Part I: Starting a Psychotherapy Private Practice

Beginning a psychotherapy private practice or group practice is both an exciting and overwhelming step, in many therapists minds, culminating a long academic and professional road. Launching this type of practice requires thoughtful preparation, organization, and adherence to legal and liability guidelines. Most of all, it requires patients and a plan to stay afloat financially throughout the process. This post isn't intended to be a step-by-step guide to staring up a practice - certainly there are things missing, things that vary by region or professional credential, and that change over time, but my hope is to give an idea of the process, timeline, and something you may have overlooked.

Laying the groundwork

Like many of you, I started my practice as a private practice, and there are things I wish I would have known or thought about back then, especially now that I have expanded into a practice group. You can set up your private practice for growth and to be scaled into a practice group without any extra time, cost or effort. Things to consider include:

• Practice name: most people create a legal business name that is essentially their name + LLC. You have to have your license, register this name with the state board (at least in PA) and once they approve, you can register your LLC (or other type of business). You can also have a DBA (doing business as), but you may want this to be the same as or similar to your legal business name, and remember, for both, they have to meet the ethical and legal rules set forth by your state board. Think about the name you want to practice under, including if you ever decide to expand into a practice group. I never intended to name my practice after myself, but after a long, exhausting road through internship, post-doc and licensure, my creative juices were nil.

• Type II NPI: you can register a type II NPI for your organization and credential this with insurance payors as you build your practice. You simple credential yourself (type I NPI) under the organization at the same time. This saves you the headache, and possibly cost if you desire to hire a credentialing specialist, if you ever decide to add other therapists to your practice.

• Office: Your EIN and IRS letter for it will be associated with an address, and your insurance credentialing will also show an address to insurance members (so don't use your home!). Some insurances will require this address matches your IRS letter. So, congrats! It not only will take 6-months to get started, but you will need to pay rent for an office during this time.

Starting up

It seems to take 6-months+ for most individuals to go from starting to open a practice to taking clients. Since your LLC has to be approved by the state board, you likely need to have your license to set this up. You get your license, apply for approval of your LLC name name with the state board, they may or may not accept it. You may have to wait to start the credentialing process until this point in time if you want your EIN to point to your organization (LLC), or if you need the legal business name to credential your organization with a type II NPI.

Credentialing can take several months for the larger payors, and not all payors are accepting new providers. During this time period, do you have a job? Are you paying back tuition? Are you paying a specialist like a lawyer to set up your practice and a credentialing specialist to get you credentialed? I was able to see a few self-pay clients and you can offer out of network (OON) billing.

Note: with a single owner LLC, I complete all paperwork as a sole proprietor. My understanding is reporting as an S-Corp saves taxes, but requires more paperwork that could, if completed incorrectly, lead to an audit: the savings may not be worth your time or paying a CPA.

I worked at UPMC as a senior director at Western Psychiatric Hospital's inpatient treatment and determined to do this process on my own. It took many hours of reading and consulting colleagues to do it correctly, but saved me a few thousand dollars compared to what one of my friends paid. Mine got done more quickly - not all specialists are as committed or motivated (and certainly I was more motivated about my own practice than a stranger would be), but this leaves anxiety and possible pitfalls. As I built a caseload, I worked both practices (inpatient and my private practice) for 6-months out of an excess of caution to ensure stable income for my family including a 1-year-old daughter. But this did cause some stress and fatigue.

Some people opt to sign up for a large online company that does it all for them, but I've yet to meet anyone who doesn't eventually regret this - they feel they have little autonomy in their practice including ability to negotiate reimbursement with insurance. While I'm not well versed, there have been some frequent ethical concerns about how these companies manage their business.

Another option is to join a local practice group, but ensure they have the same goals - all of them want to retain their hires, but some want to make it harder for you to leave. My personal belief is that I should help clinicians learn anything they are interested in including how to run their own practice, and if they are getting what they need, they will stay. If not, it is the right thing for both of us if they determine to move on.

And lastly, I mentioned self-pay, also called private-pay and OON billing. Some people who self-pay don't have insurance (less common nowadays), don't want to use insurance (maybe don't want them to have info about seeking mental health care for various reasons), or don't think it is worth paying down a deductible (I advise people against this). Anyone doing self-pay can submit a superbill to their insurance requesting reimbursement, and we can do that for them if you so choose - there is no guarantee without a prior authorization (all you have to do is call the insurance and ask for one) that they will pay, so your client is taking on the financial responsibility if their insurance does not step up to the plate. Some services do this for you at little to no cost other than credit card processing fees - we are set up with but have yet to use Thrizer.

