through 2027 |
| MIPS Threshold | Performance threshold remains at 75 points for 2026 (unchanged from 2024–2025). Five new quality measures added; substantive changes to 30 existing measures. | Monitor |
PT/OT/SLP Medicare telehealth flexibilities lapsed twice in a four-month period — first on September 30, 2025, then again on January 31, 2026 — before being resolved. Congress passed and President Trump signed H.R. 7148, the Consolidated Appropriations Act, 2026, on February 3, 2026, extending all expanded Medicare telehealth flexibilities — including PT, OT, and SLP provider eligibility, home-based delivery, and audio-only services — through December 31, 2027, with full retroactive coverage for both lapse periods. Advocacy groups including APTA and AOTA have characterized this two-year window as a "final evaluation period," during which Congress will assess reimbursement parity, outcomes data, and fraud risk before determining whether to make telehealth permanent or allow it to sunset in 2028. Practices that have invested in telehealth infrastructure should continue building documentation of patient outcomes to support permanent authorization efforts.
Medicaid Restructuring: The Structural Patient Volume Threat
While the Medicare reimbursement changes under OBBBA are modest and temporary, the law's restructuring of Medicaid represents a far more consequential long-term risk for PT practice revenue — particularly for practices serving working-age adults, pediatric populations, and rural communities.
The CBO estimates that OBBBA's Medicaid provisions alone will reduce federal Medicaid spending by approximately $840 billion over ten years and eliminate at least 10.5 million people from Medicaid enrollment by 2034. An additional 5 million are projected to lose coverage through the separate expiration of enhanced ACA premium tax credits — which were not extended by OBBBA — bringing total estimated coverage losses to 10–15 million individuals.
Key Medicaid Mechanisms in OBBBA
Work Requirements (Community Engagement Mandates)
Beginning January 2027, certain Medicaid expansion adults must document 80 hours per month of work, volunteer activities, or education to maintain coverage. CBO estimates this provision alone cuts federal Medicaid spending by $344 billion and removes 4.8 million people from coverage by 2034.
Biannual Eligibility Redeterminations
States are required to conduct eligibility checks for expansion population enrollees every 6 months, up from 12 months. Research on prior work requirement programs (Arkansas, Georgia) found significant coverage losses among otherwise-eligible individuals due to administrative friction.
Restrictions on Provider Tax Financing
Beginning FY 2027, states are restricted from increasing taxes on healthcare providers and using that revenue to qualify for federal Medicaid matching payments — a mechanism many states rely on to fund their share of Medicaid costs. This will pressure states to cut provider payment rates or reduce optional benefits.
Elimination of Family Planning Provider Funding
The law withholds one year of Medicaid funding (July 2025–July 2026) from certain nonprofit providers that deliver primarily family planning or reproductive services. This provision is currently being litigated in federal courts.
Medicaid enrollees represent a meaningful portion of the patient mix at many outpatient PT practices, particularly in states that expanded Medicaid under the ACA. As millions of patients face coverage losses through work requirements and administrative barriers, practices can expect reduced patient volumes, increased uncompensated care, and shifts in payer mix that compress average revenue per visit. Practices in rural markets — where Medicaid represents a disproportionately large share of revenue — face the most acute exposure.
ACA Marketplace Erosion & the Uninsured Ripple Effect
Physical therapy practices also face indirect revenue pressure through the OBBBA's impact on the Affordable Care Act marketplace. The law does not extend the enhanced premium tax credits introduced by the American Rescue Plan Act — credits that had significantly expanded marketplace enrollment and made private insurance affordable for millions of lower-income Americans.
These enhanced credits expired at the end of 2025. When the November 2025 open enrollment period began, approximately 20 million marketplace enrollees saw their premium costs spike. The KFF and CBO estimate that this change alone will result in approximately 5 million additional individuals losing insurance coverage — separate from the Medicaid losses. Together, total projected coverage losses by 2034 reach 10 to 15 million people nationally.
