Concerned about the salary of a Psychologist - Please help!

[IsItOver]

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How can it cost $100k to start up a psychology practice. Although legally not a good idea, you don't have to form an LLP or PC to start, but if you did that would be max $1500-3,000 depending on your location. Then, there's insurance, which I don't know about, but it can't be that bad. Then renting space and utilities, which depends on where you are going to practice and who you know already. I take it that the $100k is inclusive of foregone income? It seems like it would be a good idea to do something part time as a provider, teaching at a college, something just to work on paying the rent while you are setting up the practice. Before you even start you could get a website (couple hundred bucks, maybe more) and work on coaching and things like that, maybe book some speaking engagements at various places that could be potential client sources. Market saturation is really not a major roadblock if you have a niche and can network your tail off. A niche doesn't have to be one from school or very specific training (e.g., neuropsych), but could be based on your personal experiences - e.g., if you have a loved one with MS, you may have special knowledge there....network your tail off with an MS treatment center and offer free seminars on coping with chronic illness. I don't know. I still don't see how it can actually "cost" $100k to start a psychology practice. That makes no sense. If you are counting foregone income and loan payments, maybe I get that. I also think that psychology is no different than any other business - from fast food franchises to lawyers offices - there is a build up period and it requires a ton of networking and effort. But anytime you work for yourself there is sacrifice involved. (Also, I am assuming that this advice is applying to someone who did not attend an unfunded program.)

I am not regularly part of this forum but just happend to come across it and thought I could offer my two cents. I actually took a graduate class on how to open and maintain a private practice, and while the exact numbers escape me at this moment, the cost was definitely not in the 100k range. Also, like you say, how much one spends is largely up to the individual, and the location in which they are establishing themselves. It is very common for psychologists to go into private practice at least part time. You can actually rent space by the day (every Tues and Thurs for example, instead of full-time), which is what my therapist did. Even at $1000 per month you would only need 10 client hours at $100 (a very reasonable hourly fee in most major cities) to pay that off.

 

[JockNerd]

Even at $1000 per month you would only need 10 client hours at $100 (a very reasonable hourly fee in most major cities) to pay that off.

lol

Is this the same kind of financial math that makes people think "Oh, sure I'll run 100,000 in debt to get my degree... I'll make 50k/year starting, and have my debt paid off in just two years!"

 

[deleted176373]

I am not regularly part of this forum but just happend to come across it and thought I could offer my two cents. I actually took a graduate class on how to open and maintain a private practice, and while the exact numbers escape me at this moment, the cost was definitely not in the 100k range. Also, like you say, how much one spends is largely up to the individual, and the location in which they are establishing themselves. It is very common for psychologists to go into private practice at least part time. You can actually rent space by the day (every Tues and Thurs for example, instead of full-time), which is what my therapist did. Even at $1000 per month you would only need 10 client hours at $100 (a very reasonable hourly fee in most major cities) to pay that off.

Ya, that works great when you still live in your parent's basement. Now lets add in your own living expenses... Let's say you want to make $52,000 per year (a very modest sum.)

You have to make at least $1,000 over what you run in expenses. Rent, Insurance, Supplies, Taxes, Business Licenses, Advertising (unless you plan on only getting clients from Craigslist.), Professional Fees, Conferences and Continuing Education. I would estimate you need to take in 3 times what you want to make in salary. So if you want to make $100k per year, you should be billing $250-300k per year.

Let's be real here... Renting space by the day makes little sense for most people trying to run a real business. It's possible, but where do you keep your records? Do you carry them too and fro each day?

How are you records secured? (in your mothers basement is the wrong answer.)

It's not as easy as some would have you believe.

