Hello, and welcome to The Testing Psychologist podcast, episode #03. I’m Dr. Jeremy Sharp, coming to you again from sunny Fort Collins, Colorado. The clouds have parted. The sun is coming out. It’s looking like it’s going to be a nice day here like it usually is. We live in a beautiful place. Even in the winter, it’s pretty sunny.
Here we are today diving into the financial aspects of running a testing practice. We’re going to talk in pretty extensive detail about how to finance a testing practice, how to buy the [00:01:00] testing materials, where to buy them, ongoing overhead, how to bill insurance, private pay, all sorts of good stuff. So hang with me as we really get into money and the testing community.
I think one of the first things that really drives the financial aspect of a testing practice is deciding what kind of testing you actually want to do. We talked some about this last time, but I touched on three pieces that I think probably influence what you’re going to do quite a bit.
One of those big ones is what you actually enjoy. So what kind of testing do you really like? Again, you got to do what you like, or you’re going to find yourself getting burned out and not wanting to do your reports. And that’s not a good situation for anybody. So think about what you really enjoy. Think about what you are well-trained for. [00:02:00] Again, did you get pretty extensive training in Psychoeducation testing? So IQ, achievements, maybe some behavioral, maybe some personality, or are you a classically trained Houston model neuropsychologist? That definitely influences the kind of testing you’re going to do and the kind of battery you need.
The other thing is considering the need in the community. We talked about this a little bit last time, but thinking about what there is a need for. There are lots of schools here, for example. We live in a pretty, I’d say high achieving school district and a school district that has a reputation for being really good. And there are a lot of parents in the community who for many reasons want to have a good understanding of their kids’ educational [00:03:00] and cognitive performance. So we have a big need for Psychoeducation testing. It depends on your community and where you live. And we’ll get into that a little bit more as we go along, but think about what you enjoy, what your training is, and what the needs are in the community.
Now, my bias is that you really have to love what you’re doing to want to continue to do it and to have longevity with testing. This will help guide you in `what you would buy.
Okay, finances. If we’re talking about full evaluations, this is a lot of money. This is also the experience that I went through. When I was in grad school, I was trained in the very comprehensive evaluation model. We did two-hour interviews. We did two-hour feedback sessions. [00:04:00] Pretty much every measure under the sun that was relevant for the presenting question. We also wrote extremely long reports.
What that taught me is certainly breadth of assessment. Since I’ve come out of grad school and I think this is a process a lot of folks end up going through, I’ve definitely pared down the battery and the reports, but I feel thankful that I had that breadth of experience where I could take that and then pare it down into something more manageable rather than the other way around.
So full evaluations. This is going to cost a fair amount of money. If you think about… When I say full evaluation, I’m talking about looking at intelligence, academic, memory, learning, attention, executive functioning, personality, behavior, [00:05:00] and well, that’s probably about it.
To get into that, you are going to need a fair number of measures. So let’s just talk, actually, let me back up. Let me run down a little bit more about the types of evaluations you might consider.
Now, even with brief evaluations, I have a colleague of mine who does what she calls a one-hour concussion battery that is very comprehensive but utilizes several different, fairly short measures to get at a very specific referral question. So that’s a brief evaluation, but the number of measures involved are still pretty high. She’s still using 4 or 5 or 6 different measures. And those are all test kits that you have to buy.
Now, a forensic practice might focus more on personality and behavior measures. So going to be less [00:06:00] expensive most likely because you don’t have to buy full test kits. Usually, you can just administer personality assessments online or paper and pencil.
A neuropsychological practice, I think is going to be similar to Psychoeducation practice, maybe even more so where you do have to have a pretty extensive range of materials available to you. And then, you go on down the list. There are different variations of psychological evaluations where you’re really just looking at personality, behavior, and maybe doing some observations. So you might not need as many measures. So I’m going to take it really from the widest range and work my way down from that.
