Navigating the Private Practice Landscape as a New Counseling Graduate
So, you’ve worked hard in your graduate program and now getting ready to find your first real job in mental health field? As you prepare to embark on your career path, it's natural to consider various avenues, with many counseling students contemplating roles in private practices. This article aims to provide invaluable insights for those navigating this transition. Drawing from my extensive experience as both a long-time graduate student—seven years of grad school and over seven internship sites—and an eight-year owner of a group practice, I'm excited to share crucial considerations. By approaching this journey with clarity and insight, you'll be better equipped to maximize your potential for success.
Good news and bad news
To start off, let’s talk about some good news and bad news. The good news about entering the private practice world soon after graduation is that it remains a really solid opportunity for you as a new professional to get good quality supervision, gain great experience and work in an environment that is conducive to work/life balance while getting paid relatively well compared to other settings. More good news: As of right now (2024), we are experiencing a post-Covid trend that has resulted in many private practices struggling to hire (and keep) fully licensed clinicians and therefore many places are looking to hire new grads. What that means for you is that you are likely to have more options as to where to interview and might even have several job offers to choose from. Now, the bad news is that until you get fully licensed, you are probably not going to work pretty hard to get your hours (for reasons I will explain later) and you are probably not going to get paid as high as you might think. To understand this better, let’s discuss some important nuances of working in a private practice.
Flow of clients
Unlike other settings (e.g. community mental health, hospitals, prisons, schools etc.), private practices are highly dependent on client numbers because the constant flow of clients is not a given. Client numbers, of course, are directly correlated to generated revenue. If we have more clients, we get paid more, if we see less, we get paid less—sometimes much less. In private practice, client numbers tend to be highly contingent on a number of factors outside our control and are therefore a serious point of consideration in all business planning. When you first start at a new job, you might just have to start slowly, with one or two clients at first. Then, depending on the exact setting you are in, it might take you anywhere from a few weeks to a year to build up to full caseload. During summers, holidays and school breaks, you are more than likely to experience significant dips in client numbers. And, as a new professional, especially if you are also young, you are going to experience a higher attrition rate of clients (i.e. number of clients that don’t stay in therapy) than a seasoned professional. Also, if you are working in a practice that’s newer, doesn’t accept a variety of insurance plans and doesn’t do much marketing, all that can contribute to slower influx of new clients for you.
Takeaway: You must be mentally and financially prepared to endure the fluctuating client numbers and slower caseload build up if you are going to work in private practice.
Insurance world
Private practices deal with insurance companies either because they feel like they have to rely on them to make any decent profit, or because they care about accessibility of mental health services to people, or both. The truth is—and it probably won’t be a surprise to you—is that insurance world is very complicated and if given a choice, any practice owner I know would love to have nothing to do with it. Here are a few things about insurance that you should know about. First, there is a serious range of reimbursement rates between different companies. Some pay out more, some significantly less, and none of them pay anything close to what the actual fees are for psychotherapy services. In the Chicago area, a typical full fee for therapy sessions is in the $150-200 range. A “good” insurance reimbursement is anything above $100, but some insurance companies pay less than that, especially if you doing family/couples therapy. Moreover, insurance companies have not raised their rates significantly in many years, despite the fact that the cost of living, particularly after Covid, has gone up pretty much everywhere. For private practices, it means that expenses went up but revenue hasn’t changed. Finally, being in network with insurance companies means a significant administrative overhead and cost to private practices. Dealing with rejected claims, delayed payouts, high deductibles, constant change in requirements, clearinghouse issues, insurance audits, clawbacks, incomplete documentation are just a few issues that private practice owners have to deal with. Many therapists don’t see all the behind-the-scene work that goes into billing insurance, but it does affect how practices structure their compensation because insurance billing is a big ordeal to manage.
Takeaway: Insurance is a necessary evil and all of its nuances and complications make it more difficult for practice owners to offer really amazing pay to therapists.