Mark

 

[PsyDr]

since there seems to be such anger at my 100k figure, i will elaborate.

in my experience, business plans require a minimum looking forward 1 yr .

so, when approaching the bank 100k for a year seems reasonable.

here is a basic list of needs:
-articles of incorporation + filing fees etc = $500-1000
- office rent (1.5-3k/mo or approx 18,00 to 36,000 for a year).
-office manager to handle insurance and scheduling (30-40,000/year)
OH NOS, NOW WE HAVE SPENT 48,500-77,000.
AND YOU HAVEN'T EVEN PROVIDED FOR YOURSELF YET
-furniture = (1-5k) unless you can convince your patients to sit on the floor
-various office supplies( e.g., fax machine to send stuff to insurance, business cards, a generic computer with billing software, telephone line, shredder, etc= 2-5k)
-insurance for property liability in case someone slips and falls
-insurance for professional liability
-a very base salary to cover your personal expenses like eating, drinking, not living under a bridge etc. say 30k.

total for that is about 83-120k

actually writing stuff up like this and taking it to a bank will get you a small business loan.

alternately:
-sublet an office (500-1000/mo). subtract loss of opportunity as the lessor will undoubtedly want "prime" hours when most therapy patients want to come in
-articles of incorporation + filing fees+ taxes, etc. 1000-3000
-figure out how to pay for your lifestyle (rent, car, food, etc) 30k min
-professional insurance
-file keeping in your house, thereby opening yourself up to lose personal property in a lawsuit
-doing all your own billing (get ready to be on the phones at 7am)
-business telephone -60moX12 mo= 720
-various office sundries : computer with billing software, business cards, fax machine, =1000-3000

even that is is minimum 40k.


i think a lot of people who do not have to get business loans have another source of income (e.g., spouses, family money, etc) that allows them to sublet a place and try to bill for themselves at night while the alternate revenue stream provides for them. but i don't think that they are real business people.

 

[Annakei]

I am not regularly part of this forum but just happend to come across it and thought I could offer my two cents. I actually took a graduate class on how to open and maintain a private practice, and while the exact numbers escape me at this moment, the cost was definitely not in the 100k range. Also, like you say, how much one spends is largely up to the individual, and the location in which they are establishing themselves. It is very common for psychologists to go into private practice at least part time. You can actually rent space by the day (every Tues and Thurs for example, instead of full-time), which is what my therapist did. Even at $1000 per month you would only need 10 client hours at $100 (a very reasonable hourly fee in most major cities) to pay that off.

I agree with this. In my area, there are companies that actually allow you to rent office space as needed for $10/hour. There are other plans where you just pay under $200/month and you get similar benefits. I gasped when I saw that as well but it's true. This company is located in a prime area, next to subways/transportation and has parking. They also cater primarily to mental health practitioners. It's a classy setup, there's a waiting area, with couches, flat screen and receptionists who will answer the phone with your business name.

With overhead you just have to get creative.

Re: PSYDR's comment:

-articles of incorporation + filing fees etc = $500-1000
Here, it costs no more than $200. Print off the paperwork fill out the information and take it down to the office to he filed.
- office rent (1.5-3k/mo or approx 18,00 to 36,000 for a year).
See my comments above
-office manager to handle insurance and scheduling (30-40,000/year)
See above. For less than $200/month you can have someone do that for you in my city. Furthermore, there are many psychologists who dont even bother with having a front office person unless it is a large group practice. Also many have moved to electronic systems such as Penelope where they self manage insurance, billing, scheduling. Really guys it's not that hard LOL
OH NOS, NOW WE HAVE SPENT 48,500-77,000.
AND YOU HAVEN'T EVEN PROVIDED FOR YOURSELF YET
-furniture = (1-5k) unless you can convince your patients to sit on the floor
Target and Craigslist are your friend. People give away office furniture all the time here.
-various office supplies( e.g., fax machine to send stuff to insurance, business cards, a generic computer with billing software, telephone line, shredder, etc= 2-5k)
This can be done electronically without the need for a fax machine. Send2Fax.com is a program that comes to mind. You can go paperless if you're tech savvy enough. But otherwise, an all in one printer would work and those cost between $150-$500. Check out Google Voice for a business line at no cost to you.
-insurance for property liability in case someone slips and falls
-insurance for professional liability
Agreed
-a very base salary to cover your personal expenses like eating, drinking, not living under a bridge etc. say 30k.
Not sure where you're getting this figure as you'd need to establish an hourly rate and then finalize net income.