I like to talk about the financial part pretty explicitly, because, for me, this was a rude awakening, to be honest. Again, I was in grad school when [00:07:00] I got the majority of my experience with testing. And then when I went to buy testing materials in my practice, it was a little bit of sticker shock as to how much I was actually going to be spending.
So a lot of different ways to plan financially to start your testing practice. One, and this is what I did, in the beginning, is that you borrow your testing measures. I don’t think this is going to work long-term for most folks, especially if you get into doing any amount of volume with testing, but for me, when I was at the point when I was only doing one or two evaluations a month, I was able to borrow them from a friend and also borrowed them from my former graduate school department. The training director there was kind enough to let me do that.
It worked okay for a while, but eventually, I got to the point where I had to have a pretty frank [00:08:00] conversation with my friend, or rather this person had a frank conversation with me about basically how it just wasn’t working anymore, which totally made sense. This person had paid for the materials and I was borrowing them with little compensation going back. So that was not working. And it also didn’t work because we were having to trade materials, you know, going by this person’s house and picking things up and that sort of thing. So not convenient, but could be a good way to do it in the beginning.
Another version of that is that you can split it with your office mate or other folks who do testing in the community. Again, this gets into the issue of how do you share the materials and trade them back and forth, and that can get to be cumbersome. So let’s move on to what it would look like to actually buy them outright.
I talked a little bit about my story in the [00:09:00] first episode, but the short version of that is that I found myself one month, this was probably 5 or 6 years ago, with a huge number of testing referrals that really came all at the same time. Let’s see, what happened?
Our local university changed its policy where all college students who were requesting ADHD medication had to have a full evaluation first. And at that point, I was one of very few people here in town who do adult ADHD evaluations. And I all of a sudden found myself with 10 or 15 evaluation referrals at once. And to do all of those at the same time and get them done in a timely manner, I needed pretty much all of the measures at my disposal. So that was [00:10:00] my kick in the pants to say, okay, I think you need to just buy these testing materials instead of trying to borrow or find them somewhere else.
Now, I am a pretty financially risk-averse person. And this was really hard for me. So I got online and looked at all the places that sell test materials. So when you think about that, Pearson is a big one, MHS, ProEd, PAR. Those are probably the four biggest publishing companies that sell psychological testing materials. I know there are others, of course, but those are the ones where I buy the bulk of my materials. So I jumped onto those websites and we’ll have links to those websites in the show notes, and started to put together my battery.
I’m going to walk you through this and [00:11:00] go in the order that I went and maybe you’ll have a similar experience that I did when I was totaling all this up. First of all, I was looking at an intelligence test. Well, intelligence tests are expensive. You’re looking at around $1200 or $1300 for a full kit that we’re talking WISC, WAIS. Any full intelligence test is going to be at least $1000. Now, I do a lot of academic testing as well. So I checked that out. At that time, it was the WJ III. Now we have the WJ-IV. A full kit for that $900. The WIAT-IIl which is what I use these days for the most part is $500 for the full kit. At this point, we’re up to somewhere between, let’s say $1,800 $2200.
So then I was [00:12:00] looking at the WMS for those cases where I need to really dig into memory. And of course, we can get into battery-specific questions and different people use different things, but I’m coming at this if you went a pretty comprehensive route. WMS is $800 a full kit. So we’re up to $3000. Depending on whether you get that, then there are other options for memory. So there’s the CVLT. And if you need something that covers individuals that are younger, you need the CVLT-C. So those are $350 and $210 each. So now we’re still hovering around $3000.
The ChAMP is a new memory test that just came out that is actually getting really good reviews from a lot of folks. And that comes in at around $400. The Rey–Osterrieth Complex Figure (ROCF) test is $150. So at this point, depending on if you get the WMS or if you go the CVLT route or [00:13:00] the ChAMP route, we’re around $3000, $3200.