As insured patient volumes decline — particularly among working-age adults who are not yet Medicare-eligible — PT practices should anticipate a shift toward higher uncompensated care, greater reliance on workers' compensation and auto insurance payers, and potential volume losses in evaluation pipelines. Practices that have historically benefited from strong ACA marketplace payer penetration in their markets should model this exposure explicitly. Rural and safety-net practices face compounding risk from simultaneous Medicaid and ACA marketplace erosion.
The Hospital and Referral Network Effect
PT practices that depend on hospital referrals — through health system employment, joint ventures, or preferred provider arrangements — face a second-order risk. Medicaid represents approximately 20% of average hospital revenue, and significantly more for rural facilities. The Center for American Progress estimates that more than 300 rural hospitals are currently at "immediate risk" of closure under OBBBA's projected Medicaid cuts. Hospital closures and financial distress will compress referral volume and may accelerate system consolidation, altering the competitive dynamics of PT markets in affected geographies.
Key Implementation Dates
Valuation & M&A Implications for PT Practice Owners
For PT practice owners contemplating a sale or equity transaction, the legislative environment created by OBBBA has meaningful implications for valuation, deal structure, and timing strategy.
Payer Mix Scrutiny Is Intensifying
Institutional buyers are performing increasingly granular payer mix analysis in due diligence. Practices with high Medicaid concentration — particularly in expansion states — will face heightened scrutiny regarding forward revenue projections, as buyers model coverage loss scenarios into normalized EBITDA.
The 2026–2027 Window Matters
The temporary 2.5% Medicare supplement inflates 2026 trailing revenues relative to a 2027 run-rate. Sellers who transact using 2026 trailing EBITDA — before the supplement expires — are presenting financials at a structural high point that buyers will likely normalize in their models.
Rural Market Risk Premium
Practices in rural markets face compounding exposure: Medicaid-dependent patient populations, hospital referral network fragility, and fewer alternative payer sources. Buyers are pricing a risk premium into rural market acquisitions that was not present pre-OBBBA.
RTM & Revenue Diversification as Valuation Driver
Practices that have successfully implemented Remote Therapeutic Monitoring programs and caregiver training billing — both recognized Medicare revenue streams — will demonstrate diversified income that is insulated from Medicaid erosion, supporting premium valuation multiples.
"In a legislative environment defined by temporary relief and structural headwinds, the practices that transact on defensible, normalized earnings — and with the support of advisors who understand both the regulatory and the M&A landscape — will be the ones that maximize total proceeds."
Practice owners should also consider that the OBBBA accelerates the timeline for Medicare Hospital Insurance trust fund insolvency. The CBO projects that without Congressional action, automatic Medicare spending cuts could be triggered — amounting to approximately $500 billion in reductions between 2026 and 2034. This systemic uncertainty is a material factor in long-term revenue modeling for practices with high Medicare dependency.
Quantifying the Impact: Medicare, Medicaid, and State-Level Variation
Abstract policy changes only matter when they translate into real numbers on a practice's P&L. This section models the concrete revenue impact of OBBBA and 2026 CMS rule changes across Medicare and Medicaid — and examines how dramatically that impact varies by geography and payer mix.
Medicare: Quantifying the 2026–2027 Cliff
The net Medicare reimbursement impact in 2026 is a product of three overlapping forces: the nominal +3.26% conversion factor increase, a permanent –2.5% work RVU reduction on evaluation codes (97161–97164), and OBBBA's temporary +2.5% supplement. The blended result is a net –1% impact on total Medicare revenue for most PT practices — but the OBBBA supplement expires January 1, 2027, creating a compounding cliff.