I should also add that I work for a psych practice and have been here since they got started and it certainly did not cost 100k to get started. I think the CEO would choke if I told him someone said that. The reality is that there are many many resources out there that you need to check into before determining realistic numbers. I realize that everyone doesnt live in what I call the mental health mecca where we have companies willing to cater to the needs of those in this field but there are many resources out there to help cut down on cost.

 

[PsyDr]

annakei,

in response:

-my #1 problem with your disagreement with me is that you offer NO WAY of supporting yourself while waiting for your business to become profitable. imo, it is extraordinarily naive to believe that you will hang a shingle and your schedule will fill up. while your practice is building (i.e., not being profitable), i have no idea how you would pay static cost of living expenses such as rent, food, car/insurance, health insurance, etc without a business loan unless you have someone supporting you or have substantial savings. business loans require projections into at leasst one year.

in your scenario, someone opens a private practice:

they require:
-$200 for articles of incorporation filed with no professional consultation
-$2400 for rent/year
-roughly $1500 for computer + software
-$2-5k for insurance
-i guess you are taking free furniture from craigslist which is moved by friends. and/or the rental place has furniture
-i guess no business cards
-i guess no office decoration
-minimum 30k (from your description of a major metro area, 30k won't even come close to covering cost of living ) to support yourself while waiting for patients show up in sufficient number to cover overhead
-i guess there is no marketing budget or it is coming out of your personal finances, so i am unsure how people will learn about you. phone book? sandwich board?
-professional fees for membership/journals/etc come from ??? min =100/yr or you could be a louse and violate ethics standards and not remain current.
-a few hundred to file corporate taxes (my paperwork was over 200 pages last year, so i am pretty sure that most people will not do this)



-i understand the filing fees are not substantial. the articles of incorporation are the bulk of the cost. i find such paperwork important enough to hire someone to write, as they determine personal liability in the event of a lawsuit and/or corporate bankruptcy. then again, i like all my stuff.

-the setup you mention is not available in most areas. it is certainly not in mine.

-in your set up, agreed on receptionist.

-self managing insurance is, imo, a massive waste of time. if you see a patient for generic insurance company A, you might have to
1) get call from patient, listen to them, find out insurance (5-10min)
2) call insurance, get precert (5-10min) sometimes much much more
3) see patient (50min)
4) fill out insurance paperwork + fax it in (5 min)
5) get denied (30 seconds to open the letter)
6) request an appeal (5-10 min on phone; occasionally 30+min)
7) talk to insurance company (5-10min)
8) get check deposited and/or e-deposited (depends on tech savy)

so, in the course of a generic get denied, appeal, etc process, you can easily spend 30 min to get reimbursed $100 for the original 50 minutes. in other words, for a cash service, you would make $2/min. if you have some very minor problems you make $1.25, effectively a 40% pay cut. if you are not busy, then i guess this is ok. when i am at work, i am there to make money, otherwise i am going home.

with no office manager, you would also have to get on insurance panels yourself. that is weeks worth of work, that will cost you, if only in lost opportunity.

then again, some people are willing to do this.


-i find it terribly unprofessional to have second hand furniture. imo, money breeds money. to some extent a high end office= high end patients. conversely, a sofa with a blanket over it brings in lower end patients with lesser insurance. but, that is just my opinion and taste.

-sendtofax, googlevoice, etc still requires a computer. imo, mixing personal assets (e.g., personal computer )with business assets is extremely risky and likely a violation of general article of incorporation.

-sendtofax and googlevoice are in direct violation of HIPPA.

-where does document storage take place in your scenario? does it comply with HIPPA standards for offsite storage? what is the cost?


it all seems so simple to open your own practice, make $100/hr, see 40 patients a week and bring home 200k. until you actually start to put a little bit of thought into it.

