How much should I charge for my therapy services? If you're asking yourself this question,
In this article, we'll review the best practices for setting private practice fees and review which common mistakes to avoid.
Due Diligence In Therapy Fee Setting
Conducting extensive market research is the first step to setting your therapist fee. You'll want to dedicate at least 1-2 hours to studying what other therapists are charging in your local area. In addition to tracking geographical data, you also want to consider how long they've been practicing, their current areas of specialty, and what specific services they offer.
Market research has its nuances to consider. Some therapists determine the median number and then charge slightly less than other providers. They often have the belief that a cheaper fee will attract more clients. And while that may be the case, if you set your fee too low, you might struggle financially or become resentful of your rate.
Other therapists decide to charge more than other therapists. This can be beneficial if you have the qualifications and confidence to match this rate. However, it may take longer to build your practice, and you might be priced too high for certain kinds of clients.
In doing your due diligence, you want to consider who your ideal therapy client is and how likely they are to pay your rate. There's no magic formula for this, but over time, you will develop a sense of building your fee structure for current and potential clients.
Considering Your Own Lifestyle and Financial Goals When Setting Therapy Fees
It's true that private practice therapists get to determine their own fees, but the catch is that you're solely responsible for ensuring your own financial well-being.
Before setting fees, consider these important factors:
How many clients you want to see: Burnout can be a significant pitfall for therapists, and high caseloads can certainly increase the risk of burnout occurring. Many therapists find that working with fewer clients (and charging slightly higher rates) allows them to be more present and engaged with their work.
How many hours you want to work: Will your private practice be a full-time endeavor? Or are you seeking to see just a few clients in addition to other income streams? Knowing these answers can provide you with a helpful roadmap as you set fees.
Your personal budget and monetary goals: Unfortunately, it's often considered taboo for therapists to embrace having a money mindset. But your financial wellness matters. If you're struggling with money, that can affect every part of your well-being, and it can trickle into your work with clients.
Vacation time and personal time off: You need to consider how many weeks a year you will realistically plan to work. Consider any vacations, sick time, and personal time off. When you have your own practice, it's unrealistic to work every single day of the year!
Reassess Your Practice Fees and Expenses
It isn't enough to simply consider your income goals when establishing your fee. You also need to factor in how various expenses will affect your overall profit. If you aren't already tracking business costs, you need to start as soon as possible. Owning your own business means tracking
The most common monthly expenses include:
Office rent: It's also important to include any furnishings, decor, and basic office essentials within this fee.
Marketing costs: Marketing costs can include anything from directory listings to business cards to website costs to networking expenses.
Practice management software: Any software that you use for your business is an expense (including the Internet). If you're paying too much for EMR, consider reevaluating your system. At Navix Health, we offer low pricing that starts as low as 29.99/month, and we also have free trials for all new users.
Continuing education courses: All therapists need to complete CEUs to maintain good standing with their licensing boards and stay up-to-date with current trends. Any professional training or workshop should be noted as a business expense.
Liability insurance: You are required to have liability insurance as a private practice therapist. The cost of this insurance is also a business expense.
Supervision and consultation costs: If you pay for supervision or consultation, these are considered business expenses, and they are important to track.
Health insurance: The cost of your insurance premium is generally considered a business expense. However, there may be some exceptions, so always consult with an accountant to review healthcare-related costs.
If your expenses feel too high, consider areas where you can cut back. However, keep in mind that most therapists operating cash-pay practices need to spend more money to attract clients and advertise their business. This is especially true if you're in the beginning stages of building your therapy practice.
Sliding Scale Rates
Many therapists choose to have a few sliding scale slots in their practice. There's no hard rule that states you have to do this, but it can certainly help make therapy services more accessible, and it can be an easy option for starting a cash-pay practice.
Keep in mind that, if you work with insurance panels, you may not be able to offer this sliding scale. You need to check the insurance providers' contracts. Some will prohibit therapists from charging a lower rate to cash-pay clients than insurance clients.
If you opt to have a sliding scale, you need to consider how you will discern this specific fee. Some therapists seek proof of income, while others base this fee using an honor system. Keep in mind it's usually helpful to reassess this fee throughout the therapeutic process.
In addition or instead of a standard sliding scale option, some therapists choose to:
Offer pay-what-you-can therapy services: You can reserve some therapy session fees to honor a pay-what-you-can model. You might want to provide a minimum payment, or you can leave it completely up to the client's discretion. Some therapists also choose to maintain a few pro bono sessions in their practice.
Set up payment plans: If a client faces sudden financial hardship, you might want to offer a payment plan to allow them to continue meeting with you without paying your normal session rate each week.
Give back to the community in other ways: It may not be feasible to have sliding scale rates. Some therapists choose to give back by getting involved in advocacy, volunteering their time, or donating money to good causes.
Determine Your Cancellation Policy
No-shows and cancellations can get costly and may seriously affect your bottom line. These can cost more than just the ordinary session cost. No-shows also represent lost opportunity costs- you could have better scheduled that time for other commitments or sessions.
The industry standard for most therapists is to charge a cancellation fee if a client cancels a session with less than 24 hours' notice. Some therapists set this time to 48 or 72 hours, but you need to do what feels right to you.
Consider how and when you want to make exceptions and outline those in your informed consent policy. For example, most therapists will not charge a client for missing a session if they are seriously ill or if an emergency arises. That said, if it's a consistent issue with a certain client, you may need to revisit your therapy process or boundaries with them.
When to Raise Your Session Fee Rates
Inflation is a constant threat to every occupation, and just as most employees need consistent raises to keep up with economic trends, private practice therapists also must consider how they give themselves raises. If you don't, you risk giving yourself a pay cut.
Therapists have different strategies for raising rates, but here are some common approaches:
Raising fees on an annual basis: This is the simplest and most straightforward method. However, it's important to consider how and when you will tell existing clients about the cost increase. Ideally, you want to provide reasonable notice. If you suspect certain clients may not be able to afford the new fee, it's essential you both have time to review other options and provide appropriate referrals if needed.
Raising fees for new clients: Some therapists choose to raise their rates for new clients while keeping their existing clients at their original fees. The most important consideration in this approach is ensuring that you aren't discriminating against any specific client demographic.
Raising fees based on specialization/expertise: Every year you practice brings more experience and knowledge. With that, it's entirely reasonable to raise rates based on your skill set and your general advancements in the field.
Raising fees when you're almost full or at capacity: If you continue to be full in your practice, it may be time to consider increasing your session rates. Your caseload already speaks to the fact that people are willing to pay your current rate.
Final Thoughts On How to Set Private Practice Fees
Private practice therapists should be both mindful and educated when setting their fees. Make sure to do your research and charge a rate that feels equitable to you. Remember that it's normal to increase your fees over time. Finally, don't apologize for charging your professional worth.
At Navix Health, we help simplify the work for all mental health clinicians. Whether you run an individual therapy practice, group practice, or major organization, we are here to streamline your process and allow you to focus on doing what you do best: providing excellent clinical care.
Sign up for a free trial or custom demo of our services today.
