wealth in mental health

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

Posted in Financial aspects of a growing practice
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Perhaps one of the more shocking secrets in our mental health field is how little profit is in the profession. There is not much wealth in mental health. The whole mental health business remains a low margin business model with minimal opportunity for making a considerable profit. And what little profit there is in mental health is in psychiatry, not in outpatient mental health services. Livable wages are possible, but you are going to have to work hard to get there.

Why so little wealth in mental health?

To make sense of this reality, we need to understand who pays for mental health services. Answer? Insurance companies and the government. Both private insurers and public, i.e., Medicare and Medicaid, pay the largest portion of fees.

And who sets the fees that insurance companies pay to providers? Of course, insurance companies do. And it is the same for government run programs. Providers do not influence those payments much. And in my area, we have not seen fee increases in over a decade. Sure, I am free to set any fee I want, but the insurance company will only pay the “contracted rate.” I have no choice but to accept that fee. And have you ever tried negotiating with an insurance company? I have and while I think it is worth the effort, the cards are stacked against us. Rarely do they budge. Bottom line? We providers do not control our prices.

Meanwhile, expenses do not stay the same. Rents, technology, software, and everything else goes up, but the fees we can collect do not. So since we cannot raise our fees as our costs go up, we must work more hours to cover the increased costs. To get a more complete picture of how therapists are paid, see this article: How to calculate a psychotherapist’s private practice pay.

And this situation has not improved in my 40 years of practice. The system is what it is. (Some advocate only working with cash clients. Just don’t take insurance. I advise against that option and explain why in this post: Why join insurance panels.)

What hospital administrators know

As if we needed more proof, hospital behavior tells us the same thing. Mental health has low-profit margins, and hospital systems know it. Large hospital systems are quite adept at figuring out where the profit is in health care. They continuously shift services around to capitalize on the most profitable areas.

The delivery of outpatient mental health services is not at the top of most hospitals’ agendas. When they do invest in mental health, they do so out of the mission that they are committed to and for their community. Yet in most cases, they seem quite willing to leave the financial crumbs of outpatient mental health services for small entrepreneurs.

An interesting conversation

A couple of years ago, I had a conversation with a hospital psych unit medical director. He was a psychiatrist with thirty years of experience. In the previous two years, his hospital hired fifteen psychiatrists for their staff. At the time, they hired zero outpatient therapists. He told me that he wanted some therapists around, but the administrators determined that there was not enough profit in employing outpatient therapists. There it is again–limited wealth in mental health. Consequently, they refer out for outpatient psychotherapy.

No doubt, he was wanting me to know that more business would come to my organization and that I should be pleased. Instead, while happy for the business, my larger feeling was sadness about what he was implying about outpatient psychotherapy in general. And yet I think his judgments accurately summarize the current state of affairs in outpatient mental health practice.

Interestingly, a decade later, this same hospital group waded into hiring a few outpatient therapists. I think they are mostly part-time people who work some hour inpatient and some outpatient. They have the office space, so why not try it again. We will see if they stay at it. My point about little wealth in mental health remains the same, even with such explorations.

We get the leftovers

And we are the entrepreneurs running our small businesses on a shoestring. I have yet to see anyone in our field, “making a financial killing” in outpatient mental health though some methods work better than others. (See wealth in mental health: Where are the good-paying jobs?

Even those who become owners of large outpatient practices count it a good year if their business is in the black. The truth is that during lean times many organizations keep afloat with borrowed money. They hope to pay it back in the more prosperous times. We were thrilled if we saw a 2 or 3 percent profit. Those were our best years.


Knowing that there is little wealth in mental health helps us understand the context of outpatient mental health. Most of us got into these professions because of our sense of calling. So if wealth is one’s goal, then the delivery of mental health services is unlikely to get you there through a livable wage is undoubtedly possible. For that, we can be grateful.

Also read:

How therapists get paid in a private practice

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  1. George Anderson says:

    I agree with every word in this post. I would like to share one exception. There is not enough space to share here. Therefore, I ask that you visit my website at http://www.andersonservices.com. Start with my linkedin profile.

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