Overhead
I’d like to take a moment to talk about overhead expenses in private practice because in my experience many therapists tend to overestimate how much money practice owners get to keep based on their lack of knowledge about business expenses. The typical train of thought is “We charge this client $200 per appointment, so it’s fair that I get to keep 50% and the practice owner still gets $100, minus maybe $10 or 20 bucks for expenses”. I might be slightly exaggerating here, but it is a sentiment that I have heard many people articulating in one form or another (especially in anonymous Facebook posts!). So, here are some basic business facts to counter that. A healthy adjusted profit margin for any type of business (i.e. what business generates on its own if an owner would walk away from it) is considered around 20% or more. So, if a business generates 1 million dollars in revenue per year, a healthy profit would be $200K. In mental health world, that 20% margin is hardly attainable and typically owners are grateful for anything between 10-15%. In my experience of running a private practice and consulting a number of other practice owners, we as owners actually have to work really, really hard to get to that 10-15% profit margin. That’s because the overhead expenses are very significant and the amount of clinical and administrative expertise it takes to run a group practice is more substantial than many realize. When hiring other therapists, here are some basic costs that go into maintaining the setup that can accommodate a team:
Billing costs: billing companies typically charge 6-10% of receivables for their services
EHR subscription: an average group practice spends $10,000-15,000 per year on a platform such as Simple Practice or Therapy Notes
Supervision: when you receive supervision from your clinical supervisor, it’s not “free” to them to provide because it’s the time they could be seeing a client and generating money from that, so it needs to be calculated into the expenses
Other typical expenses:
Payroll taxes
Training and development for staff
Rent or mortgage payments for office space
Office building maintenance, decor, furnishings and supplies
HIPAA implementation
Legal consulting fees
Accounting and bookkeeping fees
Liability insurance
Worker’s comp insurance
Payroll and benefits administration
Intake and office management
Marketing/advertising and website creation and maintenance
Credit card processing fees
Takeaway: Even though at first glance private practices appear to charge a lot of money for their services, the overhead expenses leave most practice owners having to work very hard and very smart to maintain a business that is profitable and sustainable.
Payment/reimbursement packages
So, this brings us down to a BIG question: would should you reasonably expect to get paid when you are looking for a full-time position at a private practice? Here are some landmarks for you to follow in evaluating possible job offers.
1099 or W-2 issue
For many years, private practice world used to be a 1099 world, meaning most therapists were hired as independent contractors rather than employees. This included pre-licensed professionals too. In the recent years, the tides have shifted and more practice owners have become aware of the legalities surrounding 1099 vs. W-2 status and nowadays the private practice world has become (or is slowly becoming in some parts) a W-2 world. The important thing for you to know is that in the state of Illinois (and many, many other states) for as long as you need to practice under supervision, you must be a W-2 status employee, not an independent contractor.
Pay structures
The vast majority of private practices base their pay on the number of completed sessions as opposed to offering flat salaries. So, if you see 5 clients a week, you get paid for 5 clients; if you see 25 clients per week, you get paid for 25. Now, this variable compensation can take form of either percentage or hourly rate. There is a wide variety of creative pay structures out there, for example:
Base pay per clinical hour+ % pay
Hourly rate per clinical hour + admin rate per admin hours
% pay for clinical hours
% pay for clinical hours + admin rate per admin hours
Tiered % pay for clinical hours (the more clients you see, the higher the %)
Tiered hourly pay for clinical hours (the more clients you see, the higher the hourly rate)
Benefits
Any of the above pay structures can also have some benefits thrown into them. Some practices offer health insurance and retirement plans, but it is not common place because it’s rather expensive for small businesses to offer those. Practice owners have gotten creative with offering smaller scale benefits, such as professional development stipends, personal computer use stipends, paid time off, etc. The one important thing to know is that all practices have a certain budget when it comes to compensation. So if they offer a higher hourly pay or percentage, it leaves them with less money for benefits. If they offer great benefits, chances are they are going to have a base pay that’s a bit lower.
Average numbers
Now that you have an understanding of some factors that go into the financial aspect of private practice work, hopefully you are already figuring out that there is no black-and-white answer to the question of “What’s should I get paid?”. The answer is “ it depends”. It depends on your clinical experience, licensure level, your geographical area, your life experience, your cultural and linguistic aptitude, your desired caseload and other factors. Having said that, there is a rough ballpark that is helpful to have when applying for jobs. Again, this is geography specific, but in the Chicagoland area where I live, provisionally licensed clinicians (LPC, LSW, ALMFT) can expect to get paid 40-50% (less with benefits, more without benefits) or $45-55 per clinical hour (again, less with benefits being offered, more without benefits). In the case of hourly pay, many places also offer a separate rate of around $20-22/hour for admin time in addition to clinical rate for direct client hours.
