Harnessing the Winds of Change

It's the perfect time to reinvent your private practice

Magazine Issue
July/August 2007
Harnessing the Winds of Change

In 1972, I lived for a year with friends in a Victorian, wood-framed house on a commune just outside of Bellingham, Washington. We had a big canvas teepee anchored in the backyard, which looked out over hundreds of acres of forest. Our back fence was the border between the United States and Canada, and our nearest neighbor was on the Canadian side of it—a German immigrant-turned-border-guard. He lived alone in a traile, and spent hours sitting on its steps, smoking and watching the fence.

One March evening, he walked through a break in the fence and knocked on the back door. “Chinook’s coming.” he said, referring to the strangely warm mountain wind that occurs after an intense cold spell. “Better take down the teepee.”

Snow was still on the ground, and it was bitterly cold, but he said he could smell a “snow eater,” a wind that would raise the temperature by 40 degrees in minutes. He dragged me outside with him, so I could smell the wind, but sniff as hard as I could, I didn’t notice anything different. That evening at dinner, we talked about his warning. We thought he was a weird old guy, but we checked anyway to make sure the teepee was anchored tightly in the frozen ground.

At 2:00 a.m., I woke up to what I thought, in my confused state, was an earthquake. The house was swaying back and forth. I ran outside, oddly warm in my thin, cotton nightgown, and watched as a strong gust swooped under the teepee, filling it like a helium balloon, easily tearing it off its anchors. Up went the teepee, over the fence to Canada. And there, in the moonlight, was my German neighbor standing on his stoop, laughing and pointing to his nose.

Today I feel somewhat like that border guard. As I talk to fellow psychotherapists, I try to warn them that those of us in private practice are in for some big economic changes. By watching how health care dollars are spent and interpreting current surveys about psychotherapists’ earnings, I see disturbing financial markers. But I also see creative strategies by which therapists are already improving their practices—strategies that make me believe that we in private practice can ride out the downturns and develop business models that help us survive and thrive. To do this, we must pay attention to the market, think beyond one-off solutions, and be open to making broad, intentional changes to protect our livelihood and, ultimately, our profession. In other words, it’s time to wake up and smell the wind.

I hear a lot about the state of private practice. I’ve been a psychotherapist in private practice for 20 years, and have worked as a business coach for therapists for the past 10. My practice-building books sit on the shelves of graduate-school libraries and the bedside tables of senior therapists. I write a monthly e-mail newsletter that goes out to 6,000 therapists, many of whom write back, telling me about their situations. I cross the continent giving practice-building workshops and seminars, teach teleclasses to groups of therapists every week, and individually coach a dozen therapists at any given time. A large part of my clientele has always been newly graduated therapists, struggling to get established. But starting in 2003, more senior therapists began contacting me for help. These therapists had spent decades being secure in their client count and reputations—but all of a sudden, they were hurting. “I thought I was beyond this,” was a common refrain. “Once again, I’m having to beat the bushes for new clients, and I’m having trouble paying my bills,” senior therapists reported to me, feeling embarrassed and defeated.

I kept watch, wondering what it meant for the profession as a whole if our most expert practitioners were having trouble keeping their caseloads full. Then, last year, Psychotherapy Finances, a newsletter for behavioral health providers, released an industrywide survey of those in private practice and confirmed my observations. After 20 years of relative income stability, the financial picture for psychotherapists it described was dismal. With managed care on the rise, senior professionals surveyed, such as social workers, reported an inflation-adjusted 22-percent decline in overall income since 2000. Those who depended on indemnity insurance or self-pay clients reported problems keeping their caseloads full. A combination of factors led to the decline, but I’m convinced private practice stands at a crossroads of viability today.

Private practice has been the delivery system of choice for psychotherapy over the last century, for many reasons. It offers clinicians necessary autonomy and reduces split transference, so that communication between clinicians and clients is direct and honest. It helps define the methods we use, and allows us to shape the direction of treatment. It’s always been a way for a seasoned therapist to afford a decent living.

