Setting fees is one of the single most stressful things a mental health counselor faces when starting out in private practice. You must find a fee that will make ends meet, but will also be supported by your client base. During this process, you will likely struggle with self-doubt over your worthiness of any payment for services, and perhaps guilt over charging a fee at all.
When I started my counseling private practice, I put exactly zero thought into setting my fees, because I was so uncomfortable with the subject. By default, I started out charging a flat rate on the high end of the sliding scale range I had charged as an intern - but no more. I also applied to insurance panels indiscriminately, with no idea of what the area needed or what I was personally prepared to take on. I ended up being rejected by most panels since I was just a few months past my license. I would have known this would happen if I had done any preparation...at all.
When this haphazard approach (shockingly!!) didn't produce the desired result [a full therapy practice, great income, and zero guilt about charging for my services] I was so frustrated. I wasn't paying my bills. I wasn't getting new clients or keeping the existing ones. I felt stuck. What was I supposed to do now?
While more than a few things were going wrong in my business when I started out, the problem with my pricing approach was that it didn't take in the realities of my business needs and my client base. My numbers were based on nothing but air. It's no wonder they fell apart when push came to shove!
Does that sound familiar to you?
Are you a mental health therapist, counselor, psychologist or psychiatrist in private practice currently struggling with how to set a reasonable fee for your mental health practice - one that pays your bills but doesn't bleed your clients dry?
If you've struggled with the issue of setting fees, you need a simple and sensible way to discover the right fees for your therapy practice.
And that's exactly what you're going to learn today.
How To Set Your Fees, Step-By-Step
1. Find out what rate range is reasonable to expect in your area. Making a profit is not wrong, but it's not right (or smart) to take more than your clients can give, either. To create an accurate fee range, use objective data to understand your clients' financial capabilities.
This is one way to do it:
First, take a sample of the counselor profiles in the zip code of your psychology practice using a tool like Psychology Today. Scroll down to the "Finances" section of each profile, writing down each counselor's lowest fee, and each counselor's highest fee. Then average the rate of the lowest fee charged, and average the rate of the highest fee charged. That gives you a range of fees that is appropriate for your area. You can also check to see whether most counselors in your area accept insurance, and if they do, which ones they take.
You can see an example of some data pulled from a Psychology Today profile in the picture below.
Second, check City Data for the most recent public tax information available for your private practice zip code and surrounding areas. Though the data is generally a few years behind, it gives you a good idea of what most of your clients will be earning on a yearly basis.
Putting this information (fee range and area income) together lets you develop your price strategy.
For example, if you are in a high-income area, you may want to set your fee closer to the high end of the range you discovered on Psychology Today. This will let you position yourself as a high-value service provider in an area that can support it.
If you are in a low-income area it may make sense to develop your strategy around working with insurance panels. One “advantage” of accepting third party payments is that they will set the fees for you - no thinking required on your part! You can add or drop panels based on client needs and your reimbursement rate. This will help you position yourself in line with the needs of the area.
No matter what an insurance reimbursement rate might be, this should not change your stated or published fees. In other words, even if an insurance company will only reimburse $70.00 per appointment, you can still set your usual fee as $140.00 per appointment--the fee that you will charge clients who self-pay. Knowledge of what an insurance company will pay helps you to determine your likely total income, but need not affect your published fee structure.
If you are in a metropolitan area or an area with a wide range of incomes, you may want to do what I did as a counselor in the Dallas/Fort Worth metroplex. I set my flat rate almost exactly in the middle of the other counselors in my area, and also set up a limited sliding scale range to give the lower-income individuals options to see me at rates that would still cover my bills. This lets you position yourself to effectively serve two populations.
When you know the facts about your area, you can make an informed decision about your rate!
2. Know WHY you charge what you charge. The second step in setting an appropriate fee for your counseling private practice services is to understand the financial status of your business.
- What income do you need to have to simply cover your bases?
- What do you need to save for paying taxes?
- What income do you need to have to support yourself, including dependent children or family members?
- What other financial obligations do you have? (Student loans, etc.)
- What amount of “shrinkage” should you anticipate? Fees that are never collected, bounced checks, expired insurance, etc. (It will probably be about 5% to 10%.)
You should also understand the relationship between your fee and the client's experience with therapy.
- Will this fee (or copay) be enough that I can give this client the time they deserve, or will it be too low for me to devote significant energy to their case?
- Will this fee (or copay) be enough that the client assigns value to the process?
- What are my client's other options if they cannot afford my rate?
This last one is where the guilt would usually come in and we might be tempted to cave. However, the reality is, not everyone will be able to afford your services in private therapy practice, no matter how reasonable your rates. When that happens, you can still support someone in finding the right resources, even when it's not you.
In fact, it is our ethical obligation and privilege to help the clients who cannot afford our services get matched up with other resources that can help them.
In order to do that, keep a collection of recommended resources on hand. Develop relationships with leadership at local community support organizations, nonprofits, and faith-based resources. Then, when a client needs it, you can tell them not only the name of the organization, but a person to contact.
Take the time to understand for yourself why you charge the rates you do. You will feel much more confident as you share your fees with clients. You will also know when your business can afford for you to waive or lower your normal rate. And you will know when you need to stand firm with your clients on the rates you have set, for the greater good of sustaining your business.
Effective practice management isn’t just about balancing your schedule or completing various administrative tasks. Understanding the logic behind your fees helps you provide the foundation for a business that will last a long time!
3. Deal with your "counselor money issues." "Money issues" are beliefs and hang-ups about money that get in the way of the private practice counselor providing quality services and managing the needs of their business. That is why every counselor must confront them if they are going to successfully set session fees.
