Here are the results of a Therapist Wage Survey with data from 40 different practices. I collected data through the e-newsletter list for this website and via LinkedIn. Data collection for this report took place from August 2020 through January 2021.
This report summarises the results, plus my observations and reflections on the meaning of the results.
Table of contents
- Who took the Therapist Wage Survey?
- Q1. Are therapists hired as independent contractors or W-2 employees?
- Q2. What percentage of collections do therapists retain?
- Q3. Benefits offered to therapists
- Q4. What outside services do practices hire?
- Q5. How much marketing do newly-hired clinicians do?
- Q6. Amount collected for an hour of psychotherapy
Who took the Therapist Wage Survey?
Mostly small practices
Respondents to the Therapist Wage Survey mainly work in small organizations. The majority (62.5% or 25 of 40) work in organizations with one office location. Additionally, there were a few larger groups who took the survey. Seven organizations (17.5%) have two sites; Seven (17.5%) had three or more locations. And one large organization (2.5%) has more than 6 locations.
As you would expect from a sample with this profile, 45% (17 of 40) work without support staff, and 45% (17 of 40) had between one to three support staff. Only 10% (4 of 40) had more than three support staff.
These results are no surprise to those who study mental health practice structures. The mental health field, as a whole, is mostly a collection of solo and small businesses. Our sample seems to match the general trends in our profession.
Q1. Are therapists hired as independent contractors or W-2 employees?
The Therapist Wage Survey asked a couple of questions about how many therapists are hired – independent contractors or as W-2 employees. The results are these:
- 42.5% (17 of 40) had only W-2 employees
- 30% (12 of 40) had some employees and some independent contractors
- 27.5% (11 of 40) had only independent contractors
Another way to say this is that 72.5% of mental health organizations employ W-2 employees, and 57.5% hire independent contractors for clinical work.
I am a little surprised at this result. It suggests to me that even smaller organizations are hoping to become larger. If one wanted to stay small, why create a W-2 payroll system? And yet, these data suggested a preference for going through the effort. Apparently, we are a hopeful lot. (For more on these considerations on making this choice, see Picking the best option: Independent Contracting vs. Employing.)
Q2. What percentage of collections do therapists retain?
Respondents to the Therapist Wage Survey hint at several exciting findings. First, 41% (12 of 29) of those who hire W-2 employees have more than one percentage they pay. Those variations are due to the “clinician’s license or other factors.” And additionally, 30% (7 of 23) of those hiring independent contractors similarly vary the pay based on license and other factors.
This finding is quite remarkable. It shows that practice owners are quite creative in establishing the percentages of collections paid to clinicians. One size is not fitting all. This truth is further evidenced in the variations of actual percentages paid to clinicians.
The actual range of percentages paid to clinicians is quite broad. Here is a sample of the most popular choices:
Percentages for W-2 clinicians
- 33% pay 50% of collections to the clinician (9 of 27)
- 15% pay 55% of collections (4 of 27)
- 26% pay 60% of collections (7 of 27)
Therefore, 74% of our respondents pay W-2 employees in the 50% to 60% range.
Percentages for 1099 Independent Contractors
- Interestingly, 26% of practices pay 50% of collections (6 of 23), 26% paid 55%, and 26% paid 60%
Therefore, 78% of our respondents pay independent contractors in the 50% to 60% range.
So it seems quite clear that whether hiring independent contractors or W-2 employees, the clinician will retain between 50% and 60% of collections.
These results are not a surprise at all. They seem spot on with my experience.
What the Therapist Wage Survey Outliers teach us
And yet, there were some surprising outliers. Three practices (7.5%) of our sample have very generous arrangements for the clinicians. Here are three outliers that deserve particular comment:
- #1 Outlier with 11-15 employees (W-2) reports paying 80% of the collections to the clinicians
- #2 Outlier with 2-5 employees (W-2) reports paying 100% of the collections to the clinicians
- #3 Outlier with 2- 5 Independent Contractors reports paying 80% of collections to the clinicians
These three outliers offer extremely generous financial terms for the clinician.
I wonder how these financial arrangements scale up as the practice grows in size. I especially wonder about Outlier 1, which reported hiring 11 to 15 employees. How do they have enough margin to cover expenses? In examining all the responses, Outlier 1 provides seven benefits to employees and has 4-6 support staff. Even with exceptionally inexpensive space (a church, perhaps?) I wonder how this arrangement works. Frankly, I do not know how they do it.
Unusual financial choices
As I was looking through individual responses to the Therapist Wage Survey, I noticed some unusual financial choices. A few of the practices that hire both W-2 and independent contractors had a 20% or more pay gap from one type of employee arrangement to the other (4 of 40 or 10%). Additionally, in a few cases, the practice pays the same percentages to W-2 employees and independent contractors (3 of 40 or 7.5%).
My interpretation of the unusual financial choices owners are making
These differences surprised me. Taxation differences do not justify these choices. The actual difference a therapist pays based on employment status is between 7.65% to 11%, depending on benefit costs. Indeed, most of our sample had a 5% to 10% difference in their percentages, i.e., contractors got about 5% to 10% more than W-2 employees. That makes sense. A 10% difference between the two employee types at least attempts to have some equivalence. (See Picking the best option: Independent Contracting vs. Employing for more on how the IRS handles these two types of employees.)