 

[Annakei]

Folks who have started practices in my area have done so while working another job be it FT or PT. They do this in such a way that allows them to see private clients on the evenings and weekends. As the practice builds, depending on their day jobs they may decrease their hours, change their schedule or quit altogether. CEOs, clinical directors and chief of staffs here of state agencies are indeed doing this. They have a FT/PT day job and have a private practice they operate in the evenings. Some have left their day jobs when the practice filled up enough to support themselves without a day job. And, frankly the psychologists that I know have their hand in several pots: research, teaching, consulting and clinical practice. Call me naive but as Ive said many other times here, it works in my neck of the woods. Not everyone MUST have a business loan and it doesnt have to cost close to $100k to open up a new practice. If that were the case then we wouldnt have as many as we do here. I know this from experience, so call me naive but my experience personally and professionally supports my position.

I dont know about 2-5k for insurance. The last time my boss renewed his malpractice insurance, that was no where close. The building you rent space from typically has a master policy that covers physical accidents (slips and falls, snow not being shoveled) and you get malpractice insurance for yourself. Basic business insurance, I happened to secure this the other day for a private venture (yes, my naive experience ) and it wasnt even close to $2k.

Yes, I have helped friends get free furniture that businesses who are shutting down were giving away and it cost them $59 to have it hauled to their office location.

Office decorations: again Target is your friend. Depending on your needs that may cost less than $200.

Articles of Incorp. Again this is a personal decision and not an issue for me personally because I do have attorney friends that are able to review the information for me. If not then I suggest that you buy a kit online to help guide you in the process. Once you show me how it's done the first time then I am certainly able to do it for myself moving forward with little guidance.

Marketing: this where your naivete comes in to play. If you understood how marketing successful psych practices really work then you know that MOST successful practices come as a result of word of mouth which is through patients giving recommendations to friends, colleagues and family, networking at local meetings/conferences/CEU courses and doing presentations in the community to get your name out there. I have watched my current psych group go from a no name to established within our community doing the above mentioned. Again, several psychologists, including former professors of mine are WELL KNOWN in the community and have thriving practices.

Keep good records and you can go the Turbo Tax route or just get a tax person to do the work for you. Either way it's a at least $200 to file.

Furniture: Again this is a personal choice. Keep in mind not all second hand furniture is bad at all. The same "high end" folks you speak of told me they do this very thing so frankly, you don't know what you're talking about. The group practice I visited with last week told me that the BEST office they furnished, all items were from a thrift store. I would post pictures but I don't know who reads this board. Once the furniture is moved in, they just have someone come in and clean it and it dries almost new.

I never said this was easy, but what I have said is that it takes time and thinking outside of your box. No, patients won't come running once you set up shop, but if you're smart about your networking then you can be successful. To each their own.

Tell me how Googlevoice is any different from Vonage, Verizon Wireless, ATT
and the like? GV is an emerging technology and until you show me specifically where Google Voice is in violation then it's a matter of HIPAA specifically outlining that this technology is in violation. Google Voice simply gives you a business# for FREE and allows you to receive messages via email by transcribing your voice mails so that you can read them in your account which can also be used as part of your Google office enterprise/Google business suite.

Send2Fax is no different than emailing documents between a clinical team which happens more often than you think. Again, your naivete is showing here. Send2Fax just makes it easy by allowing you to for example, fax a monthly report to the assigned SW directly from your computer to her/his fax machine in the office. Or the SW filling out an intake form and then faxing it over, the difference with Send2Fax being that it shows up in your secure email account rather than some random fax where anyone can pick up the information. IMO it's way more secure than a traditional fax machine. At least with an email program, I have a complex password which has a smaller likelihood of being discovered : colleagues, cleaning people and other clients in your office.

Regarding the below, the folks I deal with hardly if at all deal with insurance because the time required to deal with the paperwork reduces the effective hourly rate. The ones that do, have done so enough time to streamline the process via electronic software and ask the patients to come to the first session with certain information. I dont know other than 1 practice that takes straight insurance in my area, the most they do is provide you with the information you'll need in order to get the sessions covered.

