Preparation for entering and succeeding in private practice is one vital area that graduate programs typically cannot give adequate attention to due to the long list of “academic” courses and clinical training experiences that must be offered to ensure the development of necessary clinical competence. And it seems that there is never enough time to learn all we need to know to be fully prepared for our professional roles after graduation day. But the preparation specific to having a career as a private practitioner is an important aspect of career growth and planning. This chapter will provide guidance on how to prepare for a career in private practice.

Years ago, psychologists would receive their degree, become licensed, have business cards printed, take out a yellow pages ad, rent an office, and begin treating patients. Unfortunately, the practice landscape has become much more crowded, competitive, and complicated over the years. There are numerous mental health professionals with various amounts and types of training who are all competing for many of the same patients. While clinical proficiency is mandatory, it is not nearly enough to ensure success in private practice. Running a private practice is a business enterprise that requires advanced planning, market analysis, a business plan, targeted marketing, and solid business practices.

1. Preparation for Private Practice

Rather than using a trial-and-error approach and just learning as you go along, it is best if you prepare well in advance to enter private practice. You can begin by using the resources that surround you to explore options that will allow you to become more marketable and better prepared to be a successful private practitioner. Use your graduate school professors, professionals in your community, state and national professional associations, internet websites, and social media networking sites to explore your options as early as possible. Seek out mentors who can assist you to prepare for a successful career as a private practitioner. Refer to the checklist below to familiarize yourself with some of the issues you will want to consider both before and after receiving your degree.

2. Is Private Practice For You?

A career as a private practitioner is not for everyone. However, for those who are well-prepared and who have realistic expectations, it is an enriching and rewarding career choice. Educate yourself about the realities of private practice to ensure your decisions are not influenced by common myths or misunderstandings about private practice (Reference Barnett and ZimmermanBarnett & Zimmerman, 2019). Consider if private practice is a good fit for your personality, needs, and professional goals. Personal characteristics such as strong internal motivation and an entrepreneurial spirit will certainly play a role in your success in private practice, but these factors alone are not enough. Consider the pros and cons to establishing and maintaining a private practice provided in Table 17.1.

After making the decision to enter private practice and considering the personal characteristics and professional issues above, it is important to start thinking about some of the more practical issues you will face as a private practitioner. For instance, how will you start your practice? Jumping right into full-time private practice is not necessarily a viable option for all recent graduates. Consider the most realistic and beneficial options relevant to your situation. Specifically, find out how much time it takes to build a full-time private practice, assess the financial demands of opening a practice in your area, evaluate how you will make ends meet while you are building your clientele, consider your need for health insurance and other benefits, and make sure you will be able to find sources of professional support, especially early on. When examining the big picture, some recent graduates prefer to start out in another setting and transition to private practice slowly. This is not considered failure or a ‘second best’ option, and in fact may teach you valuable lessons that will reinforce the success of your future practice as an independent practitioner.

One way to do this is to work full-time in a salaried position and start your private practice in the evenings and on weekends. This will provide you with a full-time salary, benefits, collegial interaction, and supervision. This is a good time to develop competence in specialty areas of practice that you can begin marketing in the local community. You will also have the opportunity to network with other professionals in the local area and to build your reputation while avoiding the potential financial instability that may be a part of your early years in practice. Or, if you have the financial flexibility, you might want to work part-time in a salaried position with benefits and build your practice in the remaining time. While perhaps slightly more risky from a financial perspective, this arrangement gives you more time to build your practice while enjoying the security and benefits of a salaried position.

An additional option is to dedicate yourself full time to the development of your private practice. This choice provides the fastest route to a full-time private practice but carries the greatest financial risk. With each of the first two choices you can decide, based on your success and/or preference, just how much of your time you want to spend in the private practice setting. Some practitioners cut back on the number of hours worked in a salaried position as their private practice grows. Others will find that working part-time in two positions provides them with the best possible combination of financial stability, benefits, varied work activities, and collegial interactions to meet their needs.

