How to increase therapist pay in private practice

Everyone who is in private practice wants to know how to increase therapist pay. Of course, our first goal is to fill our schedule with clients. But once that is accomplished, let’s consider how we can continue to improve our income from year to year. In this article, I will outline several efforts that will increase therapist pay. Let’s start.

1. Improved business processes that increase therapist pay

1. Develop consistent, timely collections processes throughout your team

Though we do not control what an insurance company pays for our work, there are fee-related things that we do control that make a difference.

First, money should be one of the topics covered when establishing a new relationship. We want to show that we can address money issues face-to-face.

Second, the better our processes for dealing with collections, the higher our collection rate, i.e., the amount collected for each hour of treatment. I cover this topic in these posts: 

• Daily business demand #3: Billing
• Weekly business demand #4: Collections

Third, we need a timely collection process that will keep clients up-to-date on their financial obligation. Moreover, the more consistently we send our insurance claims, the better. Today’s practice software is excellent at facilitating the daily submission of claims. (See Selecting a practice management system.)

Finally, collecting everything owed us usually takes teamwork. The collection process will improve if we can hand it off to staff, and the whole team has some part of the responsibility for collecting fees.

2. Reduce your “no shows” and “late cancels” by how you manage your schedule

The best way to reduce one’s “no shows” and “late cancels” is by scheduling all your regular clients into a consistent time slot for each week’s appointment. A regular schedule becomes part of the client and your life routine. 

Some practices send confirmation texts or emails. That is a good idea until the pattern gets set. Beyond say the first month, or so, it may not be necessary. Talk to your client to see what they prefer. Some seem annoyed by the reminders, and some depend on them. 

3. Manage your expenses wisely

Everyone knows that ” a penny saved is a penny earned.” (If you enjoy an intriguing rabbit hole, click here for the tangled history of the phrase.) One way to increase therapist pay is by weighing every expense. Finding efficiencies is, of course, a balancing act of competing interests. A couple of principles may be of help here.

First, technology is ultimately less expensive than hiring an employee. And fortunately, many technology tools exist to manage routine and repetitive tasks efficiently. Purchase them and use them. You will not regret the choice.

Second, support staff time is ultimately less expensive than clinical staff time. Consequently, the more we can ease the load on clinical staff, the more energy they have to do the parts that only they can do. For example, only clinicians can see clients, connect with referral people, and invest in their teammates. 

2. Structural changes that increase therapist pay

Not only can we improve our business processes, but there are structural changes that will increase therapist pay in private practice. 

1. Hire help to answer the phone while you are busy or in session

With all the online tools available these days, most launch their practice without the expense of hiring support staff. This approach makes sense when starting up. However, there will be a day when the lack of someone on the phone will limit potential growth. 

Elsewhere, I have used the example of how I hurt myself by getting busy and then tired, which resulted in less responsiveness on my part. (See, Learning to manage myself: Solving my self-imposed roller coaster.) I had to personally figure out how to be busy and still do the right things. 

Hiring help was transformative. Once I had someone to keep things rolling while I was occupied, it made a massive difference. And in no area was that more important than having someone to handle the phone. Especially for new clients, so many issues were solved by having that first call answered. Eventually, even on evenings and weekends, our phone system would send new calls to one of our support staff. She was willing to take some information and then call back the next day. Having that person there was so reassuring to potential clients calling for the first time.

2. Add appointment slots for clients to schedule, especially evening and weekend appointment slots

One of the more obvious methods of increasing therapist pay in private practice is to open up more slots for clients to schedule. And there is no doubt that evening and weekend slots, what we call “prime time” slots, are the most popular. Those are also the slots we are most reluctant to open up due to our own needs. 

I have a friend who says that being a therapist is a second-shift job. That is undoubtedly true initially, but as demand for our services goes up, we can reshape our schedules more to our liking. 

3. Dropping low paying insurances

Especially when we have an excess of referrals, we can study our payor mix. For instance, some insurances do not pay as well as others. Using some spreadsheets and calculations, we can examine which payers are our bread and butter and those that are not worth the effort. 

Of course, the fee we collect is only one factor to evaluate. We may keep a lower-paying account because we want to serve a particular referrer. But generally, dropping the low-paying insurances will mean that those patients go to an out-of-network benefit that will cover some of the costs. 

We are in the best position for this decision when we have lots of referrals and are looking for ways to increase the collection rate per hour.

4. Negotiating insurance payment rates

Elsewhere I have written about how therapists do not control our fees, and insurance companies do. (See Wealth in mental health–Why isn’t there more?) But the little-known secret is that there are times when insurance companies will negotiate. 

Let’s look at some of the nuts and bolts of approaching negotiation. First, you will want to identify and eventually connect with the patient care manager for the insurance company, though some companies use a different title. You are looking for someone within the insurance company to help you understand the insurance rates and help you get to the decision-makers. 

Next, be sure to obtain an up-to-date Fee Schedule from the insurance company you are approaching. Things change, so start with the latest information. 