Do you look down at your toes when you tell the client your session rate? Do you have the belief that talking about money just isn't something that's polite? Do you avoid budgeting? Then, my friend, you might just have counselor money issues.
I have previously presented at the American Counseling Association National Conference with the seminar: Practice For Profit: How To Charge What You're Worth And Fill Your Appointment Book By Dropping Your Money Issues. In preparing for and presenting on that topic, I learned that when you have untamed money issues, you can easily run into disaster.
- You might undercharge your clients, and then can't pay your own bills.
- You may undercharge your clients, and then have to work too much to make up for it, ending up burned out and stressed.
- You might over-charge your clients, and then your clients end up with overdue invoices or in collections because they can't pay.
- You may over-inflate your rates, and then never have enough clients to begin with.
- You might waffle over your rates, and end up losing the respect of your clients who need to see you as a constant, not a "flake."
- You could cave quickly on a client's request for a lower rate without cause, causing your client to view the service as less valuable. (And as a result, commit less to the therapy process.)
- You may not be prepared to offer clients who can't afford your fees other options, and leave them feeling helpless to find the solutions they need.
Yet, despite this, many of us avoid dealing with our money issues because it feels so uncomfortable. We end up in a vicious cycle in which we never make what we need, but never do anything about it.
However, as a cognitive-behavioral therapist, I believe that by changing your beliefs you can change your emotions. So I encourage you to address your money issues by evaluating some of your core beliefs about money:
- Do you believe that practicing for profit and serving your clients is mutually exclusive?
- Do you believe that it diminishes the value of therapy to "put a price on it?"
- When your client disputes your fee or says it's "too much," do you take it personally?
- Do you feel you are a better person if you charge less/take insurance than are others who do charge more or do not take insurance?
- Do you believe that talking about money is impolite, greedy, or otherwise negative?
As you evaluate each of these beliefs, ask yourself why you believe this thing? Where did it come from? Sometimes we can act as if something is true for so long that it becomes true, with no other reason for it. In that case, it may be an idea that needs to be released. In other cases, you will reaffirm what you believe about money, and be stronger in your convictions for it.
Another way to examine your beliefs is to start at the very beginning...I hear it's a "very good place to start."
What was your first "money memory?"
Was it your parents arguing about money? Was it being told that something was "too expensive"? However you answer that question, consider how that first money memory may have shaped your beliefs about money.
For example, let's say money was tight in your family. There was never enough to go around. From that money memory, you may have taken the principle that "Money is scarce." As a result, you may accept lower session rates than is necessary for you to survive, believing you have to take what you can get. See how your beliefs can lead into actions you would never anticipate?
Once you've opened up your mind to confronting your "money issues," you can see more clearly how they affect your business, and what beliefs may need to change in order for you to succeed.
4. Set your fee. Now that you've done the research and have found the right fee for your therapy practice, and dealt with any money issues that might get in the way of it, make a commitment to a new rate.
If you decide to charge only a flat rate, do just that.
If you decided you need to earn a certain rate whether flat rate or insurance-based, get off the insurance panels that don't provide you with a fee schedule that matches your needs.
If you decided to charge based on a sliding scale, set for yourself your minimum and maximum rate, along with the indicators you will use to guide you in choosing what rate each client gets.
It's that simple - and it must be that simple.
In fact, if you feel wishy-washy about any of these numbers, go back to the steps before this one and ask yourself why. Address any money issues and clarify your reasoning for your rates so you can stand behind them.
5. Create your exceptions. Though this might appear to contradict my last step of just committing to your numbers, the truth is that there are always some exceptions. Part of setting your fees is knowing what they are in advance, so that you aren't caught off guard.
Your task now is to be mindful of opportunities you wish to create to lower or waive your fees.
I've heard of exceptions based on:
- Personal conviction someone feels to help a group of people, i.e. special rates for survivors of domestic violence.
- Need, such as lowered rates for the elderly on a fixed income.
- Special partnerships such as keeping on panel with TRICARE only to serve military families.
By creating thoughtful exceptions to your financial policies, and building them into the budget for your therapy or psychology practice, you can be responsible as a business owner while fulfilling your desire to help those who couldn't normally afford your rates.
There's a lot of flexibility in how to accomplish this goal:
- Have scholarship/pro-bono spots available.
- Charge this group of clients what they believe they can afford to pay for the session, letting them choose their rates.
- Charge them the equivalent of the rental/electric expenses only, waiving your profit.
- And so forth.
As long as it's considered an ethical means of fee-setting, you are free to set this structure however you like.
When you know the cost of your exceptions, you can make it a part of your business plan, helping others in need while keeping your counseling practice afloat.
6. Create a financial policy for your practice. You have thoughtfully considered the rates you wish to offer. Now it's time to put it in writing.
Your financial policy may blend with your informed consent or be a standalone document. Either way, these are the elements I believe it should contain for boundaries to be clear:
- When the payment is collected and how.
- Your no-show and cancellation policy.
- What happens if the client has bills that are overdue or checks that bounce.
After you have put these parameters in writing, explain this policy to the client confidently and clearly at the beginning of the relationship. Doing so will enable you to refer back to the conversation if the policy ever needs to be enforced. It will also make it less likely for that to happen, since the client understands the terms.
And that's how to set fees your clients can actually afford - while still making a profit.
About Stephanie Adams:
Stephanie Adams is a licensed professional counselor in Fort Worth, TX specializing in anxiety in teens and young adults. She loves talking all things private practice, especially marketing, practice management, and using telemental health to better serve your clients. She welcomes emails at stephanie@stephanieadamslpc.