How to Convert to 100% Private Pay for Therapists (Checklist & Ultimate Guide)

Making the switch from insurance-based payments to private pay can be a daunting task, but it’s well worth it in the long run. In this guide, we’ll walk you through everything you need to know in order to be well informed and make the transition as smoothly as possible. You’ll learn how to market your private pay practice, fix your rates, find new clients, and much more!

1. Why Shift Away From Insurance?

The first step in making the switch to private pay is understanding why shifting away from insurance can be such a beneficial move for your business. After all, insurance can seem like a pretty good deal – you get paid a set amount per session and don’t have to worry so much about marketing or finding new clients. 

So why would anyone want to leave that security behind?

Fixed pricing

With insurance, you’re stuck with a set rate that doesn’t take into account the time or effort you put into each session. It also doesn’t take into account inflation. 

Private pay, on the other hand, allows you to set your own rates. This means you can charge what you want, and you can let the free market decide the value of your services. 

Insurance can be limiting to your practice’s profit because you have to see a certain number of clients just to make ends meet based on the insurance rate.

Private pay, however, opens up the possibility of seeing fewer clients while still making a comfortable living.

There are two “levers” that a practice owner can “pull” to generate more revenue for their business.  

Revenue Lever #1: see more clients. 

This is the equivalent of selling more products.  But this often leads to burnout in the mental health profession.

Revenue Lever #2: raise your prices.  

Raising your prices allows you to potentially see less clients and make the same amount of revenue.  

This is basic economics. When your revenue is tied to mostly insurance payments, then the only way to make more money is to see more clients.  Which, in my experience in working with practice owners, is an option they do not want to make. 

Delays in payment

Another downside of insurance is that you often have to wait weeks or even months to get paid. This can put a serious strain on your cash flow, especially if you’re just starting out. 

Private pay clients, on the other hand, will typically pay you at the end of each session. This means you’ll have the money you need right away to cover expenses like rent, marketing, and supplies.

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Less profitable overall (Lower reimbursement rates, paying for a biller)

One of the biggest reasons to switch to private pay is that it can be much more profitable in the long run.

Insurance companies often have below-market reimbursement rates, which means you end up making less money per session.

Private pay clients, on the other hand, will typically pay you a higher rate. Not because they want to get rich, but because they need to pay themselves and their own business expenses. 

Another expense you have to consider is the cost of a biller. If you primarily rely on insurance payments, you’ll likely need to hire someone to handle all the paperwork and billing for your practice.

Most Eletronic Health Record (EHR) software can manage insurance payments, BUT, if you’re a high-volume practice and have contracts with multiple insurance companies, you’ll probably need a biller just to make sure you’re receiving all the payments insurance companies are holding hostage.

This can add up quickly, and it’s yet another expense that eats into your low-margin profits. 

Private pay clients rarely have insurance billing issues, so you can save money in this area as well.

Private Pay Rates vs. Insurance Rates (Real World Results)

According to Thervo,  here’s a quick look at the average hourly rates for therapists in the US:

• Private Pay Per Session: $60-$250

• Insurance Payments Per Session: $40-$200

Brand Your Practice’s Research of Current Clients in the Partnership Plan:

• Private Pay Client Intake Session: $175 – $250
• Insurance Payments Per Session: $127-$152

• Private Pay Per Session: $165 – $197
• Insurance Reimbursement Per Session: $127-$150

As you can see, there’s a big difference between private pay and insurance rates. Private pay rates are typically much higher, which means you can make more money per session.

Of course, there are always exceptions to the rule. Some therapists charge less than $75 per hour, while others charge more than $150. Ultimately, it’s up to you to decide what you’re comfortable charging. Just keep in mind that private pay clients are typically willing to pay more for quality services.

Private pay practices can be more generous with sliding scale clients

When your practice is a private pay practice, you can more easily put policies in place for sliding scale clients or Medicaid clients. 

You may not contract directly with Medicaid (which the amount of paperwork is insane, and the reimbursement rates are typically abysmal), but you could develop a policy where you can take on one or two Medicaid-level clients to provide services for without devastating your revenue.

More time with Clients

Another advantage of private pay is that you can spend more time with each client. Insurance companies often dictate how long each session can be, which means you might feel rushed to get through everything in the allotted time. 

Private pay clients, on the other hand, typically don’t have any time restrictions. This means you can take your time and really focus on providing quality services.

In fact, it allows you to be VERY flexible.  

Let’s say you feel like couples have more succes in their counseling sessions when they are 90 minutes instead of 60 minutes.  If you’re private pay, you can structure your services and prices to reflect that. 

From my understanding, insurance companies do not reimburse for 90 minute sessions.

In the end, it’s up to you to decide whether switching to private pay is right for your business. If you’re looking for more flexibility and freedom, then private pay might be the way to go.

2. How to Shift to Private Pay

If shifting away from insurance sounds promising to you, here is how you can implement private pay in your practice.

Find your ideal demographic

The first step is to brainstorm your ideal clientele. Who do you want to work with? What kind of clients are you looking for? What kind of clients were you drawn to in the past? What specialties or special education/ trainings do you have that could help a certain population? What are your interests?

Do you want to work with women, men, children, teenagers, couples?

After you have answered these questions, you can start to get a better idea of who your ideal client is. This will help you when it comes to marketing and advertising your private pay practice.