Another important decision to make concerns your practice setting. You may choose to open your own “solo” private practice; you may form a group practice with one or more colleagues; or you may join an already existing group practice, whether it be only with other psychologists or with a range of other mental health professionals. When starting out as a solo practitioner you may lease office space on your own or sublet an office in a suite with other mental health professionals. For those who decide to build their practice part-time, subletting space in a larger suite of offices may be the best course of action. Offices may typically be rented quite economically, often by the hour, the half-day, or by the day, and come furnished and offer amenities such as telephone, photocopier, internet access, and even a shared receptionist to greet patients and answer the phone. As your practice grows, you may be able to contract for additional time in the office. Another benefit of this arrangement is the proximity of colleagues. Being in a solo private practice on one’s own may be an isolating experience. Further, not having to pay for office space full time when only using it part time is much more economical. However, when working in a suite of offices with other mental health professionals it is important to ensure that your solo or independent practice is clearly represented to others so that you will not incur any liability from the actions of others in the office suite.

If you choose to participate in a group practice, an additional point to consider is the composition of the group. It may be comprised entirely of psychologists or it may be a multidisciplinary group. Further, as Reference Walfish and BarnettWalfish and Barnett (2008) recommend, “When joining a group practice, choose your associates wisely. These individuals can enhance or detract from your reputation and increase or decrease your liability” (p. 56) and your income! Thus, all potential practice arrangements should be fully investigated and careful consideration should be given before making such a decision. Table 17.2 provides an overview of the benefits and drawbacks of solo and group practice arrangements.

Again, it is helpful to speak with private practitioners in a variety of practice settings to hear about their various experiences. This will help you decide on the best plan of action for you. Keep in mind, however, that many practitioners look for positions, get interviewed, accept an offer, and then see how it works. There is only so much we can know in advance; some of it must be learned through experience. However, if you consider all these issues and get a clear sense that one practice arrangement best suits your needs, personality, and comfort level, then that is what you should try.

3. The Business of Practice

Even the most competent clinician can end up sitting alone in the office waiting for the phone to ring. After assessing your local area’s needs, developing a specialty area or practice niche, deciding on group or solo practice/multidisciplinary or all psychologists, purchasing business cards and possibly even developing a website and/or social media presence for your practice, you must now tackle the business of practice; and it is a business. Ask yourself the following questions regarding the business of running a private practice.

First, will I work as an independent contractor or an employee? An employee is hired by, and works for, an employer; is directed by the employer which patients to treat, when, and how; and the employer takes out withholding for taxes and pays a portion of the individual’s social security tax. IRS Tax Topic Bulletin 762, Independent Contractor (Self-Employed) or Employee, explains that an independent contractor is defined as an individual who is not an employee, but who works with another individual under a contractual agreement. Independent contractors treat whichever patients they like, and when and how they might like. They purchase their own supplies and set their own hours. They pay quarterly estimated taxes and no taxes are withheld by the other person. For additional information see the Internal Revenue Service’s website at www.irs.gov/taxtopics/tc762. Additional important information is provided at the IRS webpage Independent Contractor Defined at: www.irs.gov/businesses/small-businesses-self-employed/independent-contractor-defined.

If you should choose to work as an employee, ask yourself how you will establish your fee structure for services rendered and how you will be compensated by the practice. Employees typically receive a specific salary and benefits, based on a certain number of employee billable hours provided in the practice. The employer also pays a portion of the employee’s social security taxes. Additional administrative tasks may also be assigned as part of your work duties as specified in your employment contract. As an employee, you have the right to negotiate your employment contract, but do consider the learning and support you will receive as an employee as part of what you are gaining and factor that into your negotiations.