How we protect and position our practices will have consequences for our profession. It’s up to us to read the signs of change and respond, so we can control and craft our future. This can be an opening for a long-overdue evaluation and self-renewal, or a missed opportunity. As Bob Dylan suggested, our answers are blowin’ in the wind.


Reading the Signs

According to the survey, the average licensed counselor, social worker, or marriage and family therapist in full-time private practice is earning a “salary” or net profit—income minus hefty practice expenses—of only $30,000 a year. The main reason for the drop in income is that managed-care fees for individual sessions, which account for 43 percent of the average practitioner’s income, haven’t risen for a decade, languishing at around $75 at the high end and $60 at the low end for a 50-minute session.

It’s not that there isn’t enough money: according to Plunkett Research, a company that specializes in health care market analysis, health spending in the U.S. is at about 16 percent of the gross domestic product, and growing. But the money funnels primarily through managed care delivery systems, which are disinclined to promote mental health. John Klein, editor of Psychotherapy Finances, notes that 15 years ago, the health care consultants he talked to found that 10 percent of all insurance dollars went to pay for mental health services. “Today, the figure I hear from the consultants is closer to 1.5 percent,” he says, sounding discouraged.

Some psychotherapists stay above the fray, free of managed care (especially in metropolitan areas, such as New York; Washington, D.C.; and San Francisco), but even they face a good-news-bad-news situation. The good news is that self-pay fees are up: marriage and family therapists can ask for and get on average $100 from self-pay clients, as opposed to $75 in 1997. But the self-pay market itself is eroding, making up less than 33 percent of the average psychotherapist’s practice. Psychotherapy Finances found that self-pay clients fell from a high of 44 percent of therapists’ caseloads in 2000 to just 26 percent in 2006. Psychotherapy has always been a tough sell. Even though the 1999 Surgeon General’s Report on Mental Health stated that 1 in 2 Americans has a diagnosable mental disorder in any given year, it found that fewer than half of all adults and one third of children seek help. A study in the February 2000 Journal of Psychiatric Services showed that the majority of the population didn’t understand their health plan’s mental health benefits, and that the concept of getting treatment was misunderstood and feared, and conveyed feelings of stigmatization.

The market of potential clients may be weakened by a siphoning-off effect from other types of healing professionals, such as alternative health care practitioners who offer energy work, bodywork, nutrition, and life coaching as treatments for stress, low-level depression, anxiety, and other problems that used to be the purview of psychotherapy. A therapist in Pittsburgh said a new client diagnosed with dysthymia called to cancel her sessions after the first month, saying she was “feeling much better by just going to a weekly meditation class,” and would rather use her money for that purpose.

To make matters more challenging, the cost of doing business in a private practice remains unchanged from previous years, ringing in at a hefty 30 to 45 percent of a therapist’s total income. Expenses such as office space, utilities, phone, internet connection, billing administration, advertising, malpractice insurance, marketing, and professional dues continue to be significant and unavoidable.


Systemic Concerns

As if these problems in building and sustaining a profitable practice weren’t enough, we face concerns that have less to do with market forces, and more to do with the uniqueness of our profession.

First, our age. We’re a graying profession. The average age for a marriage and family therapist (MFT) is 56, and average age for a social worker is 50. Our profession attracts those seeking a second or third career; as a result, many regard their practices as something between a hobby and a way station to retirement, and are less likely to embrace technical innovations that improve efficiency. For example, half the psychotherapists in private practice don’t use a computer. “Too often, at the point of delivery, psychotherapy is basically a cottage industry,” explains Klein. “It’s someone in a room, doing paperwork, by hand, with little interest or understanding about virtual marketing, high-tech delivery methods, or automated operating systems.”

Second, our demographics. Where have all the men gone? In most professions, feminization means a lowering of pay, and, unfortunately, that’s been true of psychotherapy. A Psychotherapy Finances survey published in 2000 found female MFTs reporting incomes of 59 percent of their male counterparts, down from 99 percent three years before. Female psychologists’ incomes dipped during that period too, from 91 percent of men’s in 1997, to 78 percent in 2000. The reason for this trend, according to the survey, is that male clinicians respond more aggressively to managed care, charge self-pay clients more, and work more hours per week than their female counterparts.

