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Solo VS Group Practice

Discussion in 'Psychology [Psy.D. / Ph.D.]' started by jmiah717, Aug 25, 2017.

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  1. jmiah717

    jmiah717

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    I've worked group PP before and I have some opportunities to do that again. This is a side gig for me though, and when you're not seeing that many people, it really eats into your income to give up 40-60% of your income. My question is about the administrative side of things.

    What would I have to think about if I go solo? Obviously rent, etc, scheduling, billing....I'm mostly curious about billing and paying taxes since the office staff did that for me at the group practices. I imagine I'd need a business bank account too?

    Do I need a Tax ID or is my NPI good enough? How do I file with the IRS? As far as billing, what traps might I run into? Etc?

    I've found some places with decent rent in an area with a basically unending stream of referrals and a shortage of therapists for the amount of work. So, referrals and having enough work will never be a problem. That's why I'm thinking it might make sense not to give up a bunch of my part time salary when I probably don't need to. I'm going to shop around to see what various groups are paying (what %) but I'm curious what pitfalls I might encounter if I go solo.
     
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  3. WisNeuro

    WisNeuro Board Certified Neuropsychologist 7+ Year Member

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    Do you have your own LLC or PLLC?
     
  4. jmiah717

    jmiah717

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    I don't. Would I need an LLC to get started and have a Tax ID? I figured I might
     
  5. WisNeuro

    WisNeuro Board Certified Neuropsychologist 7+ Year Member

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    The main reason you want one is to protect your personal assets in some way from business debts and liabilities. Also helps with pass through income and other things that can save you on taxes. My first step would be to find a tax attorney with experience in this area. Might cost you some cash up front, but will likely save you thousands on the back end.
     
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  6. PSYDR

    PSYDR Psychologist 10+ Year Member

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    A single owner llc will not protect you for taxes, business liabilities, etc. the IRS treats a single owner llc as a pass through entity. Most offices require a personal guarantee to rent, so the llc won't help. For liability, the llc only protects you if it the actions of the other employees of the llc. It does not protect you in the event of malpractice.

    There are several strategies which do help with this stuff. But you have to find some fairly expensive professionals to help you. Depending on your state, marital status, assets, etc he options are multiple tiered llcs, s corps, flps, irrevocable trusts, etc.


    You're gonna need $5-40k in startup.

    1) prepare yourself financially. Increase your lines of credit, get a mortgage if you don't have one already. Mortgages for the self employed require a minimum of 2 years of tax returns.

    2) go to a GOOD attorney. Create an llc. Do not do an online cheapo llc formation. This one expense has implications for your taxes, credit, and liabilities. Wanna get sued for a few million and have some loopholes in the articles of incorporation? You'll get a tax id number here. Good because this is gonna go on a ton of documents. You're looking at a few grand here. And around $10k in startup funding, which you'll need to avoid piercing the corporate veil.

    3) with #2, go to the bank and create a business bank account. Business lines of credit do not count towards your personal credit score.

    4) get a business address. Keep in mind you're cash flow negative now. Yes, you need the address FIRST. You'll need to learn the term "Nnn" or triple net
    And what it means. Office rent is usually expressed in price/sq ft and NNn. The latter is variable, but you can ask for previous year estimates. An office with a fountain in the lobby might look nice, but there are nnn implications.

    5) phone, computer, fax machine (fax is incredibly important even though you'd think 1800s technology isn't. And yes, fax machines are that old). Office furniture, etc. make sure everything is ada compliant. This includes doorknobs. There are people that sue for this stuff, for a living. DO NOT USE PERSONAL FUNDING TO BUY THIS. You'll pierce the corporate veil. Accounting software is pretty handy. Some higher end credit cards can export directly to the software.

    6) buy malpractice insurance, knowing it gets more expensive every year.

    7) buy office insurance also. This covers you if someone falls in your office. Actually happened to a friend of mine. One jerk tried to do something similar to me because he got a static shock in my parking lot. Not even joking.

    8) create a clinic npi. This is where ou need the business address. You only bill as a clinic now. Change the address on your personal npi of you can. Cms has a guide on when you can change addresses and when you have to create a new one. Locums stuff is a good way to understand this.

