Things No One Tells You About Starting Private Practice
Going into business and running a private practice can be a great choice for therapists who want to take control of their schedules, the patients they serve, and their financial earnings. Many of Practice Solutions’ customers are first time practice owners just starting out on their private practice journey. By interacting with new practice owners, we’ve learned some things that mental health clinicians wish they had learned before they started a practice.
1. Setting Up the Business
There are a few steps that need to be completed to actually start your own business, and these things should involve some careful planning. Many clinicians either did not know how to do some of these steps, or rushed through setting them up and later ended up making changes. Here are some things to consider:
Establishing Goals
Goal setting is an incredibly powerful tool in developing a business. The more specific that you can get with your goals the better they can inform your decision making, and there are a lot of decisions you will need to make when starting a private practice. You can consider financial goals, goals about your clients, and growth goals. Having concrete goals is a great place to start.
Naming Your Business
Your business name can range from something fun and interesting to something more traditional such as your own name. Changing your business name later on in the life of your practice is possible, for example if you expand from an individual to a group practice, you may not want to be the only name representing the practice any more. If you do make a name change later on, there are a lot of entities that would need to be updated: the IRS, any insurance companies you work with, your clients, your landlord, your bank, etc.
When naming your business, consider your goals. Do you intend to only practice as an individual with no desire to expand to a group, or do you hope to hire more clinicians later on as a group? Do you want to serve a specific population, such as veterans, children, or elderly? Use those goals to help name your business.
Registering Your Business
In every state there is a branch or office of the government that handles all licensing affairs, and business regulatory items. This is an incredibly important office, but unfortunately they are mired in work and are sometimes slow to respond. Each state names their regulatory office something different. In Michigan, that organization is called LARA (Licensing And Regulatory Affairs).
Every business in Michigan (it could be different in your state) must register two documents; an LLC application and articles of incorporation. Those documents are submitted and then approved by the state. They also must be renewed every year for your business to maintain its name in the state of Michigan.
It is important to make sure that you are following all the requirements to register your business in your state in compliance with all the state regulations and guidelines. If your state is a little more complicated, we recommend that you get in touch with a lawyer who can help with the LLC formation process so that you can have a valid business within the state.
Applying for a Tax ID
You may decide to run your practice and bill using your social security number, however we recommend that you apply for a tax ID for your business with the IRS. You can do so here. You will also need to credential yourself using this tax ID, or update your credentialing information with the new tax ID if you are already credentialed.
2. Credentialing
Deciding Whether or Not to Accept Insurance
Whether or not you accept insurance is up to you! You may decide that accepting insurance is too much of a hassle and set your practice up to serve cash-pay clients only. You may decide that accepting insurance is the right path for you, and to avoid the hassle of billing you hire a super awesome biller from Practice Solutions. Or, you may decide to do a mix of both! Ultimately, it’s up to you but here are a few resources that may help in making your decision:
The Credentialing Process
Before billing to insurance companies, you will need to credential with insurance companies. This process can take up to 6 months to fully complete, and if you begin billing before the credentialing process is complete it will result in many claims issues. We’ve helped a lot of clients resolve billing issues that were due to starting billing before their credentialing was complete! Even if you were previously credentialed under a group practice before starting your practice, you will need to verify how you were credentialed and make any necessary changes. For example, you may have been credentialed under your previous employer’s group NPI number and using their EIN number, or you may need to update your address.
For more information on credentialing, you can check out the following blog topics:
3. Managing Finances
Establishing Your Rates
When you go into Private Practice, you get to set the cash rates for your services! The cash rate is what a patient would pay if they are not using insurance, not to be confused with the contracted rates established by the insurance companies. We have an entire blog post on the differences, here. You can use a variety of different factors to inform your session rates such as:
Rates of other providers in your area (You want to be on par)
Contracted rates from insurance companies (For most providers cash rates tend to be higher than contracted rates)
Financial goals for your practice (Use your financial goals in combination with number of sessions/week to calculate what to charge per session)
The number of sessions you anticipate completing in a week
Determining Your Financial Goals
Ultimately, businesses exist to make a profit. The business of therapy is ultimately about helping people, but that does not mean that your business cannot be profitable. If you are someone who feels guilty for making a profit, you are not alone. Setting realistic financial goals can be helpful in alleviating that guilt because you are working toward a specific plan.
The basic principles that you want to cover when setting these goals is to cover any expenses such as rent for an office, subscription fees for business tools such as your EHR, and payroll. Payroll includes paying yourself!
When setting your financial goals, we would recommend that you consult with an accountant or financial advisor. While we have some general suggestions based on our experience with providers, an accountant or financial advisor is going to have the best professional advice. We recommend Green Oak Accounting, since they specialize in accounting for mental health professionals in private practice!
Taxes
As a business owner, you will need to pay taxes! A portion of your revenue will need to be reserved and most likely paid quarterly to the IRS. This is important to consider when you are setting up your financial goals, and another reason why we recommend working with an accountant- they are the tax experts, and can advise you on what to expect when it comes to tax season!
4. You Don’t Have to Be Alone
Running a business can feel overwhelming and lonely at times, but it doesn’t have to be! Assembling a team of reliable experts can be the best decision you can make for your practice. We’ve mentioned having an accountant for your practice, you may also want to consider hiring an admin to do patient intakes and scheduling, and of course we recommend bringing a Practice Solutions biller on your team if you want to spend less time on the phone with insurance, and more time with your patients. Contact us today to learn more about how we can help you on your Private Practice Journey!