For independent contractors the typical arrangement is to pay the practice owner a certain fee or certain percentage of fees collected for each patient seen. Typically, independent contractors working within an established practice pay the practice owner 40 per cent of all fees collected and keep 60 per cent for themselves. If you are offered a lower percentage of fees collected, such as 50 per cent, be sure your contract stipulates criteria for it increasing over time. Keep in mind that a lower percentage reflects the fact that the practice may be providing referrals and your business will get built-in marketing just by being a part of an established practice with its own reputation. A typical arrangement would be to start with paying 50 per cent to the practice and then having this percentage decrease as you begin generating your own referrals. Should you begin providing referrals to others in the group due to your success, the percentage paid to the practice should decrease even further. All of this should be clearly laid out in the contractual agreement signed upon joining the group. Being aware of these long-term issues when starting out is very important to your success in private practice.

It is essential that you have all contracts reviewed by your own attorney prior to signing them. Without legal training, we are not able to know the implications of every clause that may appear in a contract. Your attorney is your advocate and considers each contract based on your best interests, at present and over the long term. An investment in legal services at the outset is an investment in yourself and your practice. Paying for the services of an attorney can save you tens of thousands of dollars over the years as opposed to trying to do it all on your own. Specifically, your attorney will help you agree to a contract that contains provisions that will grow your earnings in years to come. Failure to consult with your own attorney prior to signing a practice agreement or contract may result in your unknowing agreement to provisions that promote the best interests of the practice owners over your own best interests, and sometimes even at your expense.

Additionally, as you negotiate the contract, you will need to consider what you are receiving for the percentage of collections you pay to the practice. The practice owner is providing the office space, furnishings, office staff and supplies, and perhaps most importantly, referrals of patients for you to evaluate and treat. Typically, practice owners who are very busy and have more incoming referrals than they can personally treat will take on independent contractors. For the new psychologist just entering private practice this can be an excellent way of starting out. There is a ready stream of referrals, a furnished office with trained staff and infrastructure already in place, and the possibility of supervision and peer support. As mentioned, other contractual arrangements are possible, such as leasing space in another practitioner’s or group’s office, so consider the options available to you as you find the arrangement that is in your best interest and best meets your needs based on your particular circumstances.

Finally, be sure to educate yourself on certain business principles such as non-competition clauses before you sign a practice agreement or contract. This is a major area of concern for independent contractors, especially when and if you eventually hope to leave the practice and branch out as a fully independent practitioner. The non-competition clause will be laid out and agreed upon between you and the practice owner when signing your initial contract. This clause may specify that if you decide to leave you may not practice psychology for a specified period of time within a certain distance of the practice you are leaving. This will protect the practice owner from direct competition from you should you decide to leave after they assist you in becoming established and developing your professional reputation with referral sources in the local area. Unless you have a specialty area not otherwise available in the local area, such contractual clauses are generally deemed enforceable. The practice owner is providing you with referrals and assisting you to develop your reputation and referral sources in the local area. Without such a clause in the contract you could fill your schedule, build your reputation, and then leave and open your own practice across the street or across town. Yet, these clauses can sometimes be negotiated and they do not necessarily need to be included in practice agreements and contracts. This is another important aspect of contractual negotiations where your attorney can prove invaluable.

4. Rules of Business Success

5. Being a Business Person and Entrepreneur

If you are in practice, you are in business. While your goal undoubtedly is to help others in a compassionate and caring manner, if you are not adequately compensated for the professional services you provide you will not be able to stay in practice. Thus, you will need to run an effective business. You will need to create a business plan, understand what your start-up expenses will be and how much financial support you will need to run your practice while working to build it, and know how many patients you will need to have to break even and to then begin making a profit. Reference Stout and GrandStout and Grand (2005) provide an excellent template for a business plan in their book Getting started in private practice: The complete guide to building your mental health practice. Using such a template can help ensure that you have a viable and realistic business plan for your private practice and increases the likelihood of being financially successful.