Takeaway: Private practices usually pay a percentage rate or a flat hourly clinical rate, so your earning capacity really depends on how many clients you see. There is a number of creative pay scales out there and benefits are not a given. If someone offers benefits, they typically pay less in base pay and visa versa, so it is important to look at the whole package.
Evaluating a job offer
When you are interviewing and evaluating job offers, it is incredibly important not to give into the temptation to make your decision solely based on how nice the person was who interviewed you and how much money they are offering. Yes, please read that last sentence again! In my experience, most new graduates are driven by too much personal insecurity and anxiety about money, so much so that they don’t take time to ask important questions about the practice. And perhaps sometimes it’s simply hard to know what important questions are, so I would like to offer some guidance.
Understand the insurance portfolio of the practice
There is a big difference between a practice that is self-pay only, a practice that is only in network with one or two highest paying insurance plans, and a practice that accepts many/most insurances. The wider the insurance net, the easier it is for the practice to generate referrals and fill your caseload. On the flip side, a wider insurance net most likely translates into a lower average reimbursement rate per session which affects the company’s budget for compensating you. In cases where you are being offered a percentage, the most important question to ask is, “A percentage off of what?”. For example, 50% may look good on paper, but if the practice has an $80 average payout rate from insurance, you will be better off making 40% with a practice who has $120 average rate of payout.
2. Assess the stability and longevity of the practice
Distinguishing between a seasoned group practice with a decade or more of established operations and a newer practice (under five years) striving for growth can make a world of difference. Typically, longstanding practices have more refined business strategies, robust systems, comprehensive support, stringent compliance measures, and structured pathways for nurturing emerging professionals. Moreover, they often maintain equitable and sustainable compensation models aligned with market standards. Conversely, newer practices may entice with higher pay as they seek swift recruitment, yet their financial acumen might lag, potentially jeopardizing their long-range sustainability.
3. Evaluate a full picture of all the resources and all the requirements that the practice has in place
To ensure you're making an informed decision and finding the best fit for your career goals and needs, it's crucial to ask some questions about both the supports and resources that the practice will have in place for you as well as their expectations for you. Here is a non-exhaustive list of areas to explore:
What type of supervision and professional development is offered? Understanding the support available for your ongoing growth and learning is vital. Inquire about supervision structures, opportunities for continuing education, and any mentorship programs in place.
Administrative time requirements. Clarify the expectations regarding administrative tasks, such as documentation, scheduling, and client intake processes. Knowing how much time you'll need to allocate to these duties can help you manage your workload effectively.
Flexibility in workload. Ask about the flexibility in setting your caseload and scheduling appointments. Understanding the practice's expectations regarding client volume can help you gauge if it aligns with your preferences and capacity.
Expectations regarding work schedule. Gain clarity on the expected work hours, including evenings and weekends.
How is office space allocated? Inquire about the availability of office space and how it's assigned to therapists. Understanding the logistics of workspace allocation can give you insights into your working environment and any potential limitations.
Will you be expected to do your own marketing and business development? Understand the practice's approach to marketing their services. Some practices may expect therapists to contribute to marketing efforts, while others handle this aspect internally.
What kind of administrative support do they offer? Learn about the level of administrative support available, such as reception services, billing assistance, and IT support. Having robust administrative support can streamline your workflow and allow you to focus more on client care.
Do they expect you to use your own electronic devices, or are those provided by the company?Determine if you'll need to use your own electronic devices for work purposes or if the practice provides them.
How strong is their existing referral network? Explore the practice's existing referral network and partnerships with other healthcare providers. A robust referral network can significantly impact your caseload, so understanding its strength is crucial.
By probing into these areas during your interview, you'll gain valuable insights into the private practice's culture, expectations, and support structures. Remember, the interview is not just an opportunity for the practice to evaluate you but also for you to assess if it aligns with your professional goals and values. Good luck on your job search journey, and may you find a fulfilling and rewarding role in a place where you can truly thrive!