| Practice Profile | Medicare % of Revenue | Net 2026 Medicare Impact | Estimated 2027 Reversion | Annual Dollar Range |
|---|---|---|---|---|
| Small practice (1–3 PTs, ~$800K revenue) |
55–65% | –1% net (eval code drag offsets CF gain) | –2.5% from 2026 (supplement expires) | –$11K to –$16K/yr vs. 2026 |
| Mid-size practice (4–8 PTs, ~$2M revenue) |
45–55% | –1% net | –2.5% from 2026 | –$22K to –$27K/yr vs. 2026 |
| Multi-location platform (3+ sites, ~$5M revenue) |
40–50% | –1% net | –2.5% from 2026 | –$50K to –$62K/yr vs. 2026 |
OBBBA's deficit increase of ~$3.4 trillion triggered the Statutory Pay-As-You-Go (PAYGO) Act, which would have required an automatic 4% cut to Medicare payments beginning February 2026 — on top of the existing 2% Budget Control Act (BCA) sequester, producing a combined 6% reduction. This was averted: the November 2025 continuing resolution wiped the PAYGO scorecard clean for the current congressional session. The additional 4% PAYGO cut did not materialize in 2026.
Critical: The 2% BCA sequester remains in effect through FY 2032. The published CMS conversion factor of $33.40 overstates what practices actually receive — after the standing 2% BCA reduction, the effective reimbursement rate is approximately $32.73. All dollar projections in this whitepaper use published CMS rates; practices should apply the additional 2% BCA sequester reduction in their own revenue models. The 4% PAYGO risk is also not permanently resolved — Senate bill S.2749 to permanently exempt Medicare from OBBBA-related sequestration has been introduced but not enacted. Treat re-triggering as a recurring budget-cycle risk.
Medicaid: Modeling the Patient Volume Loss
The Urban Institute projects that between 4.9 and 10.1 million people will lose Medicaid coverage in 2028 under OBBBA's work requirements and biannual redeterminations — with the range driven by how aggressively each state mitigates administrative barriers. For PT practices, this translates directly into reduced patient volume among the working-age adult population (ages 19–64) in Medicaid expansion states.
Consumer Edge analysis of Medicare claims data found that rehabilitative services are approximately 3.4× overexposed to Medicaid relative to other healthcare facility types, meaning outpatient therapy practices carry a disproportionately high concentration of Medicaid-covered patients. Using that data alongside CBO and Urban Institute enrollment projections, the following scenarios model revenue exposure for a hypothetical practice with $1M in annual net collections:
| Medicaid % of Revenue | Coverage Loss Scenario | Estimated Patient Volume Drop | Revenue at Risk (per $1M collections) |
|---|---|---|---|
| 5–10% Lower-exposure market |
Moderate (high state mitigation) | 10–15% of Medicaid panel | $5K–$15K |
| 15–20% Typical expansion state |
Moderate | 15–25% of Medicaid panel | $22K–$50K |
| 15–20% Typical expansion state |
Severe (low state mitigation) | 50–62% of Medicaid panel | $75K–$124K |
| 25–35% Rural / safety-net market |
Severe | 50–62% of Medicaid panel | $125K–$217K |
Note: Revenue at risk estimates assume full volume loss translates to revenue loss without backfill. Practices with strong commercial referral pipelines and waitlist capacity may offset a portion of this exposure. Projections reflect 2028 steady-state; phased impact begins 2027.
Does It Vary by State? Yes — Significantly.
OBBBA's Medicaid impact is not uniform across the country. Three factors drive state-level variation: (1) whether the state expanded Medicaid under the ACA; (2) the size of the expansion population subject to work requirements; and (3) each state's administrative capacity and political willingness to mitigate coverage losses. The 40 states (plus DC) that expanded Medicaid face the sharpest exposure — together absorbing an estimated $526 billion of the $840 billion in projected federal Medicaid spending reductions.