If you do a continuous performance test, which I do, a lot of agencies and referral sources require a CPT. We all know, researchers here and there with the CPT, but some places require them. So a CPT varies. I use the Conners CPT 3™ which is $1200 for unlimited use. Prior to that, I used the T.O.V.A, which is only $700, but it’s also $15 per administration. That adds up quickly. If you think about it, at our clinic, we do anywhere from 15 to 20 evaluations a month. So, that can be $200 to $300 extra per month for the T.O.V.A. So $700 is low to get in, but then has a [00:14:00] pretty hefty ongoing costs. So I opted to do CPT-3 which is $1200 for unlimited use. So now we’re up to about $4,000, maybe $4,500.
For me, I do a lot of autism spectrum evaluations. And I think a lot of us know that the ADOS-2 is a pretty important component of autism evaluations. ADOS-2 kit is $2,000. So now we’re up to about $6,000. Two years ago, I added aspects of the D-KEFS for executive functioning. The D-KEFS is $800 for the kit. So now we’re up to about $6,500 to $7,000.
I know that that does not cover everything by any means, but those measures are the ones that I draw on the most. I will occasionally do a WPPSI. I will occasionally do the CTOPP, things [00:15:00] like that. Or maybe the NEPSY here and there, but that’s my core battery. Again, on the conservative end, that’s between $6,000 and $7,000.
So here I was with 10 to 15 evaluation referrals from this agency who was wanting a really comprehensive eval to make determinations about medication choice and differential diagnosis. So I went to my wife and said, so we need to talk about something. I think I need about $7,000 or $8,000 right now. And she looked at me like, are you kidding me? But thankfully, I’m married to an incredibly kind and patient, and trusting woman. And she said, help me understand why you need this and how we’re going to pay it back, which are great questions.
And so that in turn forced me to think about, okay, so for each of these [00:16:00] evaluations, I said, 10 to 15 evaluation referrals right there. So your eyes can kind of pop. And certainly, mine did when I saw this $7,000 sticker, but I went back, I said, okay, I am going to bill or collect at least $1,500 for each of these evaluations. So on the conservative end, that’s $15,000, on the upper end, it’s about $20,000. So, return on investment. Those testing measures are going to pay off within the next month or two at least double and then I’ll have them and they will allow me to build this practice. And she said, okay. Thank goodness that she did because that broke the seal so to speak with my financial risk averseness and also got me used to the idea that something [00:17:00] a lot of people say, you spend money to make money and in testing, that case is absolutely true.
So how do we finance this? A lot of you are probably thinking, okay, I don’t have $7,000 right off the bat and neither did I, to be honest. What I did was I looked for a very low interest, I mean zero interest small business credit card, one that allowed me to pay off initial purchases within 12 months. There are a lot of those out there. I use the Chase Ink for Business card which is still, I think, pretty highly rated as a small business card.
And that’s what I did. It ended up like I said, being paid off pretty quickly and got bonus points and got 0% interest. And so, that for me was a relatively safe way to do that. So that’s one way to finance your testing practice is with a zero-interest credit card that will allow you to pay it off over 12 or 18 months.[00:18:00] Now, we are fortunate in that our overhead is very low for mental health practices in general. Unless you’re running a different kind of practice that has extra expenses for whatever reason, overhead is pretty low. So, putting a balance on a credit card knowing that it would be paid off quickly was relatively safe for me.
Now you can also look at business loans. So business loans are a little bit of a different beast. You have to go through your bank and interest rates can be fairly low, but also higher than 0%. So if you’re in a place where you need a really big business loan, maybe you’re opening a large testing practice and you know right off the bat, you’re going to need multiple kits for multiple clinicians, then that might be a time to get into a business loan because you may not have [00:19:00] maybe the income on paper to justify a high credit limit for a 0% credit card. So business loan, you can always go through your bank. You can likely get a rate between 4% and 7% or 8%, and of course, can pay that off over time as well.
Another way to do it, of course, is to do a hybrid of borrowing and buying. So you might buy the measures that you know you’re going to use the most. And then as you make money doing evaluations, you will supplement and add more over time and slowly pair back on the borrowing and build up your inventory.