-self managing insurance is, imo, a massive waste of time. if you see a patient for generic insurance company A, you might have to
1) get call from patient, listen to them, find out insurance (5-10min)
2) call insurance, get precert (5-10min) sometimes much much more
3) see patient (50min)
4) fill out insurance paperwork + fax it in (5 min)
5) get denied (30 seconds to open the letter)
6) request an appeal (5-10 min on phone; occasionally 30+min)
7) talk to insurance company (5-10min)
8) get check deposited and/or e-deposited (depends on tech savy)

annakei,

in response:

-my #1 problem with your disagreement with me is that you offer NO WAY of supporting yourself while waiting for your business to become profitable. imo, it is extraordinarily naive to believe that you will hang a shingle and your schedule will fill up. while your practice is building (i.e., not being profitable), i have no idea how you would pay static cost of living expenses such as rent, food, car/insurance, health insurance, etc without a business loan unless you have someone supporting you or have substantial savings. business loans require projections into at leasst one year.

in your scenario, someone opens a private practice:

they require:
-$200 for articles of incorporation filed with no professional consultation
-$2400 for rent/year
-roughly $1500 for computer + software
-$2-5k for insurance
-i guess you are taking free furniture from craigslist which is moved by friends. and/or the rental place has furniture
-i guess no business cards
-i guess no office decoration
-minimum 30k (from your description of a major metro area, 30k won't even come close to covering cost of living ) to support yourself while waiting for patients show up in sufficient number to cover overhead
-i guess there is no marketing budget or it is coming out of your personal finances, so i am unsure how people will learn about you. phone book? sandwich board?
-professional fees for membership/journals/etc come from ??? min =100/yr or you could be a louse and violate ethics standards and not remain current.
-a few hundred to file corporate taxes (my paperwork was over 200 pages last year, so i am pretty sure that most people will not do this)



-i understand the filing fees are not substantial. the articles of incorporation are the bulk of the cost. i find such paperwork important enough to hire someone to write, as they determine personal liability in the event of a lawsuit and/or corporate bankruptcy. then again, i like all my stuff.

-the setup you mention is not available in most areas. it is certainly not in mine.

-in your set up, agreed on receptionist.

-self managing insurance is, imo, a massive waste of time. if you see a patient for generic insurance company A, you might have to
1) get call from patient, listen to them, find out insurance (5-10min)
2) call insurance, get precert (5-10min) sometimes much much more
3) see patient (50min)
4) fill out insurance paperwork + fax it in (5 min)
5) get denied (30 seconds to open the letter)
6) request an appeal (5-10 min on phone; occasionally 30+min)
7) talk to insurance company (5-10min)
8) get check deposited and/or e-deposited (depends on tech savy)

so, in the course of a generic get denied, appeal, etc process, you can easily spend 30 min to get reimbursed $100 for the original 50 minutes. in other words, for a cash service, you would make $2/min. if you have some very minor problems you make $1.25, effectively a 40% pay cut. if you are not busy, then i guess this is ok. when i am at work, i am there to make money, otherwise i am going home.

with no office manager, you would also have to get on insurance panels yourself. that is weeks worth of work, that will cost you, if only in lost opportunity.

then again, some people are willing to do this.


-i find it terribly unprofessional to have second hand furniture. imo, money breeds money. to some extent a high end office= high end patients. conversely, a sofa with a blanket over it brings in lower end patients with lesser insurance. but, that is just my opinion and taste.

-sendtofax, googlevoice, etc still requires a computer. imo, mixing personal assets (e.g., personal computer )with business assets is extremely risky and likely a violation of general article of incorporation.

-sendtofax and googlevoice are in direct violation of HIPPA.

-where does document storage take place in your scenario? does it comply with HIPPA standards for offsite storage? what is the cost?


it all seems so simple to open your own practice, make $100/hr, see 40 patients a week and bring home 200k. until you actually start to put a little bit of thought into it.

 

[PrisonPsych]

My malpractice insurance through CPH costs me about $200 a year.

 

[PsyDr]

annakei,

i never called you naive. i said it was naive to think that hanging a shingle would result in a full schedule. which i stand by. and you later agree with in the most recent post when you stated, "no, patients won't come running once you set up shop". as far as i can see, we agree and then you call me naive ,and question if i understand marketing.

this stemming from my defense of my opinion that 100k is a good number for starting a private practice. which is based on my experience. i find my estimate reasonable and hedge most of my opinions by saying they are such. should you disagree, i would urge you to keep a professional tone, not use ad hominems, and simply present your divergent viewpoints.

a lot of what we disagree about is a matter of tastes: furniture, managing risk by consultation with professionals about things like article of incorporation, etc.