When approaching the negotiation, think through a few things. Is this a carrier you are willing to drop if they will not negotiate? Furthermore, could you accept becoming a second-tier provider in their system? No one can prove it, but it does seem that sometimes a company will give you a better rate, and then the number of referrals will slow down. 

It helps to do these negotiations when you are super busy, and you can take the chance. Furthermore, the insurance company is also feeling the strain of too many referrers and might be a little more flexible. 

Factors that may determine your success

I have no insider knowledge of insurance companies’ criteria for determining whether they will increase the payment schedule. But some principles are clear.

First, the larger your organization, the higher your probability of success. Insurance companies seem to prefer working with a few larger organizations than working with many small ones. From the insurance companies’ view, it is easy to keep track of fewer organizations. 

Additionally, you may provide services that they especially want in their network. In some areas, they want addictions, or eating disorders, or child specialists. Different niches may have appeal in different geographical locations. 

And lastly, the more extensive your coverage, geographically, the better. Again, size may matter to them.

Be sure to highlight all the factors that you think might help your chances.

3. Therapy that increases retention rates

Elsewhere I have written about how to increase retention rates. 

• Is it good for clients to stay longer in therapy? Client Retention Part I 
• Beyond the therapist’s control: Client Retention Part II
• How to retain clients: Client Retention Part III: 

Below is a quick summary of the main points.

1. Build expectancy from the first

We have learned from common-factors research that those who instill a sense of hope get better outcomes. Building the expectation that things will improve, in itself, will help things to improve.  

2. Focus on early attachments

Similarly, attention to the client-therapist attachment, especially early in treatment, is highly associated with therapeutic success. A solid early attachment makes it possible to stick with the more challenging moments that may come later on.

3. Discuss your plan

As one would expect, clients are more engaged when they feel a part of the planning process. Therapists who collaborate with clients in developing the plan bring clients along.

4. Follow up on commitments

Many clients struggle with trusting a therapist, or frankly anyone. Therefore early treatment may include small tests to see how reliable the therapist is, and failure slows the progress.

5. Handle confrontation gently

During treatment, there will be times when it is vital to confront the client. Yet as crucial as this may be to the outcome, a gentle hand generally works much better, especially in the early phases of treatment.

4. Become a “highly desired expert”

The more celebrated a clinician is, the higher the collection rate. Consider reasons to aspire to become a “highly desired therapist.” 

• Clients will wait for an opening in the schedule of a highly desired therapist
• The highly desired therapist rarely has holes in the schedule
• Clients will take less desirable appointment times in the highly desired therapist’s schedule
• Clients are willing to pay out-of-pocket for that highly desired therapist
• Lastly, clients are more likely to follow the suggestions of “experts.” Therefore your therapy will be more effective if you are seen as an expert

Similarly, I have outlined how increased demand for your services results from developing expertise while creating a visible and clear message. (See Creating demand by marketing.)

Of course, there is no quick way to become highly desired, and it takes consistent efforts. Nevertheless, here is how to get there. 

1. Define your niche

We all have certain types of clients that we prefer. Figuring out your niche is the first step.

2. Become the local expert for that niche

Potential clients want to find a local expert for their challenging issues. To become that expert may require additional training and sometimes even adjusting the office space to accommodate the niche.

3. Market your expertise

The last step to becoming the local highly desired expert is to let people know of your expertise. Possessing the skill is of little use if no one in your area knows about it. 

The good news is that there is a tipping point where the momentum can carry you along without tons of ongoing effort, and that is where we want to go.

Ultimately the goal is to provide a consistent, high-quality experience for every client. The better you can do that, and the fuller your schedule will remain.

Increase therapist pay by using the financial formula for mental health finances

Another way to organize these efforts to increase therapist pay is to think in terms of the financial formula that drives mental health finances. Elsewhere I have outlined how the finances work in private practice. (See, How to calculate a psychotherapist’s private practice pay.)

The bottomline is that there are three ways we might increase our income.

• Increase the amount we collect for each appointment
• Increase the number of sessions we provide
• Reduce our expenses

So when we look at what we have discussed in this article, we can organize our efforts to increase therapist pay in private practice in this way.

1. Increase the average amount you collect per session in these ways

1. Develop consistent, timely collections processes throughout your team

2. Dropping low paying insurances

3. Negotiating insurance payment rates

2. Increase the number of sessions you provide in these ways

1. Reduce your “no shows” and “late cancels” by how you manage your schedule

2. Hire help to answer the phone while you are busy or in session

3. Add appointment slots for clients to schedule, especially evening and weekend appointment slots

4. Increase retention rates

5. Become the local expert

3. Manage your expenses in these ways

1. Manage your expenses wisely

Conclusion

Obviously, no one tackles all of these at once. My recommendation is to pick one and work on it. It takes time and energy to change processes, structures, retention patterns, and to become a highly-desired local expert. Working on the practice can be fun, and in this case, financially rewarding.

Eight excellent reasons NOT to start a new practice

Wealth in mental health–Why isn’t there more?

Wealth in Mental Health – Where are the good paying jobs?

How to calculate a psychotherapist’s private practice pay

Follow the money: Therapist pay in private practice