    9) using #9 and # 3 apply to insurance panels using the clinic npi and your personal npi. Wait 2-6 months. Yes it takes that long to hear back.

    10) Find a credit card service to take payment. Costco is recommended.

    11) Billing is a nightmare. You are not going to get it right for a long time. You should absolutely plan on long stretches of time with no income. Audits happen and sometimes they freeze sending stuff while the audits underway. Call around for billing companies. Many are not going to take you on a client. I was told that most didn't take anyone on with less than $1mill in billables. Some take up to a 25% cut.

    12) find a great cpa. You now pay quarterly taxes. Since you're self employed, your income is variable. The IRS does not care. They assume you make 20% more each year. Don't have it? You still owe it. For example: if your estimated quarterly payment is $40k and you only made $30k overall that quarter; you'd still owe $40k which won't be corrected until April.

    13) find a financial planner. For the first year, a SEP ira is a pretty good choice. You can put away around $49k/year tax deferred. Means in 15 years, you're a millionaire. But you'll need further panning if you want to ever buy a house, car, retire, etc. remember there will be times you make a bunch and times when you loss money just by being open. And none of this is predictable or scheduled. When I first started out, a client owed me a ton of money and wouldn't pay for 6 months.

    14) expect to spend around 8hrs/wk on the business stuff. Keeping track of expenses is key. So is returning phone calls. Figure out your daily cost of doing business. There is a cost for each day you are open which includes taxes, rent, employees, utilities, etc. Helps to know how much you need to earn each day. If you have employees, you need to know how much profit you make off each. My annual operating cost, when I had a staff, was well into the six figures.

    15) Learn about what posters are required in your state. Yes, you have to buy posters that show state and federal laws and there are fines if you don't have them. Amazon is your friend. There are inspectors which show up.

    16) If you hire staff, which you should not do for the first few years, learn about workers comp and unemployment stuff.
     
  7. WisNeuro

    WisNeuro Board Certified Neuropsychologist 7+ Year Member

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    That all sounds like a lot of fun. Where do I sign up?
     
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  8. jmiah717

    jmiah717

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    This is all great info. Sure makes Group practice seem all the more enticing though. I'll start looking into all that. Thank you.


    Sent from my iPhone using SDN mobile
     
  9. PSYDR

    PSYDR Psychologist 10+ Year Member

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    @jmiah717

    17) BIG ONE: because you're self employed let me introduce you to your new pal, Mr. self employment tax. That's right you pay 13% up to the first $100k because no one is paying the other half of your social security taxes. Live in a bad state income tax place, earn enough, and you're paying almost 50% in taxes!

    18) some states have weird tax structures on Medicaid, although I don't know why anyone would take that.
     
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  10. Ollie123

    Ollie123 10+ Year Member

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    Well, I have officially been talked out of ever starting any sort of side clinical practice. Not that it was on my list of things to do anyways.

    I'll stick with the plan of doing more consulting as things move along. Seems infinitely less complicated.
     
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  11. Justanothergrad

    Justanothergrad Counseling Psychologist 2+ Year Member

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    Not me, I'm more interested than ever. I'm all over this pp side gig right after I hire someone to punch me in the face every day.
     
  12. foreverbull

    foreverbull 2+ Year Member

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    Several psychologists I know in my area who go into private practice become sole proprietors, which is separate from an LLC, but business law varies by state.

    Fictitious business name filing is another thing no one tells you about! Not sure if this is California-specific, but you have to file with the county after you get an EIN from the IRS and publish your FBN in the newspaper and then give the proof that you did it to the county.

    In a group practice, taxes and business practices start getting REALLY complicated if you are a general partner and/or have management/ownership. I started a group practice that is a general partnership, but have in-laws who are accountants. Come tax time, I will rely on them to sort through everything. You have to create partnership articles for dissolution, death, or if a partner willingly leaves, which is tricky.

