One does not usually find “mental health” and “wealth” in the same sentence. In a previous post I wrote about the reasons why there is very little wealth in the typical outpatient practice (see “Wealth in Mental Health: Why isn’t there more?“). In this post, I explore more deeply some ways to make an exceptional living in spite of the challenges.
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The headwinds against us: A small margin
In my practice of 40 clinicians, about 84% of our income was paid out in wages, payroll taxes, and employee benefits. This pays the salary, taxes, and benefits for our clinicians, support staff, leadership, and for me, the owner.
[Sidebar] I actually like this aspect of our business. We are spending lots of our income taking care of our employees. That is pretty great and one of the more satisfying aspects of leading an organization. But it also creates large challenges. We have to be careful with our spending or we get into trouble. [Back to the main conversation.]
In addition to employee costs, rent takes another 8.5% of our income. So space and staff are accounting for 92.5%. That leaves only 7.5% to cover all other expenses—software, hardware, phones, marketing materials, office supplies, etc. . . . Not much wiggle room.
Furthermore, this explains why hospitals are not eagerly jumping into the outpatient psychotherapy business: our margin is too small.
For example, suppose a hospital purchased an outpatient practice and converted the employees to the hospital’s pay scale. Hospital benefit costs are closer to 30% to 40% on top of the employee’s salary. Ours is 11%. If the hospital purchased the practice and changed the pay scale, they would lose significant money. There is just not enough profit in outpatient psychotherapy practices to add more benefit costs.
So given the very small margins, how can one make an exceptional living in mental health?
1. Stay small
I know a few solo clinicians who see clients out of their residences. This is extremely efficient and gives you a 8.5% raise from what my organization spends for space. Maybe more. And there are other upsides. The commute is wonderful. Kitchen and bathroom facilities are just like home—wait, they are home. Cool. So this is certainly a very cost-efficient model.
And in these days of teletherapy, working from home is what most have been doing anyway. And as long as teletherapy is dominant, this is an easy choice.
But of course, this approach also means working as a solo practitioner. And certainly, that is not a good option for many. Furthermore, once we do shift back to in-person therapy, the home is less private since your clients know exactly where you live. There may be zoning and Home Owner Association (HOA) restrictions. And your house needs both a waiting room and a therapy room preferably with a separate entrance. Nevertheless, with the right setup, this approach can be great. (To consider another of the challenges of this approach see “The dilemma of success: Do it myself or delegate“.)
2. Go big
The average pay for an owner or CEO of a larger mental health organization is now about $120K to $150K per year (see Payscale.com). But getting to that level requires a willingness to extend beyond one’s clinical skills, i.e. to become a manager or executive which are some of the higher paying positions in mental health.
Additionally, see these posts for a sample of what is involved in becoming a manager:
- Practice owners ask: Is this all worth it?
- Why effective leadership is lonely and exhausting
- 7 management principles that excellent, but untrained, managers know
- Five key attributes of excellent managers
- How to overcome employee betrayal: 5 steps to love resiliently
But is that what we signed up for? Becoming a manager or executive requires developing some different skills and some different headaches. Not every clinician will be interested in developing competence in managing the financial and human relations aspects of running a business. And these are the two areas that stress managers the most.
3. Seeing a lot of clients
I know of two clinicians who do more than 65 client-hours per week. I knew each of them for years before they told me how much clinical work they did each week. It was clear they were embarrassed to confess their work patterns; they knew it wasn’t healthy. They work six days per week. One starts at 7 a.m. and then did groups two nights per week with clients on another two nights. The other starts later in the morning and goes until 10 p.m. each night while running a couple of groups on Saturday.
Believe me, this approach makes plenty of money. If we consider “full-time” to mean 25 clinical hours per week, each of these clinicians is making more than twice what a “full-time” therapist makes.
Neither of these clinicians is divorced. And they both raised children. Somehow it worked for them and their families and, I presume, for their clients.
Nevertheless I cannot in good conscience suggest this approach. The toll must be enormous, and most people could not do this without relational issues affecting their families.
4. A niche that pays
After my previous post on wealth in mental health, I heard from a rare therapist who shared his way of making a good income. (See “Wealth in Mental Health: Why isn’t there more?” for the first post.) In short, he uses his clinical gifts and applies them in a niche area that pays well. He found a clientele that can afford to pay out of pocket. No insurance with limited concerns about collections.
Others have created that niche by working with couples, eating disorders, hoarding, etc. Just about any area can work if you build the skills and develop the credentials that convince people that you are “The One” they need to see. Demand is the name of the game here.
Read more on creating demand in this post:
- The benefits of creating demand in your community
- Creating demand for your services
- Build a more valuable practice by diversifying referral streams
And to make this work you must focus on how you position yourself in a community. Your goal is to create an outsized demand for your skillset. Clients need to perceive you as an expert, preferably a superstar. Once that position is established, fees can rise and income will improve and one can get out from the constraints of insurance companies setting your fees.
An example
George Anderson is 80 years old and found his niche in California. George went to Harvard so started with a degree that stood apart. And then he found his niche—working with physicians on anger management. He calls his approach the Anderson & Anderson Disruptive Physicians / Executive Coaching/Anger Management Program™. You can learn more by clicking on the link. George states that he continues to make more income than most psychiatrists. No small trick. Here is one of George’s stories:
The traffic is terrible in Los Angeles. Currently, I have one physician who I see at his hosptal. I am paid $500 each way for travel and $500 for the session; $1500 for one session. This appointment is at 9 a.m. I return to the same hospital at 4 p.m. to see another surgeon and a nurse for a total of $2000 in a day. This program is for 6 months and I am paid in advance.
Bottom line, there is some wealth around the edges . . .
It is possible for a therapist to earn a better-than-typical income. But it takes considerable experience and effort and may require developing skills beyond what we learned in our clinical training.
And for the rest of us who are working in the typical not-for-profit or private practice, we will do well enough to live off of our clinical work. An income of $50K to $100K is quite possible just by doing good clinical work full-time. For more on what therapists really make, see: Private practice therapist salary: What can you reasonably expect?
And we have the incalculable benefit of participating in people’s lives as they find better ways of living. How does one put a price on that?
Also see: