Private Practice Fee Setting
All clinicians need to set fees for their services (yes, yes even those insurance-based practices). Clinicians who accept insurance need to set fees because not everyone who wants to see you is going to have insurance, want to use their insurance or maybe you just aren’t paneled with their insurance company.
First thing to do when setting fees is figure out what services you provide. Do you see individuals? Couples? Children? Families? Groups? Workshops? Webinars? A little bit of everything? Do you do longer intake appointments? Will you have options for clients to do 50-minute, 60-minute or 90-minute sessions?
Think of all the options out there and paint a clear picture of what you want your practice to look like.
After this, set prices for each individual service and become comfortable with stating your prices. This is a very important step because we need to be confident in our prices so when we get prospective client calls we aren’t fumbling all over our words and reducing our fees for everyone just because we aren’t comfortable with the amount we have set.
For the services we provide, this process can look different than with other goods (tangible items) because we are essentially pricing ourselves. For the bulk of us, our service is our knowledge, compassion and skills.
Also, the mental health and wellness fields as a whole don’t do a good job at empowering us to explore our worth. We often tie it to what we hear so often “there isn’t any money in this field” or that “we are here to serve not to make money”.
For most individuals in private practice our fees and hourly rate is going to be higher, if not significantly higher, than what our hourly rate was when we were in a different setting.
These higher rates often make the clinician uncomfortable (fear of judgement from other clinicians, prospective clients, their loved ones, imposter syndrome…) and sometimes leads to clinicians setting their hourly rate quite low to begin with. This can be problematic because it may not be taking into account self-employment taxes, business expenses and lifestyle expenses.
For example, a counselor who is used to working at an agency where they approximately made $16 an hour (gross annual of about $33,000.00) charges $40 per 50-minute session in private practice thinking they will more than double their annual salary.
$40 per session x 40 hrs per week = $1600 a week x 49 weeks (3 weeks off for vacation) = $78,400 gross a year
Issue with this thinking is that full time private practice work is not 40 clinical (billable) hours a week, it is typically closer to 20.
So, it would look more like $40 per session x 20 hrs per week = $800 a week x 49 weeks (3 weeks off for vacation) = $39,200 gross a year
Which is not a lot more than the agency salary and we still haven’t paid self-employment tax or our business expenses yet.
So, let’s factor in our expenses (self-employment tax, rent, and other expenses of doing business) into our session fees.
If your monthly expenses are $1,800.00 and you typically have 20 sessions a week so 80 sessions in a 4-week month you know that $22.50 (1800 divided by 80) of each session is going straight towards expenses. Therefore, out of your $40 fee to your clients you are only seeing $17.50 of that.
Hmm…what the crap. So, what now?
1. Remember that being in private practice is a commitment to having inconsistent pay at times, so factor this in from the get-go. Maybe you raise your rates a little to account for this, maybe you see less clients per week to allow time for your side hustle, maybe you diversify your income and do groups, workshops, or something nonclinical that brings in “steady” money.
2. Know that your rates for services wont all be the same. Maybe you are doing couples and individual work and charge differently for those or maybe it’s the difference between your self pay rate, insurance-based rate and sliding scale rate. Account for these variances.
3. Don’t forget about your business expenses.
4. Remember that the services that you offer are special and needed in this world and that customers (yes your clients are consumers) expect to pay for services.
So, to figure out this “fee setting thing” let’s start with what you need to sustain your lifestyle. Maybe its $30,000.00 a year or maybe it’s $100,000.00.
Spend some time figuring this out and make sure you are factoring in all your current expenses but also accounting for having extra to save for the future (home buying, family growth, retirement, vacations, home renovations…).
After this figure out how many weeks you need off for vacation each year (I would say a minimum of 3).
Then figure out your business expenses (actual or estimated). Checklist here.
Now it’s time for the math. See full example here.
As human helping private practice owners we often forget that we are a business (because we are here to help) and that we need to make a livelihood. With not switching our therapist hat in for our business owner hat we can get in the way of our business surviving and thriving. Therefore, we need to slip our business hat on every once in awhile and make sure we are factoring expenses into the costs that we charge our clients.
Want to make $60,000 a year
Need 4 weeks off a year
Business expenses of $1200 a month
$1200 monthly business expenses x 12 months = $14,400 yearly business expenses
So, need to gross $74,400 a year to cover the expenses and bring home $60,000
If working 48 weeks a year then we need to divide $74,400 by 48 to get our weekly amount ($1550.00)
Then we can divide $1550 by the cost per session to see how many sessions we will need each week.
$1550 divided by $60 = 26 sessions per week
$1550 divided by $80 = 19 sessions per week
$1550 divided by $90 = 17 sessions per week
$1550 divided by $100 = 15.5 sessions per week
$1550 divided by $150 = 10 sessions per week
Looking at the graphic below we see that the national averages for cost of counseling are between $75-$250 a session.
These higher hourly rates that often make people uncomfortable and lead to clinicians setting lower rates to begin with can hopefully now be looked at through a different lens. A lens that assists us in creating a fruitful life for ourselves outside the office, all while making sound business decisions and allowing us to provide the services we want to our communities.
Here at b.mindful Louisville, we not only provide our tenants with a comfortable, modern and safe space to practice out of but we also like to have an open dialogue around these topics and more. We have structured consultation hours to frame the conversation but also just find it beneficial to be open and transparent with one another about best clinical and business practices to assist each other in tackling the world of private practice. We are better together, if one of us succeeds we all succeed.
To learn more about the shared workspace of b.mindful Louisville click here, or call Shannon Gonter at 502-528-1363 to book your tour today.