    Startup costs will easily hit $8-$10k at the lowest, and regular business costs for private practice in an average year can run $10-25K depending on factors like: rent, insurances, licensure renewal/CEs, professional associations, supplies, psychology today membership, website, billing services, software, phone, internet, consultation, etc. If you have a lobby and hire an admin or have "employees" for tax filing purposes, you pay unemployment insurance and other added costs in addition to salary as well. The moment you tell a company you're a business or in a business building, some service rates shoot through the roof. Phone starts at $80/month for business offices in my area, which is outrageous for one line taking mostly local calls. Colleagues and I get around it by buying a cheap phone for business only, and some do google voice. Internet costs can also end up outrageously high when you're in a business building.

    Lots of things you learn along the way. We have a Facebook group for people looking into or in private practice if you want to join (just PM me).
     
  13. jmiah717

    jmiah717

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    Well, as far as office space goes, I have a bunch of options that will make that cheaper. Phone and internet is included in most places around here. Office sharing is also common around here, if you know someone who works part time. There will not be any employees in the mix, that is for sure. CEU's, license, certs, aren't a problem due to my full time gig funding most of that. I have a good friend who is an accountant that I think would give me the friends and family deal come tax time. My biggest concern is all the extras you and PSYDR mentioned. That's a lot to consider with another full time job but I'm gonna look into it.

    Makes me think that it may be worth the 45% or so lost income just to be in a group again. A lot to consider and research.


    Sent from my iPhone using SDN mobile
     
  14. foreverbull

    foreverbull 2+ Year Member

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    For sure! For some, having more control/income once FULLY established and making good income is worth it (could be a few years away), and for some, the additional business logistics/details can be a deal-breaker. That "lost income" percentage in the group practice you mention would be lost to business costs in private practice as well....but with more paperwork and business savvy needed. You could always start with the group, and once you understand more of the business side of things, branch out on your own and take your clients with you once you felt ready; doesn't have to be one or the other!
     
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  15. HEM0305

    HEM0305 7+ Year Member

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    When I was first thinking about how to open up a practice, I interviewed with group practices about joining. And the usual split in this area was 60/40. And so I thought about what that actually meant. Usually the only thing that is included in the fee split was office space, scheduling, and billing. Some would help with paneling on insurance but for the most part you would have to do that whether you joined a practice or not because even if there is already a group contract in place, each provider needs to be credentialed with the insurance.

    There are lots of costs (as listed by others) but frankly, after doing the math, you give up a lot money in doing a fee split arrangement. Essentially, say you want to work a half a day and all day Saturday for a side gig, about 10 clients (that's for easy numbers to demonstrate). So if you see 10 clients a week, the services you are getting are worth 4 of those hours every week. In a 4 week month, that means you are saying the office space, scheduling, and billing are worth $1600 based on $100 reimbursement rate from insurance (you will likely make more but again easy math). You are also likely not an employee but a contractor, which means you are still liable for up to all of that money for taxes as some insurance companies contract with the provider not the group. Plus, the software that is available for scheduling and billing for a small practice will at most be around $100. And if you aren't taking insurance, even less as you won't need to pay for clearinghouse services. And some are even free. I have a full practice of 20-25 contact hours a week and I probably spend 4-6 hrs on admin stuff. But if I had to split with a group, I would need to work almost a full 35-40 hrs of nearly all contact with clients to equal the amount I make having 20-25 contact hours. There's a learning curve but my preference was to do that and end up working less hours per week and have more free time to do things i enjoy.


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  16. jmiah717

    jmiah717

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  17. WisNeuro

    WisNeuro Board Certified Neuropsychologist 7+ Year Member

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    Eww, a 60/40 split? I'd think that 70/30 would just be the starting point for negotiation.
     
  18. jmiah717

    jmiah717

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    My last practice was 55% me/ 45% practice.


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  19. WisNeuro

    WisNeuro Board Certified Neuropsychologist 7+ Year Member

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    Hopefully that's why it's a former job and not a current one.
     
  20. jmiah717

    jmiah717

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    Haha it was a great practice and was a side gig. I really didn't know any better and should have at least tried to negotiate. But we moved. I now am way more confident in my negotiating skills and what I bring to the table.


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