Private practice

I’ve compiled this information for graduate students in clinical psychology who are considering private practice as a career option.  I have led workshops on this topic for students at Roosevelt University, and share this in the hope that it will help them understand what the elements are in private practice work.

A word of caution, though.  There’s a lot of information here and therapists will spend a considerable amount of time making the decisions that I am outlining.  This is intended to give you a view from 30,000 feet about the process rather suggest that these are all actionable decisions at the start of your career path. Be sure that you bookmark this page for farther down the road, too.

Let’s begin with the basics:

Psychologists work in different settings that have different rates of pay.  This is a factor to consider when you are thinking about employment options.  Salary data can be limited because it isn’t always available to the public, and there can be significant amounts of variation around the average.

Bureau of Labor Statistics earnings data for clinical/counseling psychologists (May, 2022) and for mental health counselors (May, 2022).

The American Psychological Association also has salary data, but it hasn’t been updated in many years.  Salary data from the American Psychological Association (2015)

There are other sites that you can look at that have greater specificity, like Glassdoor or Indeed, but that information should be considered more tentatively because of how it is compiled.

Figures from these sites need to be interpreted within a broader framework. For instance, salary isn’t the same as compensation (which also includes the value of your benefits, like health insurance or retirement contributions). Some jobs provide these, others do not. Some positions allow for loan forgiveness, which can be computed as an addition to your compensation. There’s also an important difference between gross income (the amount of money that comes into a practice) and net income (the amount that remains in your bank account after expenses and perhaps taxes).

All of these financial calculations are set against your psychological backdrop.  What are your attitudes or scripts about money?  What are your thoughts on being an entrepreneur/small business owner?  How do you approach professional risk vs. potential reward? These will feed into your career choices and decision making.

“Is private practice right for me?” represents the most basic question that you should ask yourself.  There are advantages (e.g., flexibility, autonomy, potential high pay, potential to be entrepreneurial) but there are also disadvantages (e.g., more uncertainty, less of a safety net compared with other employment options).  There are then variations, such as will your private practice be full-time, almost full-time, or part-time.

The most fundamental distinction within private practice is whether you are a solo practitioner or if you are part of a group private practice. Solo practitioners do all of the work, assume all of the risk, and they also receive all of the income (after expenses, that is).  Psychologists in a group practice receive a portion of the income that they generate. Most often, they are independent contractors and split clients’ payments with the practice owners (e.g., they receive 60%, and the practice receives 40% of client payments). A smaller number of practitioners are hired as employees and receive a fixed amount of money as a salary payment (either on an hourly basis or a flat/annual basis).  It is good to know the difference between being an employee and an independent contractor if you are part of a group practice; the terms of these agreements vary and matter.

Here are some links to help you think about the differences between solo and group practices so you can better navigate this decision.

Solo vs. group practice
Questions to consider when joining a group practice
Sample independent contractor contract for a group practice

You’ll need name your business if you’re in solo practice, set up your business structure, and apply for your tax identification number (EIN) and your NPI number.  You’ll also need to think about where you want to have an office or the extent to which tele-therapy will be a part of your practice.

Many private practitioners need to then think about how they are positioned in the marketplace.  Several questions are part of these decisions, such as: Why should clients choose to work with me rather than someone else?  How can I distinguish myself in the therapeutic market?  Should I specialize?  Are there ways in which I can expand to increase my compensation?  Here are a few readings that address this process.

Building and managing a private practice
Opportunities outside of managed care – 1
Opportunities outside of managed care – 2
Passive streams of income

Another fundamental decision for therapists in private practice is whether they will accept insurance, which is also called third party payment.  If you are in solo practice, you will make this decision for yourself.  If you are part of a group practice, this decision will likely be made for you.  There are many aspects to consider when making this choice that are likely both positive and negative (e.g., being able to offer your services more affordably to the vast majority of clients, increased pool of potential clients, rates set by insurance rather than yourself, additional requirements to participate in insurance panels, burdens in terms of billing and accounting).  Here are some links about making this decision, rate differences, and a link on how to become credentialed.

Will you accept insurance?
FairHealthConsumer.org (see local rates for 90834 and 90837)
CAQH and credentialing

More recently, large companies have stepped into the marketplace that allow private practices to connect into their insured client base.  Rather than joining different insurance networks, private practitioners contract with these companies directly.  Under these scenarios, they deal with insurance so you don’t have to and they then pay you directly. However, they take a cut of your compensation.  These include:

Alma
Headway

These are different than the telehealth companies that are funded by venture capital.

As you prepare for take-off, you’ll also have to consider other important elements of your business.  A necessity is your malpractice or liability insurance.

The Trust malpractice insurance
American Professional Agency insurance

You will be looking into electronic medical record systems, too.  These integrate different functions of your practice, such as scheduling, charting, and billing.  I use TherapyAppointment and there are many other software options

Marketing is also an important part of building up your client base.  Group private practices reduce this need in some but not all instances; solo practitioners definitely need a way for clients to find them.  The traditional strategies involve networking, creating partnerships for referrals, and in some cases print advertising.  More common strategies nowadays are online therapy directories which have monthly subscriptions.  Here are some of the most common:

Psychology Today directory
GoodTherapy.org directory
Mental Health Match directory
Therapy Den directory
ZocDoc (this one is different because it allows for direct scheduling with providers)

Another common element of marketing is having a webpage for your practice, which can be especially important for solo practitioners.  It begins with securing your website address, and then moves into creating a webpage.  There are services that assist with webpage design and search engine optimization, but some people will design their webpages themselves using sites like WordPress.

GoDaddy domain name purchase
TherapySites and Counseling Kit

I strongly encourage practitioners to think about joining PSYPACT so they can serve clients from across the country through telehealth.  You can see the current map of states that have signed on to this agreement.

There are additional readings that provide much greater depth on all of these topics.  Here are some of my favorites.

• “Thriving as a therapist” by Megan Gunnell
• “Private practice made simple,” by Randy Patterson

• “Financial success in mental health practice,” by Steven Walfish and Jeffrey Barnett
• “Getting better at private practice,” edited by Chris Stout
• “Handbook of private practice: Keys to success for mental health practitioners,” edited by Steven Walfish, Jeffrey Barnett, and Jeffrey Zimmerman
• Practice Institute Blog

There are also professional associations that can be helpful as well.

APA Division 42, Psychologists in Independent Practice
Illinois Psychological Association
APA, Practice Directorate
Illinois Mental Health Counselors Association

There are many other decisions to make in private practice that involve working with professionals such as accountants and attorneys.  These include choices such as the structure of your business (i.e., whether to be a sole proprietor or form an LLC/PLLC or an S-Corporation, ensuring regulatory compliance); how to establish professional accounts (e.g., business banking and credit cards or even obtain a small business loan); how to track expenses and file taxes for your practice income; or how to save for your retirement, which is especially important given that there isn’t necessarily a 401K plan from an employer.

As you can see, there are a lot of moving parts to being successful in a private practice!  It will be a great career option for many psychologists for a variety of reasons, but it may not be the best fit for everyone above and beyond your area of specialization.

Also, remember my caution from the top of this webpage — there’s a lot of information and you are not supposed to have things figured out at this point!  However, it is nice to have a roadmap for the journey ahead if you choose this route.

A concluding question for your consideration, especially if you are thinking about being a solo practitioner, is — how comfortable am I with being a small business owner?  Personally, I have found it to be very meaningful and fulfilling as one part of my own career.