-building insurance is just that. it covers slips and falls in the hallways and lobby of the building. like in a condo, you are provided with a property insurance. this insurance does not cover what happens inside your unit. you have to purchase this insurance on your own in case of fire, slip and fall, etc. add in professional insurance, and any other insurance you personally want (e.g., disability, health, etc). 2-5k seems reasonable to me.

-send2fax is NOT HIPPA compliant. HIPPA specifically states that fax and email are 2 entirely different entities. there are specific email account requirements (HIPPA section 163). and then there are specific fax requirements. please see HIPPA for further reference.

-i think it is great that you know people that can do a fee for service business. however, when dealing with insurance the scenario i presented happens semi-frequently in my experience.

 

[Annakei]

Send2Fax is indeed HIPAA compliant. You should check fact check statements before posting them here: Secure fax distribution from Send2Fax is HIPAA compliant. from the Send2Fax website:

Internet Fax Solution Options

Send2Fax is a leading electronic messaging company. We are continuously developing new Internet fax solution options everyday to ensure the best customer service.

Our core services currently include the following:
Desktop Fax
Secure Desktop Fax (HIPAA, GLB Compliant)
Secure Email and Secure Fax Combination Services
Secure Storage and Secure Fax Combination Services
Integration of Internet Fax with Your Software or Web-based Application

annakei,

i never called you naive. i said it was naive to think that hanging a shingle would result in a full schedule. which i stand by. and you later agree with in the most recent post when you stated, "no, patients won't come running once you set up shop". as far as i can see, we agree and then you call me naive ,and question if i understand marketing.

this stemming from my defense of my opinion that 100k is a good number for starting a private practice. which is based on my experience. i find my estimate reasonable and hedge most of my opinions by saying they are such. should you disagree, i would urge you to keep a professional tone, not use ad hominems, and simply present your divergent viewpoints.

a lot of what we disagree about is a matter of tastes: furniture, managing risk by consultation with professionals about things like article of incorporation, etc.

-building insurance is just that. it covers slips and falls in the hallways and lobby of the building. like in a condo, you are provided with a property insurance. this insurance does not cover what happens inside your unit. you have to purchase this insurance on your own in case of fire, slip and fall, etc. add in professional insurance, and any other insurance you personally want (e.g., disability, health, etc). 2-5k seems reasonable to me.

-send2fax is NOT HIPPA compliant. HIPPA specifically states that fax and email are 2 entirely different entities. there are specific email account requirements (HIPPA section 163). and then there are specific fax requirements. please see HIPPA for further reference.

-i think it is great that you know people that can do a fee for service business. however, when dealing with insurance the scenario i presented happens semi-frequently in my experience.

 

[psychmama]

Wow! is the sniping really necessary. While I'm interested in this topic, I'd rather read this thread without the rancor and condescension. Are we not all on the same team here?

 

[PsyDWannabe]

Wow! is the sniping really necessary. While I'm interested in this topic, I'd rather read this thread without the rancor and condescension. Are we not all on the same team here?

i agree guys, though the information is helpful (and thanks for taking the time to offer input), seems a little bit like tempers are flying here

 

[PsyDr]

i'm really not mad.

i just wanted to clarify my opinion.

annakei took exception to them and called me names.

still don't understand what that was all about.

 

[Annakei]

i'm really not mad.

i just wanted to clarify my opinion.

annakei took exception to them and called me names.

still don't understand what that was all about.

I called your statements naive, I never called you names and don't feel the need to scapegoat you either by playing the victim. I stand by my previous comments. 🙂

I'm quite fine. This is a message board and I've been a member here for a few years now, every now and again spirited discussions arise and you just go with the flow. No hard feelings at all. I don't know anyone here personally so it's not that serious at all for me to be "mad". Carry on 🙂

 

[psychmama]

...so happy we're one big happy family again!😉