PhD/PsyD private practice percentage cut

[stel4]

Hi all,

I'm currently finishing up my postdoc with a small group practice in a major city. They have offered me a psychologist position once I'm licensed which comes with a shift from (poorly) salaried to fee-for-service. Both positions include full benefits. However, the percentage of fees that I'd be keeping seems quite low, and I'd like to ask for a higher cut, but I'd like to try to do some research to justify my request in the first place. Unfortunately, my usually acceptable google-skills aren't cutting it here, so I thought I'd ask you folks if any of you can direct me some non-anecdotal resources that might help back up my request. I've looked at some of the posts on the forums here, but I'm trying to find something more formal indicating what might be expected.

Here's the basic info for our practice.

We are out of network (no insurance), and most of the clinicians on staff (myself included) typically carry a full caseload of between 20-30 billable hours/week. While we do see a small number of clients on a sliding scale basis, the reality is that we are not cheap. I'd guess that 90% of our clients pay the full hourly rate (well over $200/hour). Most of our expenses are covered by the clinic, and they are responsible for the majority of the referrals (although we are all expected to network and market ourselves as much as possible). There support staff also takes care of billing.

The percentage cut for psychologists on staff depends on how many clients you see each week, but assuming I average 20 clients per week (expected, given my current caseload), my percentage (assuming no clients are sliding scale) is 35%. If I average 25 clients per week, it goes up to 38%.

How does this compare to similar practices in most major cities? Do any of you know of any material posted online (ideally through APA - but anywhere would be great) that indicates what percentage of fees a psychologist in a group practice should expect to keep?

Thanks a bunch!

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[Pragma]

I never took below 75% in a major city, but I knew folks at 50-60%

 

[WisNeuro]

I don't know if APA can formally come out with material on these types of things (% cuts and fees) for fear of price setting/collusion. Also, I imagine it will vary wildly by geography/demography. Best bet may be a backchannel inquiry from the Div 42 or 12 listservs.

 

[Therapist4Chnge]

I believe having a 3rd party handle the data (e.g. consulting company) is fine, it just can't be the five independant psychologists who live in AnyTown, USA who share the data AND THEN collude to set the pricing together.

The laws around this are pretty clear and psychologists tend to over-react and don't share any data...which benefits only insurance companies.

 

[WisNeuro]

Sharing data is fine among individuals, I just don't think the APA itself can come out with a statement saying "we recommend charging X an hour" or "x% cut is a standard."

 

[OneNeuroDoctor]

Percentage varies between 60% and 70% after being fully licensed. Typically it is based on collected billing. Some agencies have benefits and other are completely independent contractors.

 

[PsyDr]

I've been offered anywhere from 50-80%. The high dollar required me to pay some expenses. Obviously I did not take them.


In my own pp, expenses are around 35%. The HUGE bottleneck that no one talks about it the cash flow. One day you may get 20k from a provider, one or two months you get zero. This can be problematic with staff wanting their paycheck so. Not that big of a deal so long as you have cash reserves, a properly set up LLC, and an accountant. It's getting the cash reserves up and running that is hard. That's worth something. As is a stable of clients willing to pay cash.

 

[Therapist4Chnge]

Having reserve cash flow is definitely one of the harder things to stabilize in the first 6-12 months. As PSYDR mentioned, having some cash pay patients mixed in really can make a difference, particularly if you do assessment work. I didn't have a steady cash flow in my part-time PP (assessment only) until about a yr in.

My turn around billing insurance is anywhere from 5-8+ wks. I've had to fight 6+ months for some of the payments, so if you get a few cancellations and have a few large payments in dispute in a month, that can easily be a $15k+ swing for the next month. Conversely, there are months when cases get resolved and my receivables are double or more. Building up a solid reserve is essential.

 

[smalltownpsych]

Using your numbers, 20 clients at 35 % of 200 times 50 weeks = 70000. You would be generating 200k in gross revenue for them. 130k in overhead seems a bit much. I would want to be the guy hiring you with those numbers. I don't think you would want to stay very long with those numbers as you could likely do better elsewhere. I get 60% of gross billing and a great benefits package. We don't charge nearly as much, but I also schedule 40-50 patients a week and usually see 30-35.

 

[Therapist4Chnge]

I missed the 35% mentioned in the first post….ouch. A good rule of thumb for a private practice setting is that overhead will be ~30%. Obviously there are variances for locality (e.g. NYC v. Omaha) and also services included in the overhead (e.g. who is responsible for getting referrals, do you have admin support, etc), so it is difficult to give solid #'s without being familiar with the local market. That said, 35% is a tough cut. As smalltownpsych mentioned, as an employer I'd *love* to offer 35% of receivables, though cuts are typically 50-70% for full-service support. If you are just renting an office, then a flat fee is the far better economic choice.

There are some good psych specific resources out there that cover private practice work. Steve Walfish & his partner(s) have a consulting business ("The Practice Institute") that gives talks and I think CEs about starting/running/working in private practice. I haven't attended any of their talks or seen what they've done since setting up TPI, but I'm familiar with Walfish's prior work and it is excellent. Zuckerman's, "The Paper Office" is an excellent resource too…I think it has multiple editions, so make sure to buy the most recent one. I'm not sure they'll have *exactly* what you want, but they cover enough about setting up and running a practice that you can figure out some rough numbers about cost/revenue from various types of staff (including your type of position).

 

[stel4]

I've been offered anywhere from 50-80%. The high dollar required me to pay some expenses. Obviously I did not take them.


In my own pp, expenses are around 35%. The HUGE bottleneck that no one talks about it the cash flow. One day you may get 20k from a provider, one or two months you get zero. This can be problematic with staff wanting their paycheck so. Not that big of a deal so long as you have cash reserves, a properly set up LLC, and an accountant. It's getting the cash reserves up and running that is hard. That's worth something. As is a stable of clients willing to pay cash.