Third, our view of our work. Many therapists in private practice wrestle internally with the question of whether psychotherapy is a vocation or an occupation. Is what we do a service (i.e., helping others) or a business (i.e., filling the needs of others for profit)? Unable to feel comfortable about how they view their work, some therapists struggle in a market that requires an increasing degree of entrepreneurship.

To resolve these problems, we need to rethink the business of therapy to come up with newer, more current models of private practice.


A Paradigm Shift

In 12-step programs, a story told to motivate newly recovering addicts is about a person who walks down a street absentmindedly and falls into a pothole. If the person is an unrecovered addict, he or she keeps walking down the same street and falling into the pothole, evoking Rita Mae Brown’s definition of insanity: “doing the same thing over and over again, but expecting different results.” An addict further along the recovery process sees the pothole and tries to circumvent it, sometimes successfully, sometimes not. The paradigm shift in recovery occurs when the addict decides to walk down a different street.

Can private practice walk down a different street? The place to start is noticing our resistance to altering the traditional methods of finding referrals, billing clients, and positioning ourselves with the public. Marketing guru Seth Godin, author of Survival Is Not Enough, offers an improved mind-set for the small business of today: “Change is not a threat, it’s an opportunity. Survival is not the goal, transformative success is.”

Dana Ackley, author of the pioneering book Breaking Free of Managed Care, sees the challenges we face as a potential blessing. “This might be the best thing that could happen to those in private practice,” Ackley says, “if it forces psychotherapists to redo their relationships with the insurance companies and rethink their way of interacting with the public. Those who tied themselves to the medical model have now reaped what they sowed. Private practitioners have become dependent upon insurance companies. This relationship has become abusive. Just as in abusive marriages, dependency relationships are maintained out of the false belief that I can’t get along with him or her.’ Therapists need to think about what they’d tell an abused spouse about giving up dependency relationships, and then take their own advice.”

Full recovery for private practice would mean no more hand-holding with insurance companies, or accepting their low fees as fair trade for meager referrals. We’d stop self-identifying with the medical model and find another way to define ourselves, perhaps “necessary human education” or “the prerequisite for wellness.” We could drop the jargon and diagnosis codes while we decide if we want to present our product as an art or a science. We’d learn to face the public squarely, on footing equal to that of other service-oriented professionals, and find the words to explain who we are, what we do, and why psychotherapy is important. We’d appreciate that being a small business allows us to be flexible, respond to feedback, and routinely measure client results in order to create practices that follow consumers’ needs and desires. We’d seek ways to increase market share for everyone within the profession, building alliances among therapists for advertising and PR efforts, and putting more pressure on our associations to help educate the public about the legitimacy and value of counseling.

This process would be akin to reengineering the concept of private practice from a medical model to a consumer model. As a profession evolves, it needs a different approach for each developmental stage. Business ecosystems develop in four stages: birth, expansion, leadership, and self-renewal (or death). If the birth of psychotherapy (and its delivery system of private practice) started with Sigmund Freud, then during the past century we’ve clearly expanded—in numbers of practitioners and methodology. Today, we’re poised at the leadership stage. Taking leadership means captaining our own practices to explore business models that’ll give us more access and control in bringing our services to others.


Forward-Thinking Business Models

The private practice of the future—one that’s profitable, relational, consumer driven, free of managed care, and highly marketable—may look quite different from the ones that therapists occupy today. There are many possible business models for a future-oriented practice, but here are four generic business structures, all of which seem resilient enough to ride out the upcoming economic ups and downs.

Boutique Practice. Also known as a premium or platinum practice, a boutique practice is one in which a patient or client can expect fine service, for a price. This business model is a growing trend with some physicians: for an additional fee, sometimes in the form of a yearly retainer, they limit their caseload and offer immediate access, longer appointment times, and a high level of medical care. The idea of a yearly retainer in addition to session fees seems to me to challenge the ethics of a psychotherapy practice; but in truth, many mental health professionals have created high-quality, boutique services, for which clients pay top dollar, out of pocket, for specialized, desired services.