| State Risk Category | Characteristics | PT Practice Risk Level | Example States |
|---|---|---|---|
| High Exposure | Medicaid expansion state + large working-age enrollment + rural hospital concentration + limited state mitigation appetite | Severe | Arkansas, Louisiana, West Virginia, Kentucky, Indiana, Montana |
| Moderate Exposure | Medicaid expansion state + mixed urban-rural market + moderate state mitigation posture | Moderate | Ohio, Michigan, North Carolina, Pennsylvania, Arizona, Nevada |
| Lower Exposure | Expansion state with strong mitigation posture + urban market + diversified commercial payer base | Contained | California, New York, Massachusetts, Washington, Colorado, Minnesota |
| Non-Expansion States | 10 states have not adopted full Medicaid expansion — OBBBA work requirements apply only to expansion populations, so these states have limited direct exposure from that mechanism. However, ACA marketplace erosion and the coverage gap affect these markets significantly. Most are concentrated in the South. | Limited from work req. | Texas, Florida, Georgia*, Alabama, Mississippi, Tennessee, South Carolina, Kansas, Wyoming, Wisconsin *Georgia has limited "Pathways" partial expansion only |
States with strong mitigation posture — California, New York, Massachusetts — will likely see smaller near-term Medicaid coverage losses due to proactive administrative support and political alignment with expansion. However, the federal financing restrictions (provider tax phase-down, caps on state-directed payments) apply to all expansion states equally beginning FY 2027–2028. This will eventually compress state Medicaid payment rates even in high-mitigation states, creating a second-order revenue headwind for PT practices that is slower to materialize but no less real. Additionally, ACA marketplace premium increases from the expiration of enhanced tax credits affect all states, not just expansion states.
Combined Medicare + Medicaid Scenario: What a Private Practice Could Face
| Scenario | Practice Profile | 2026 Impact | 2027 Impact | Cumulative Risk |
|---|---|---|---|---|
| Best Case | Urban, diversified payer mix, 45% Medicare / 5% Medicaid, high-mitigation state | –1% Medicare (net –$4K on $800K revenue) | –2.5% from 2026 CF supplement expiry (–$9K), minimal Medicaid loss | –$13K over two years |
| Base Case | Suburban, 55% Medicare / 15% Medicaid, moderate-exposure expansion state | –1% Medicare (–$8K on $1.5M revenue) | –2.5% CF expiry (–$20K) + moderate Medicaid loss (–$30K) | –$58K over two years |
| Stress Case | Rural, 60% Medicare / 25% Medicaid, low-mitigation expansion state | –1% Medicare (–$12K on $2M revenue) | –2.5% CF expiry (–$30K) + severe Medicaid loss (–$150K+) | –$190K+ over two years |
Estimates are illustrative models based on published CMS, CBO, and Urban Institute data. Actual impact will vary based on practice-specific payer mix, coding efficiency, state Medicaid implementation timelines, and referral source resilience. These ranges are not guarantees of outcome and should be stress-tested against your own financial model with qualified advisory support.
The Private Practice Owner: A Closer Look at OBBBA's Impact
While the OBBBA's effects will ripple across all segments of the PT industry, the implications for independent private practice owners are distinct from those facing hospital-employed therapists or PE-backed platforms. Private practices typically operate with narrower margins, less balance sheet flexibility, and a more concentrated dependence on specific payer mixes — making them disproportionately sensitive to the structural shifts the law introduces.
Revenue and Margin Compression
The combination of a temporary Medicare bump that disappears January 1, 2027, a net –1% blended reimbursement impact in 2026 after RVU adjustments, and a narrowing insured patient pool creates a compounding margin squeeze for private practices. Unlike large platforms that can absorb reimbursement volatility through operational leverage across dozens of locations, single- and multi-site independent practices face this headwind directly on their bottom line.
The OBBBA's temporary 2.5% Medicare supplement inflates 2026 revenues relative to the structural baseline that will exist beginning January 2027. Private practice owners who evaluate their practice's value — or initiate a sale process — using 2026 trailing EBITDA without normalizing for this supplement are presenting an artificially elevated earnings picture. Sophisticated institutional buyers will normalize it out. Owners who do not understand this dynamic risk misaligned expectations at the close of a transaction.
