Last January, Kessler Rehabilitation Corp. went for-profit as part of a plan to carve out a national niche in rehabilitation medicine (Jan. 9, p. 16). Now the West Orange, N.J.-based provider has entered a joint venture agreement that will greatly expand its outpatient network.
The deal, announced last week, calls for opening 100 new physical therapy and rehabilitation centers in Bally Total Fitness facilities in nine mostly East Coast states over three years. Chicago-based Bally will provide the space and equipment; Kessler will provide its physical therapists.
It is cheaper to open an outpatient rehabilitation service in a health club than to build a freestanding facility because it uses existing space and equipment in off-peak hours, the partners said. Club renovations will cost $50,000 per site.
Kessler and Bally plan to split profits earned in the 50-50 venture. It's estimated that each facility, once up and running for some time, will generate $150,000 in net income on $1 million to $1.5 million in revenues. Based on those estimates, the venture could be worth $15 million annually once all 100 sites are under way.
Kessler currently operates 11 outpatient centers in New Jersey, about half of which are located in non-Bally health clubs. The Bally agreement builds that line of business.
"We have found health clubs to be convenient and user-friendly locations in which to provide physical therapy and rehabilitation services," said Kenneth W. Aitchison, Kessler's president and chief executive officer. "Patients will be able to achieve their goals through therapy and maintain these gains in a follow-up program utilizing the health club," he said.
Kessler spokeswoman Kathy Lewis said the non-Bally sites will be maintained.
Lee Hillman, Bally's president and CEO, said the Kessler deal expands club services. Bally currently offers rehabilitation at three Florida sites in an agreement with Miami-based Continuecare Corp., a provider of rehabilitation and other outpatient services.
By January, 15 sites in the New York-New Jersey area are expected to be up and running. Additional sites will be added over a three-year period in those states and in Connecticut, Maryland, Massachusetts, Ohio, Pennsylvania, Rhode Island and Virginia.