You will also need to address issues such as renting or leasing office space, buying or renting furniture and décor, signing up for utilities and telephone service, and purchasing and maintaining necessary insurance (professional liability insurance, premises insurance, etc.). You will also need to decide which administrative tasks you will do yourself and which ones will be supported by someone other than you. You can either contract out certain services (like insurance billing) or you can hire administrative support staff to do it in house. Depending on who you hire and the agreement you make, support staff can handle everything from billing, collecting, and bookkeeping to scheduling, client relations, and external communications, as directed by you. Finally, with guidance from your attorney and accountant you will need to decide what tax status is most advantageous to you. You may decide to become a professional corporation, a limited liability corporation, a sole proprietor, or some other legal status. Each brings with it certain potential tax and liability costs and benefits.

It goes without saying that as a business person it is essential that you provide patients and referral sources with excellent service. In fact, you should be thinking (at least in part) of your ability to provide high-quality customer service from start to finish, just as any business owner would with their customers. Your patients are customers who are purchasing a service from you. Customer service can include business practices such as:

• Returning telephone calls, emails, and texts in a timely manner. Thus, you will need to schedule time to check for messages and to return communications throughout the day. Be sure to check for messages evenings, weekends, and holidays unless you have otherwise communicated your availability directly to your patients.

• Have an office that is welcoming and comfortable for patients. Many practices have complimentary water, coffee, and tea available in the waiting room. Comfortable furnishings and a professional atmosphere are important. Consider a white noise machine if you will have clients in a waiting area while you are in treatment. Even if you know that your treatment area is soundproof, your clients do not, and the extra step will give them comfort.

• Ensure that office staff members are warm, welcoming, and professional with patients.

• Be flexible with scheduling. Offering appointment times that are convenient to patients, especially when starting out, is very important. This may include working some early morning, evening, and weekend hours.

• Complete work in a timely manner. For those conducting evaluations, be sure to schedule feedback sessions quickly and have the evaluation report ready for the patient at that time.

• Be available to patients between sessions should they experience a crisis or have questions for you. If you use e-mail or texting, check it often and respond quickly. Be sure patients know how to reach you should a question or crisis arise between treatment appointments. Communicate your emergency procedures clearly and early in treatment, particularly a patient’s need to call 911 (or other local emergency services number) if they are in crisis and cannot reach you.

• Return telephone calls from referral sources in a timely manner and periodically provide them with written feedback on the work you are doing with the patient they refer.

One goal is for your patients to feel that they were treated well and that the clinical services provided met all their expectations. However, Reference BermanBerman (2005) takes this one step further, speaking of customer delight, the notion of exceeding your patients’ and referral sources’ expectations and achieving high standards of excellence in all aspects of their experience with you. The goal here is to provide them with an experience that leaves them so satisfied that they share about their experience with others, thus being valuable referral sources for you.

6. Setting Up Your Practice

If you work as an employee or an independent contractor in someone else’s practice, this will be taken care of for you, but if you open and run your own private practice you must consider and address these important issues.

First consider the physical office. The actual office must be set up so that patient privacy is protected. The use of soundproofing, white noise machines, and even insulated ceilings, walls, and doors all help to keep confidential communications private. Secretarial staff should have an area apart from the patient waiting room where telephone calls can be made. A locked room with lockable file cabinets for treatment record storage is mandatory.

Next, consider insurance coverage. At a minimum you will need malpractice insurance. It is typically recommended that your coverage be for $1,000,000 per claim and $3,000,000 per year. If you obtain hospital privileges or work on any managed care panels this is typically the amount of coverage they require you obtain and keep in force. You may also wish to obtain disability insurance to provide you with coverage should you be unable to work for a period of time and you should consult your attorney about additional types of insurance for your office and staff. You may purchase two types of malpractice coverage: occurrence and claims made. Occurrence insurance provides coverage for claims made against you any time during your career, even if you discontinue your coverage. Claims made insurance only provides coverage while the policy remains in effect. While occurrence insurance is more costly, many choose it due to the coverage provided. The largest malpractice carrier for psychologists is The Trust (www.trustinsurance.com). Others include the American Professional Agency (www.americanprofessional.com) and Healthcare Providers Service Organization (www.hpso.com/individuals/professional-liability/malpractice-insurance-for-counselors).