Payer Mix Vulnerability
Independent PT practices in Medicaid expansion states with working-age adult patient populations carry direct exposure to the OBBBA's coverage loss projections. Rehabilitative services are estimated to be approximately 3.4× overexposed to Medicaid relative to other healthcare facility types — meaning outpatient therapy practices serve a disproportionately Medicaid-dependent patient base. As work requirements and administrative friction reduce enrollment, patient no-show rates may climb, scheduling density may erode, and the proportion of self-pay or uncompensated visits will likely rise.
Volume Risk: Medicaid-Dependent Patient Panels
Practices where 15–30%+ of the patient panel relies on Medicaid or ACA marketplace coverage face the most acute near-term volume risk. As coverage losses materialize — first through ACA premium spikes in 2026, then through Medicaid work requirements in 2027 — expect a measurable decline in new evaluation volume and episode completion rates among this segment.
Uncompensated Care Creep
Private practices are not safety-net providers by design, but as the uninsured population grows — projected at 10–15 million nationally by 2034 — some of those patients will still seek care and carry balances they cannot pay. Without the bad debt management infrastructure of large health systems, private practices are particularly vulnerable to deteriorating collections performance.
Staffing and Retention Pressure
OBBBA's restrictions on medical student loan programs add long-term pressure to physical therapy workforce pipelines. Caps on Federal Direct Stafford and PLUS loans for graduate health professional students may narrow the applicant pool for DPT programs over time, compressing the future supply of new graduates at a moment when workforce demand remains robust. Independent practices — which often cannot compete with PE-platform compensation packages — may feel this most acutely.
Administrative Burden Amplification
More frequent Medicaid eligibility changes, new KX modifier documentation requirements, RTM billing compliance, and evolving MIPS measures all demand more sophisticated billing and compliance infrastructure. Private practices that lack dedicated billing staff or robust practice management systems face elevated risk of claim denials, audit exposure, and revenue cycle delays — costs that are harder to absorb at the independent practice level.
Strategic Responses for Independent Practice Owners
| Headwind | Strategic Response | Priority |
|---|---|---|
| 2027 Medicare Cliff | Model 2027 revenues at 2025 CF levels ($32.35) to stress-test margins. Identify operational levers — RTM, caregiver training codes, cash-pay ancillaries — to offset the expected reversion. | Immediate |
| Medicaid Patient Volume Erosion | Audit payer mix quarterly. Build referral relationships with workers' compensation adjusters, orthopedic surgeons, and sports medicine physicians to diversify the new patient funnel away from Medicaid-dependent sources. | High |
| RTM and Caregiver Training Revenue | Implement RTM programs using the expanded 2026 CPT code framework. Begin billing caregiver training codes consistently — most practices are currently leaving this revenue on the table. Both streams are insulated from Medicaid exposure. | High |
| Telehealth Through 2027 | Use the extended authorization window to document telehealth outcomes rigorously. Engage with APTA advocacy efforts. Begin contingency planning for a potential 2028 lapse, including cash-pay telehealth infrastructure for Medicare patients if the extension does not renew. | Ongoing |
| Exit Timing and EBITDA Normalization | Private practice owners considering a sale in the 2026–2027 window should engage a specialized healthcare M&A advisor immediately. The 2026 EBITDA figure needs to be presented with full transparency about the CF supplement — and a compelling narrative about normalized earnings — to avoid buyer retrading on price at due diligence. | Strategic |
| Valuation Multiple Positioning | Single-location practices currently trade at 3–5× EBITDA; multi-location platforms with strong payer diversification and low owner dependency can command 5–8×. Reducing owner clinical dependency, adding a second location, and implementing RTM are the highest-ROI pre-sale investments a private practice owner can make today. | Strategic |
"The private practice owner who understands that 2026 is a temporary high-water mark — not a new baseline — will be better positioned to either build durable earnings going forward, or to transact at a defensible valuation before the structural headwinds compound."