Once you are credentialed and start taking clients, you have to manage claims. If you have an EHR, most of them complete and submit claims in just a click of a button. Additionally, as of late, most also have eligibility verification checks. This have been inconsistent in terms of reliability, and in fact, if a provider logs into a payor's provider portal, it says at the top the information is not guaranteed. And there are two factors: the client is an active member, AND they are eligible to see you (even if you are paneled with the insurance, some have smaller preferred provider groups that you may not be part of, but can almost always be added to with a phone call). So why check? I often submit the claim and deal with any denial or rejection, but it is best practice to call the insurance and get a verbal go-ahead that the member's insurance is active, and that services provided by you will be reimbursed. Checking ahead of time saves you the cost (for me, $0.25) for the denied claim, gets you paid faster (no waiting for a denied claim and resubmitting), and avoids anxiety for your client. I tend to encourage new clients to call their benefits number as insurance often treats members better than providers.

Also, Getting Started...

• CAQH: this of this as the college common application or the APPIC match program for insurance credentialing. You'll have to duplicate most of it for each insurance credential, some on PDF and some electronic, but this is the initial verification.

• PECOS and PROMISE if you want to take Medicare and Medicaid, respectively. Most people opt not to take these insurances. I find it easier to do a prior auth if I or a therapist in my practice wants to see a client with these insurances out of network (OON) rather than deal with these products directly. You can ask a claims specialist or practice admin to handle this if you've hired one, or use a site like Thrizer for OON billing.

• EIN Tax Identification Number: helps separate your business finances and liability from personal.

• Business Bank Account and Credit Card: Same as the above - helps protect personal assets in terms of liability concerns. Also learn what expenses are tax deductible and put all of those on your business credit card including meals during which you talk shop.

• Liability Insurance: Trust seems to be the most common company.

• Retirement Savings: you can setup a 401(K) and Roth 401(K), whole life insurance, and get your own disability insurance and term life insurance.

• Electronic Health Record System (EHR): I use Simple Practice after testing all the competitors at the time (2020), and it still seems to be at the top of the charts. It costs a little more, but worth it for the simplicity (it's even in the name!). It has everything under one roof, and since I've ironed out all the insurance claims issues for my caseload, I just click "create and submit claims" at the end of each day. But decide what you want to pay for! Features can add up - I do not think AI Scribe services are worth it and I did my own claims management until I hired more therapists into the group practice - most will charge 6% of all claims(!!) on top of your normal +/- 3% credit card processing fees, but our contract specifies we only pay for the claims we request help with (I take a look and then hand it off if I can't fix it quickly).

• Recruitment Plan:

  • Psychology Today was all I needed, at $30/month, when I started, but it seems over the last 6-months the well has run dry. I found out they are working with other companies like Tava, and I wonder if they are prioritizing sending clients there. ZocDoc is both an outright scam and possibly worth the headache.

  • A website is a long-game and nowadays, Google is de-prioritizing websites that are not made with newer technologies that essentially require you to hire someone to build them. This will be a multiple-thousand dollar endeavor to build a modern website and market - it takes 6 months to a year for SEO to get you at the top of Google search pages. I built my own and turned it off for a few years until I transitioned to a group practice, then reinvested in a new site, SEO and marketing to support my team and legitimize the business.

  • Google Business Page is free and, while not a major source of referrals, and important thing to have.

  • Insurance companies send some, but also pull on your network, send business cards or letters to primary care offices and other local agencies. Connect with programs that match your areas of specializations - lots of eating disorder programs want to send us clients.

  • LinkTree is a good resource to manage all your links and important if you want an Instagram presence.

  • LinkedIn is a good place to build a presence, but likely won't fill your practice. Create a page for your company.

  • Facebook: create a business page and join related groups including local ones.

  • Instagram: I have one with a solid group of followers. Probably good for SEO, but I'm too old to understand it.

• Estimated Taxes: Pay your estimated taxes! You will owe for your tax bracket and technically, FICA as well which you will get reimbursed for if you don't have any W2 employees. Some people don't pay FICA or their entire estimated taxes - paying some avoids possible issues down the road. I'm not a CPA and can't offer advice. We have to do federal, state and local.

Quarterly Estimated Income Tax Template

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Choosing a Location

Your practice's location has a significant effect on its success. Think about factors such as:

• Accessibility: Make sure your office is easily reachable by public transport or has sufficient parking options to cater to different clients. Unfortunately many therapy offices are on the 2nd floor, giving more privacy but less accessibility for those who are not fully able.

  
  

• Demographics: Study the area's demographics to see if they match your target population. For instance, if you're targeting young adults, a location near universities could be beneficial. You will find this correlates to social and political values, sometimes reimbursement rates, and your advertising dollars will go further in zip codes with larger populations.

  
  

• Environment: Create an office ambiance that conveys safety and calmness. This could be achieved through using soft lighting, comfortable seating, and soothing colors.

Conclusion

Hopefully you feel overwhelmed - its not my intent, this just is overwhelming. But doable. Get your ducks in a row. Get help. And see part II when it publishes on practice groups.