Find your niche

The next step is to find your niche and market to them. Private pay allows you more freedom to work with whomever you want, so it’s important that you take advantage of that. If you try to be everything to everyone, you’ll likely end up spreading yourself too thin. But if you focus on a specific niche, you can better target your marketing efforts and attract the right clients.

Also, potential clients are looking for a specialist. The more you niche down, the higher perceived value that potential client has for your skills. And, therefore, are more likely to pay private pay rates. 

That is why, when I work with my partnership clients, I always have them niche down to either a particular demographic and/or symptom. 

For example, let’s say you’re a therapist who specializes in working with anxiety disorders. You can market your practice to people who suffer from anxiety, as well as their family and friends.

Be sure to listen to my podcast with Dr. Deb Legge. She’s the guru when it comes to transitioning to private pay. 

ALSO: She has a fantastic coaching program to help you move to 100% private pay.

Know who you do NOT want to work with

Another way to find your niche is to know who you do NOT want to work with. These are the clients that you dread seeing or suck up all your energy with one session. This can be just as helpful as knowing who you DO want to work with.

For example, let’s say you don’t want to work with clients who have substance abuse disorders. This is a perfectly valid preference especially if you don’t want to pursue licensing for abuse disorders. By knowing who you don’t want to work with, you can better target your marketing efforts and attract the right clients.

Create a specific transition plan for yourself

A transition plan will be crucial in helping you stay on track and make the switch to private pay as smooth as possible.

Here are a few things to keep in mind:

First, Set a date for when you want to start seeing private pay clients exclusively.

Second, Give yourself plenty of time to market your new practice. Private pay clients can be harder to come by, so it’s important that you give yourself enough time to attract them.

Third, determine your new rates. 

Private pay clients are typically willing to pay more, but you still need to be comfortable with what you’re charging.

Increase private-pay referrals

If you’re currently in-network with insurance companies, you can start by increasing your private-pay frees. Private pay clients are typically willing to pay more out-of-pocket for services, so this is a great way to start making the transition.

Inform current clients

This could be the hardest part during the transition. And there’s A LOT of thoughtfulness that goes into this conversation. 

I detail it here with one of my clients, Megan Humphreys from Thrive Couples Counseling. 

Let them know that you’re transitioning to a private pay model and ask if they would be interested in continuing services on a private pay basis. You can also let them know that you’re happy to provide them with a list of other providers in the area who accept their insurance.

Get More Private Pay Clients!

Willing to provide statements for out-of-network benefits

Another way to increase private pay referrals is by being willing to provide statements for out-of-network benefits. Many insurance plans have out-of-network benefits that will reimburse clients for a portion of their therapy costs.

You can provide a superbill, and clients and seek out potential reimbursement on their own time. 

If you’re willing to provide statements, let your current and past clients know. This can be a great way to attract new private pay clients who are looking for flexibility in their treatment.

Lean into your marketing strategy

In addition to reaching out to your current and past clients, you’ll also need to lean into your marketing to attract new private pay clients. There are a number of ways to market your practice, but some of the most effective include:

1. Create or update your website. 
2. Begin reaching out to 10-15 potential referral sources. 
3. Speaking at local events or workshops

By taking the time to market your practice, you can attract new private pay clients and make the transition to private pay much smoother.

Dissolve Contracts with Insurance Companies

Once you’ve increased your private pay referrals and created a marketing strategy, you can start dissolve your contracts with insurance companies. 

The insurance companies that you contracted with typically have a policy in how you can dissolve the relationship. It usually means something like this:

1. The date of your last day of services
2. A statement that you’re terminating your contract for all future dates of service
3. The date that the termination will be effective

It’s important to give the insurance company plenty of notice before terminating your contract. Plus, it’s black hole. You may or may not get a response. It’s a bureaucratic nightmare. 

I recommend planning for 6 months to terminate your insurance contracts. Every insurance provider is different so read the fine print.

Listen to Chapter 1 of my podcast below about how to leave insurance companies.

Decide on a Private Pay Rate

As we mentioned before, setting your own rates can be a bit of a daunting task. 

It’s all about mindset. 

Here are a few things to keep in mind when setting your rates:

1. Know that you are worth EVERY dollar. Someone is paying you to help them with the more intimate and complex aspects of their lives. That’s worth something to them and to you. You’re worth it.
2. Research local rates. Look around and see what the private pay rates are in your area. Then charge $25-$75 more. My rule of thumb is to start at $150 per session. $175 for intake session. That’s STARTING prices. 
3. Know your numbers. Do you know how much you need to make in order to live? Cover your expenses?  (I provide some free tools here in chapter 2 in this blog post)

Once you’ve decided on a rate, be sure to communicate it to your clients. Put it on your website. It’s okay!  They’ll need to know how much they’ll be expected to pay for services. Plus it cuts down on potential clients wasting your time asking, “How much do you charge?” 

Conclusion

Converting to 100% private pay can seem daunting, but with the right advice and support, it’s a process that can be successfully navigated. 

If you’re ready to take your practice to the next level and want to learn more about how we can help you market your practice schedule a discover call today! 

During this call, we can discuss your unique situation and create a plan tailored specifically for you and your practice. We look forward to hearing from you soon!

BONUS TIP

Be the Best Therapist You Can Be

Money isn’t everything and while in the middle of the transition remember what really matters is being skilled at helping people through their mental health struggles.

Invest in trainings and certifications that will enhance the client therapeutic experience. Ask for help if you are weak in a certain area or just need advice.

And remember, word travels quickly when you can provide the best mental health care for clients.

YOU MADE IT THIS FAR…

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