What PT Practice Owners Should Be Monitoring
OBBBA is law, but its implementation is ongoing and its downstream effects are still unfolding at the state level, in the courts, and in Congress. The following are the highest-priority items for PT practice owners and operators to track through 2026 and into 2027:
| Issue | Status | Why It Matters for PT |
|---|---|---|
| Therapy Telehealth — 2028 Cliff | Extended to Dec 2027 | H.R. 7148 extended PT/OT/SLP telehealth eligibility through December 31, 2027. Advocacy groups have called this a "final evaluation period." Congress will assess reimbursement parity and outcomes before deciding whether to make telehealth permanent — making 2027 advocacy critical for practices with telehealth revenue exposure. |
| 2027 Medicare Conversion Factor | Unresolved | The 2.5% OBBBA supplement expires January 1, 2027. No permanent Medicare payment reform exists. Watch for Congressional action or CMS rulemaking in late 2026. |
| State Medicaid Implementation Plans | State-by-state | Work requirement implementation is state-dependent. Some states may delay or decline to implement. Know your state's timeline and the proportion of your patient panel at risk. |
| Family Planning Provider Litigation | Active litigation | The withholding of Medicaid funding from certain nonprofits is being litigated. Outcome could affect state Medicaid budget allocation, including therapy benefit coverage. |
| Rural Hospital Stability | At risk | More than 300 rural hospitals are at "immediate risk" of closure under projected Medicaid cuts. Hospital referral networks that PT practices depend on may be restructured or eliminated. |
| PAYGO Medicare Sequestration | Systemic risk | OBBBA adds $3.4T to the national debt. The November 2025 CR wiped the PAYGO scorecard clean, averting the immediate 4% sequester for 2026 — but the risk re-triggers at every future budget cycle. CBO projects the mechanism could require ~$45–75B in annual Medicare cuts if not waived each session. The separate, pre-existing 2% BCA sequester remains in effect through FY 2032 regardless. |
Navigating a Shifting Reimbursement Landscape in the Context of a Transaction
The OBBBA has introduced a degree of complexity into PT practice valuation that requires advisors with deep command of both healthcare policy and transaction structure. The temporary nature of the 2026 Medicare supplement, the phased rollout of Medicaid restructuring, and the ongoing uncertainty around telehealth eligibility all create moving targets that buyers will model conservatively — and that sellers, without proper representation, may not fully anticipate.
At Mihama Acquisitions, our advisory practice is built on the premise that informed sellers achieve superior outcomes. We work with PT practice owners to develop accurate, defensible normalized EBITDA models that account for regulatory headwinds, payer mix evolution, and near-term reimbursement cliffs — and to position practices within a competitive process that drives institutional buyer engagement and maximizes total consideration.
If you are evaluating a transaction, considering a minority equity partnership, or simply building a three-to-five year strategic plan in the context of a transformed regulatory environment, we welcome the conversation.
Legislative and regulatory summaries are based on publicly available information as of the publication date (May 2026) and reflect the One Big Beautiful Bill Act (Public Law 119-21) as signed July 4, 2025, and CMS guidance in effect as of January 1, 2026. Federal and state healthcare laws, regulations, reimbursement policies, and Medicaid implementation timelines are complex, subject to ongoing change, and vary in application based on individual facts and circumstances. Mihama makes no representations or warranties — express or implied — as to the accuracy, completeness, timeliness, or fitness for any particular purpose of the information contained herein. All financial projections, scenario models, and valuation ranges are illustrative estimates only, based on publicly available third-party data; they are not guarantees of any outcome and should not be used as a substitute for a qualified financial analysis of your specific practice.
Practice owners and other readers should consult qualified independent legal counsel, tax advisors, healthcare compliance specialists, and financial advisors before making any decisions based on the information in this document. Mihama Acquisitions is a healthcare mergers and acquisitions advisory firm. Mihama is not a law firm, accounting firm, or registered investment advisor, and does not provide legal, tax, or securities advice. Mihama's advisory services are subject to a separate written engagement agreement. Prior results described in any Mihama materials do not guarantee similar outcomes. This document is intended solely for the individual or entity to which it is addressed and may not be reproduced, redistributed, or used for any other purpose without Mihama's express written consent.