This makes sense, however we collect all fees from clients at each session. We don't deal with any third parties. We have no shortage of clients approximately 8-9 months out of the year (things tend to be a bit slow around the December - February, however).

 

[stel4]

Using your numbers, 20 clients at 35 % of 200 times 50 weeks = 70000. You would be generating 200k in gross revenue for them. 130k in overhead seems a bit much. I would want to be the guy hiring you with those numbers. I don't think you would want to stay very long with those numbers as you could likely do better elsewhere. I get 60% of gross billing and a great benefits package. We don't charge nearly as much, but I also schedule 40-50 patients a week and usually see 30-35.

That part near the end - not charging nearly as much - is what's leaving me uncertain. There's no question that the cost in our clinic covers, at least in part, the difference between the 35% I'm being offered and the 50-60% that others are expecting. Our no-show rate is also very low as and we keep cards on file and inform patients that we will bill the full cost of the session (this does count towards our "billed hours" each month). Even at 35% it will not be difficult for me to break 100k (average 25 billed hours/week will accomplish this) income in my first year, which is what's making me uncertain about asking for a higher cut. It's not as though I'm not being well-paid in the position, but you're correct about the 130k in overhead sounding a bit high. Especially when you consider that each clinician in the practice is bringing in 200-300k/year...

 

[stel4]

I missed the 35% mentioned in the first post….ouch. A good rule of thumb for a private practice setting is that overhead will be ~30%. Obviously there are variances for locality (e.g. NYC v. Omaha) and also services included in the overhead (e.g. who is responsible for getting referrals, do you have admin support, etc), so it is difficult to give solid #'s without being familiar with the local market. That said, 35% is a tough cut. As smalltownpsych mentioned, as an employer I'd *love* to offer 35% of receivables, though cuts are typically 50-70% for full-service support. If you are just renting an office, then a flat fee is the far better economic choice.

There are some good psych specific resources out there that cover private practice work. Steve Walfish & his partner(s) have a consulting business ("The Practice Institute") that gives talks and I think CEs about starting/running/working in private practice. I haven't attended any of their talks or seen what they've done since setting up TPI, but I'm familiar with Walfish's prior work and it is excellent. Zuckerman's, "The Paper Office" is an excellent resource too…I think it has multiple editions, so make sure to buy the most recent one. I'm not sure they'll have *exactly* what you want, but they cover enough about setting up and running a practice that you can figure out some rough numbers about cost/revenue from various types of staff (including your type of position).

Thank you, I hadn't come across that information before - I look into those resources. I do believe that some of our overhead is expensive is more expensive than typical practices , and every clinician is a part of the practice - not just renting an office within the location.

 

[Goobernut]

I'm not sure if this is helpful to you at all, but I've done a lot of research for this at the master's level. Many people in the field advised me not to take less than 70% of billed. Really crappy places try to get you for 50-60% of billed or they offer this to people under supervision for their master's level license. This would be a position at high volume private practice agencies. I see your point where the OP's office might have more overhead (for rent and advertising??), but they are also making more profit. There is no billing company or billing staff to pay. Your 35% of $200 is not more than someone getting 70% of medicare allowable, per my quick cocktail napkin math. My first instinct is to say you should be earning more.

Please, I'm horrible with off-the-cuff math and my out-of-date billing skillz, so someone double check this for me (if I can even type it out to make sense).

So, for example:

OP's scenario
25 hours a week (for 50 weeks) @ $70 per billed hour [35% of $200] = $87,500

Master's level therapist paid via my state's medicaid fee schedule on code 90837 (60 mins of therapy) (95% of medicare, was easier to find exact numbers)
25 hours a week (for 50 weeks) @ $77 per billed hour [70% of medicaid payment of $111] = $96,250

Looks like to me they are getting you cheap? I'm in the midwest too, not on one of the coasts. Super cheap cost of living. Now before someone blows up, I'm sure a master's level therapist at an agency that sees solely medicaid and medicare patients is not making $96k a year because of many factors, to include no-shows etc...

 

[Peacemaker36]

This actually sounds like a reasonable deal to me. Most group practices serve patients who use insurance, and therefore the hourly rate is less than half of what your practice is billing out of pocket. So 35% for you is about what most practice clinicians bring home. And your deal sounds good because you'd be learning how to build a practice of self-pay patients, which is not an easy thing to learn quickly.

 

[Doctor Eliza]

There are two questions here: Are they taking advantage of you? and Could you make more money elsewhere? I would say yes to the first, but IDK about the second. How rare are cash practices in your city? How rare are cash practices that can fill your caseload in your city? My city has one group practice that is cash only and you have to find your own patients. For an ECP it is very hard to make a living in that practice.

The ECPs around here join a practice similar to the one I was a part of. They took insurance and gave a 50-50 split (i.e., about $35/hr for the therapist) and no benefits. I made like $40K working fulltime after no shows, cancels, etc. This is in a Midwest city which is one of the 20 largest cities in the nation. Pretty moderate cost of living. So if the opportunity you describe were available to me, I would have gone for it, although I definitely would have resented the $ the practice owner was making off of me.

Good luck in your decision!

 

[Loansforlife]

Anybody know what a decent split is in a mid level city for a practice with lots of community referrals and full billing and support staff. I would only work 6-8 hours a week and they would cover my malpractice. I am licensed and working on getting paneled. They are asking me what I think is fair for a split and I have no idea.

 

[smalltownpsych]

I was offered 70% at one private practice. I get 60% now but that includes benefits: medical, professional fees/dues and paid trips to educational conferences.