To fashion a boutique practice, it’s important that you openly articulate the value of your services, to help clients understand the expertise, access, and care that they’ll receive. This model works best when you offer niche services targeting a specific market. You have to know your market and understand its critical features in terms of services, location, and results. For a sole proprietor, a boutique, fee-for-service-only practice can generate $80,000 to $200,000 in annual revenue. Build market share in a boutique practice by creating a loose affiliation with therapists in your local area, targeting specific markets for advertising, and leveraging marketing time and dollars. Therapists in boutique practices specialize in services such as:

– Psychological services for children with difficulties such as ADD, learning-emotional disabilities, sensory integration problems, and autism spectrum or Asperger’s syndrome. They specialize in educational psychological assessments or counseling for high-risk teens to keep them out of hospitals and jails.

– Specialized marriage counseling, such as intensive couples workshops, premarital classes, and divorce-busting sessions, all of which appeal to men and use a direct approach to yield results quickly.

– Career-saving services, such as anger management, out-patient addiction treatment (including treatment for internet or sex addiction), and court-referred counseling.

– Single-topic counseling for issues such as adoption, pain management, infertility, sexual abuse, and eating disorders.

The boutique practice of one licensed counselor on the East Coast focuses on play therapy with mildly autistic children. She and three other play therapists in her community run continual print ads together, targeted to parents, physicians, and educators, in a loose affiliation for marketing purposes. Parents feel taken care of from the first contact, which is a visit to her website, where they fill out a brief form, listing their child’s symptoms; with the push of a button, they get immediate suggestions for helping their child and options for treatment packages. A former elementary schoolteacher, she offers adjunct school visits to observe the child in the classroom. Charging a fee of $135 per hour for therapy sessions, reports, and adjunct visits to schools (she takes checks or credit cards, but doesn’t accept insurance), she keeps a caseload of about 15 children at a time and lets parents know that when they come on board, they’re part of a select group. “Since I love educating others,” she explains. “I’m not just the child’s therapist. I’m also the parents’ resource and supportive consultant. My clients understand that when they come to me for therapy, they get a full package of help, treatment, ideas, and support. What I offer is unique and worth paying for.”

Retail Clinic. A retail clinic is a bare-bones operation, set up to cast a wider net than a boutique practice and serve less-affluent clients. We can see this model already in operation in the medical field. QuickHealth has opened retail medical clinics in Northern California, offering primary care, pay-as-you-go clinics for working families. Drugstore giant QVC has followed suit.

A retail clinic focuses on the affordability of sessions (no insurance involved) and ease of access. This model requires therapists who can counsel families and individuals for a range of generic mental health care issues: in a single day, a therapist may treat depression, anxiety, couples problems, parenting issues, and addiction concerns. Market share is critical, because in a retail clinic, a constant flow means the difference between feast or famine. Often 25 percent of total expenses in spent on advertising. One psychotherapist outside of Chicago finds clients primarily through a large ad in the yellow pages that costs her $10,000 each year, but effectively promotes her reasonable, flat fee of $49.95 (cash only, no insurance accepted) for a 35-minute counseling session. Her office is in a retail strip mall. It isn’t fancy. She returns calls within 24 hours by using a low-cost answering service that also schedules her sessions. She has a waiting list and employs two associates. All are trained in Cognitive-Behavioral Therapy (CBT), which makes managing the shorter sessions possible. She can accommodate 30 or more clients each day at the clinic, because shorter session times allows for increased volume. Last year, her clinic grossed $325,000. She asks each client to fill out a pre- and post-therapy survey, loaded on a computer in the waiting room, to track client satisfaction session by session. So far, the clients resoundingly approve of this easy, consumer-based, affordable approach.