Next, unless you plan to do all jobs (answering the phone, greeting patients, collecting fees, billing, doing insurance paperwork, filing, etc.) you will likely hire staff. Consult with your attorney and accountant and learn about applicable laws concerning interviewing and hiring practices, employment law, taxes, and related issues. Then be sure all persons hired understand both their job duties and all applicable ethical standards. Train your staff about confidentiality and related issues. Have written office policies that you instruct them in and have them agree to in writing. Be sure to supervise them adequately to ensure they do not exceed the agreed upon limits of their roles.

Another important area is fee setting. While you certainly should be paid what you are worth, it is advisable conduct an informal survey of private practitioners in your local area to see what fees they charge. You may either ask them directly, telephone their offices as a potential patient requesting information about their practice, or look for this information on their website. Not only will you learn their fees, but you will also learn about their office policies from the information they share.

You will then need to establish procedures, forms, and documents for informed consent, release of information, payment policies, billing and the use of insurance, the use of collection agencies, intake forms and questionnaires, follow-up letters to referral sources, follow-up letters for patients who drop out of treatment and for those who successfully complete treatment. You may also choose to do some patient satisfaction surveys, treatment outcome measures, and other measures. Rather than try to develop all these policies and forms yourself, you should request copies of those forms used by colleagues when you meet with them as well as from your mentor. You may also find several resources very helpful in this endeavor.

First, Zuckerman and Kolmes’ (Reference Zuckerman and Kolmes2017) book The paper office for the digital age is an excellent resource. It includes numerous sample forms, written policies, handouts, and guidelines. The book also includes a CD so that forms may be downloaded and printed for use in your practice. Typical forms include those for informed consent; a practice information form to distribute to patients that includes explanations of such issues as appointments and fees, billing, cancellation policy, emergencies and after-hours contact, the process of therapy, confidentiality, and related issues; a patient intake form; an informed consent to submit insurance form; and an employee agreement to maintain confidentiality form, and many others. They also provide useful information on marketing your practice online to include a web presence and use of social media.

You may also obtain a model informed consent to treatment form on the website of The Trust (www.trustinsurance.com). Additionally, this website provides a sample child therapy contract and a sample forensic informed consent document. You may download each of these and modify them for your use.

An additional valuable resource is the Clinical documentation sourcebook by Reference WigerWiger (2020). This volume provides many useful forms such as those designed for HIPPA compliance, administrative and intake forms, screening and assessment forms, and forms used during the course of treatment, among others. Additionally, several companies market software for tasks such as documentation and patient billing. Many psychologists find the use of such software a great benefit in terms of efficiency and consistency. Examples include TheraScribe (www.therascribe.com) and TherapyNotes (www.therapynotes.com). Finally, practice management software such as therapyappointment (www.therapyappointment.com) and TheraNest (www.theranest.com) provide software that assists in automated client management, scheduling, billing, insurance filing, and related services. Ratings of, and information on, numerous other practice management software products may be easily found by doing an online search.

Finally, supervision is especially important as you begin your career. In addition to individual supervision you may form or join a peer supervision and support group to connect you with other new private practitioners as well as more experienced colleagues. This may be of great help from a clinical standpoint, especially as you develop tools to help you better cope with the many demands of opening and running a private practice. A supervision relationship or group may also become a source of referrals. You should also consult with the information provided in Chapter 4 of this volume for much more detailed suggestions for addressing this important area of our professional development. Commit yourself to lifelong learning and ongoing professional development. It is essential that you keep your knowledge and skills current so you can best meet the assessment and treatment needs of your local community.

In conclusion, the private practice of psychology is an exciting and rewarding endeavor. With adequate advanced thought, preparation, and the use of the resources and strategies described in this chapter you should have a good head start. While a single chapter cannot be an exhaustive reference on all aspects of preparing for and being successful in private practice the information presented above and the checklist in Table 17.3 should be of assistance.