I can only presume that the owner in these outlier cases is attempting to tip the scales in one direction or another. Unfortunately, this data does not give us answers as to what is motivating these decisions.
Of course, errors in that data might explain the outliers and unusual financial choices. Many clinicians are not very financially oriented in my experience and may make errors in reporting practice arrangements. Consequently, we should not overstate what we know from one survey and so little data.
Q3. Benefits offered to therapists
As for benefits, 30% (9 of 30) offered none. And for those practices that do offer some benefits, the most popular were:
- 46% offer retirement programs, i.e., 13 of 28, with eight offering 401-K and two offering SEP accounts
- 46% (13 of 28) offered Medical Health Insurance Plans
- 43% (12 of 28) offered Malpractice insurance
- 36% (10 of 28) Reimbursement for CEUs
- Other benefits included:
- Dental (25% or 7 of 28)
- Vision (21% or 6 of 28)
- Reimbursement for licensing fees (18% or 5 of 28)
- Paid time off (14% or 4 of 28)
- One offers an Annual Bonus
So, in the end, 70% offered some benefits to employees though clearly, the range of options is extensive. Retirement plans and Medical Health Insurance programs are the most popular, with paid malpractice insurance coming not far behind.
Note that the question asks for only those benefits that are partially or wholly subsidized by the practice. Therefore we do not know the size of those subsidies. Furthermore, Medical Insurance Programs, in general, may include coverage of family members or not. Much remains unknown about the particulars of any of these benefits.
Q4. What outside services do practices hire?
Interestingly, whereas 70% of practices subsidize some benefit costs, 90% (36 of 40) of practices hire some specialists. The Therapist Wage Survey suggests that the most popular are these:
- 65% (26 of 40) hire CPAs
- 52.5% (21 of 40) hire attorneys
- 40% (16 of 40) hire website designers
- 32.5% (13 of 40) hire billing specialists
- 22.5% (9 of 40) hire social media specialists
- Other specialists include:
- 20% (8 of 40) Bookkeeper
- 15% (6 of 40) Marketing Manager
- 12.5% (5 of 40) Branding Specialist
- 7.5% (3 of 40) Insurance Credentialing Specialist
- 5% (2 of 40) Intake Coordinator
In one way, this ranking of specialists may express the level of professional insecurity practice owners experience. Accounting, law, websites, billing, etc., are all areas therapists may have little to no experience or expertise. We should not be surprised then, that they purchase that which is not a strength.
If anything, it is surprising that only 65% hire a CPA, 52.5% an attorney, etc. I would have thought the percentages would be higher. Especially when it comes to marketing. My view is that a wise investment in branding, say, in web design, social media, etc., could change a practice’s growth trajectory. Why not then put money there? See these posts for more on these subjects:
- Assembling your team of practice advisors
- Building your practice infrastructure: Tech, legal, and financial structure
- Developing a practice website
Q5. How much marketing do newly-hired clinicians do?
The next question gives some insight as to how practice owners think about new employees. Are new employees a method of creating growth or a result of it? Are they responding to the demand that already exists or trying to create it?
From the responses to the question “what percentage of the newly-hired therapist’s referrals come from the newly-hired therapist’s marketing” we see:
- 64% (25 of 39) selected 0%; These practices are filling new therapists caseloads with excess referrals from the practice
- 18% (7 of 39) selected 25%
- 8% (3 of 39) selected 50%
- 5% (2 of 39) selected 75%
- 10% (3 of 39) selected 95% to 100%; These practices are asking the new therapist to create the marketing to fill the new therapist’s caseload
Clearly, most practices hire more staff when they determine that excess demand exists. And they then use those extra referrals to fill the new clinicians’ caseloads.
I find these results interesting. It suggests that most practices hire when the current staff is overloaded. Apparently, when the demand exists, that is when they hire. Nevertheless, a smaller number of practices expand by hiring first. Those practices are expecting the newly hired to find referrals through their own efforts.
Q6. Amount collected for an hour of psychotherapy
The range of hourly collection rates is very wide. The low was in the $50 to $60 range. The top was in the $180 to $200 range.
Below is the distribution of collection amounts.
You can see that the above chart looks pretty close to a normal distribution. The median seems to be around the $110 range. Interestingly, the respondent who selected the $180 to $200 range wrote a note saying that they only accept private pay clients.
Again this seems quite in line with experience. If there is any surprise, it is in how wide the range is. A private-pay-only practice is making choices that enhance the amount collected per hour. Other practices are pursuing a broader spectrum of clients, including those with insurance or perhaps using a sliding scale. Obviously, the choice of client populations is affecting the amounts collected per hour. No surprise there.
Of course, there are lots of limitations to the data in this Therapist Wage Survey. We only wish we could interview the respondents to fill out the picture. For the sake of anonymity, I do not have a way to know who responded to the questions. And that leaves us with many unanswered questions that will have to wait for another day.
Thanks to all who participated. Please feel free to drop me a line if you would like to add more to your profile. I’d love to hear more. Click here to email me.