Fee-for-Service Private Practice

9 Tips for Transitioning to a Fee-For-Service Private Practice

$100,000 is an important threshold for private practice: At this level therapists start to really take themselves seriously, see themselves as business owners, and grow into their professional identities. This is the level where you truly start to become profitable, and you are really sharing your gifts with the world.One of the things I’m known for is helping psychotherapists build 6-figure private practices… 

Some people misunderstand  me when I talk about earning $100,000 in private practice, so let me be REALLY CLEAR: this is the starting point of a successful private practice. It is by no means a cap or a ceiling for your income. I see $100,000 as a baseline for income, and it only goes up from there. $100,000 per year is where it starts to get good!

However, earning $100,000 per year in private practice is really hard if you’re taking insurance. (I know, I know, there are plenty of you that do it, but it generally means that you are seeing more than 30 clients per week in order to do so. In my opinion, that’s way too many, and the toll it takes on your quality of life is very high.) Most insurance-based practices I work with max out at about $82,000 per year. At the current national average for insurance reimbursement ($67 in 2013), that’s 25 clients per week to earn $82,000 per year.

Generally after a few years of this, therapists start to realize that it’s hard to truly build a quality lifestyle making $82,000 per year. That’s when they start to consider transitioning from an insurance-based practice to a fee-for-service practice.

If you’re considering transitioning your private practice to fee for service, download a copy of my FREE self-assessment to see if you’re ready. This self-assessment will ensure your transition is smooth and successful:

Fee for Service Self-Assessment Checklist

Transitioning from an insurance practice to a private pay practice will require you to go through this “turning away” process. You WILL start to attract your ideal clients, but it won’t happen overnight. Here are a few thoughts to help during this transition:

  1. Get crystal clear about who you do and do NOT work with. Maintain these standards; if a new client isn’t your ideal client, offer a great referral for them. One of my mentors says, “There’s another bus coming”. If you can hold this mindset, it sends a powerful message to the universe about who the right clients are.
  2. Decide whether you are willing to provide statements for out-of-network benefits. If you are, this is a great way to service clients that specifically want to work with you but need to get some reimbursement. One key is to have them file all the forms, don’t do this for them, too much hassle.
  3. Consider what your practice specialty will be if you haven’t already done so. Trying to be a generalist with a fee-for-service practice is extremely difficult. Why not take the easy path and specialize? Clients are willing to pay a premium for your services when they know you have specialized expertise.
  4. Develop a specific process for handling new client calls. Generally it’s not just scheduling an appointment with new clients; expect some form of a consultation.
  5. The day of the “co-pay” for mental health is fading. With the prevalence of high-deductible plans, the reality is fewer and fewer clients are able to just pay a small co-pay. This means that even insurance-based practices have had to develop “sales skills”, so you’re a step ahead of the game!
  6. Carefully evaluate all of your existing marketing materials. Generally you need to re-position yourself and rework your marketing to attract private-pay clients. For instance, convenience is often paramount to an insurance client, while a private pay client is much more interested in expertise.
  7. Develop multiple streams of income. If you already have a consistent flow of new insurance clients, this is the time to start a group or workshop. This will allow you to generate revenue from these referrals, even if they can’t afford to work with you privately. (Listen to this podcast I did with Katie May on how she’s mastered that!)
  8. Cultivate private-pay referrals. People who use insurance for therapy generally refer people who use insurance for therapy. People who pay cash for therapy generally refer people who pay cash for therapy. This means that as you establish your reputation as a fee-for-service practice, you’ll get more referrals for clients who don’t want or need to use their insurance.
  9. Create a specific transition plan for yourself. Determine whether you’re going to drop insurance panels slowly, or pick a date to stop taking them all.

 One final note – I’ve never worked with ANYONE who regretted the decision to leave insurance. What I generally hear is, “I wish I would’ve done it much sooner.” You may have a few months of transition, but you’ll be so glad you did.