Product-Driven Practice. A product-driven practice attracts clients who are interested in the specific therapy method being offered. Therapists have many training options available to them, and usually select one or several based on clinical decisions. Bringing a business mind-set to the choice of training means looking for a vendor who offers solid marketing that helps promote the method to the public and provide referrals. Examples include the Academy of Cognitive Therapy, whose website lists certified CBT practitioners and a long list of media-placed articles, and EEG Spectrum International, whose website lists neurofeedback practitioners, with journal articles and case studies geared to referring professionals. Building market share then becomes an endeavor shared by the organization offering the training and the practitioner’s efforts. Therapists must employ “due diligence” to discover how much promotion the training organization will do on their behalf. This might mean seeing a written contract and contacting others in the referral network to find out if referrals have resulted from the training.

When there’s demand for a specific method, a practitioner can charge a full fee. One therapist in the Washington, D.C., area says that 50 percent of her referrals come from the website of Imago Relationship International (Harville Hendrix’s method of couples counseling). She considers these “educated consumers” some of her best clients, because they come ready for therapy. “They want a therapist using the Imago method because they’ve read Harville’s book or seen him on Oprah, and the fact that I don’t accept managed care isn’t a factor. They want the method I offer,” she says. She charges $150 for a 60-minute couples therapy session, and gives a 10-percent discount for prepayment of 12 sessions. She’s tried to add other couples methods to her mix, but few have had the same draw, so she primarily sticks with the Imago process.

Career Components. To diversify their practices, therapists are adding additional roles to their services. The most profitable diversification separates roles on tracks: imagine each role as a train, on its own track, able to chart its own direction. For example, clinical services are on one track, with their own budget, marketing plan, and client base; consulting services are on another, with a separate website, network, and budget. The services that therapists add often revolve around what’s needed in a corporate setting: executive coaching, management consulting, and team building and other business training seem to be popular and profitable roles for therapists who retool their clinical skills for the corporate culture. Building a market in a corporate setting means networking with the trusted advisers who make referrals to executives and CEOs, and with other professionals within organizations with links to the corporate world, such as the American Society for Training & Development (ASTD). Some therapists are diversifying into nonbusiness settings, such as courtrooms, where they work as expert witnesses and mediators. Diversifying into alternative services intrigues some therapists, who’ve become part-time acupuncturists, meditation instructors, personal trainers, or life and spiritual coaches.

One therapist in California taught systems family therapy at a local community college in addition to seeing families in her private practice. When a member of her class asked her about the in-fighting within her family’s business, she made suggestions based on her Bowenian training, and soon found herself hired to help sort out the dynamics interfering with the founder and his family. Now she specializes in family business consulting. Her services include structuring family governance, developing succession plans, and one-on-one “shadow coaching,” during which she spends a day in the life of a founder of a family business, to get a better sense of what’s happening on the ground. She charges $2,500 per day, a standard management-consulting fee, and says one-third of her practice time is spent with these clients. Her income from consulting, when added to her more traditional psychotherapy services, has allowed her to gross more than $100,000 per year.


Reinvention and Self-Renewal

Buddhists maintain that all efforts at changing the world begin with looking inside and changing ourselves. Looking inside is a process we understand, but when faced with the challenge of change ourselves, our first inclination may be to retreat to our teepees instead of facing the fierce, shifting winds. But this isn’t a time for inward retreat: it’s time to plan and to take action.

We want to hold on to values that define us professionally and ethically, and stay true to our core philosophy to help our clients develop insight and awareness, build skills, solve problems, and change behavior in constructive ways. But being able to continue receiving a fair market value for our services requires a willingness to rethink traditional wisdom, let go of old models, and take big steps to reshape our practices so they can stay strong over time. Some business changes take years to succeed. That’s why we need to start now and look ahead. Either we’ll be the architects of our own renewal, or we’ll feel victimized and “done in” by the marketplace. If we frame this as a time for leadership, we can determine the best outcomes for our private practices and our collective future, benefiting from an observation often attributed to Charles Darwin: “It is not the strongest of the species that survive, nor the most intelligent, but the ones most responsive to change.”


Lynn Grodzki

Lynn Grodzki, LCSW, MCC, is a psychotherapist in private practice, a master certified coach, and the author of Therapy with a Coaching Edge: Partnership, Action and Possibility in Every Session and Building Your Ideal Private Practice.