So those are ways to finance it. One thing that I did not mention earlier is the ongoing cost of testing. So at this point, I figured out that my total cost per evaluation is [00:20:00] between $50 and $75. So you’re thinking probably like, where does that come from? Here’s where it comes from.
When you add up all the costs for behavior checklists, even though these are paper and pencil forms, they cost about $2 to $3 each. And if I get kiddo who has 2 teachers and divorced parents, all of a sudden that’s four sets of paperwork right there. You’re also talking about the ongoing costs of response booklets. Even if you’re using an electronic means of testing like Q-interactive, which I’ll talk about in a second, you still have to pay for response booklets for the most part. Now, if you’re doing paper and pencil, of course, you’re paying for response booklets. But those can also be between $1.50 and $3 apiece. So I use one of those each time.
And then the bulk of my [00:21:00] testing overhead is probably for the interpretive reports of the personality tests that I use. The Millon personality measures tend to be the most expensive and run between probably $40 and $50 per interpretive report. Of course, you could avoid that if you are skilled enough and have the time that you need to just interpret the score report. I do not do that. I take the shortcut and use the interpretive report to guide my interpretation.
So those are a pretty big chunk. Even things like the PAI or the PAI-A, different personality measures come out around $20 per interpretive report. So those probably make up the bulk of the cost per assessment. If you don’t do personality in your cognitive battery, then that eliminates a substantial portion, but there is ongoing overhead. All told, I probably ended up [00:22:00] spending $500 to $750 a month on testing materials just for the volume of testing that we do.
So those are some things to consider here in terms of financing and ongoing costs of testing. Now, we should also talk about how you bill for testing. Billing insurance for testing is complicated and sometimes difficult. Private pay, there’s not a whole lot to say other than checking your market rate and making your fees very explicit.
With insurance, of course, you get into the various CPT codes for testing, who can do testing- whether it’s a psychologist or a technician. [00:23:00] How do you delineate your time in terms of billing for actual face-to-face testing versus report writing versus interpretation? In fact, I would like to do another miniature episode just on insurance, CPT codes, and all of that.
So when you get into the different CPT codes, there are a lot of things to consider. We’ll get into a little bit of detail here, so try to hang with me. If you’re not living in the insurance world or don’t plan on living in the insurance, then you can maybe pay less attention here for the next couple of minutes, but we’ll talk about private pay too here in a second.
So with CPT codes, the 90791 is always going to be present if you’re in an outpatient office setting for that initial diagnostic interview. Then things get a little more complicated. So [00:24:00] one of the big questions is, what kind of testing are you doing? The vast majority of testing, I think for a lot of us, will probably be billed under 96101, which is psychological testing by a psychologist. So what that means is time spent administering and scoring and writing the test when it was administered by a psychologist.
What I’m looking at is A pretty explicit guide from Tony Puente who is APA’s current president and a neuropsychologist. He has many presentations and extensive knowledge of CPT codes and billing insurance for testing. I would highly recommend that you check out one of those guides. I will link to one of his presentations in the show notes [00:25:00] so you can really read through it for yourself, but because I live in this world and he goes into such great detail, I could not begin to talk about it in as much detail as I probably need to. So there’s that.
Now, generally speaking, 96101 is going to be, like I said, face-to-face testing and interpretation by a psychologist. The second question to consider is, is this neuropsychological testing? The determining factor there varies a little bit in language between the insurance companies and how they define it, but generally, it depends on the question being asked because honestly, a lot of the tests are going to be similar between psychological testing and neuropsychological testing, but the referral question and the issue that you’re trying to resolve is going to guide that decision.
Now, I will say [00:26:00] briefly speaking that there are some differences between insurance companies in terms of some reimburse only for 96101, some reimburse only for 96118, some require pre-authorization for 96 101, some require pre-authorization for 96118. So there are a lot of nuances in which insurance companies reimburse which testing codes and how many hours they might allow for each testing code. This varies. It seems like a lot of insurance companies will cap the number of hours allowed at eight per day or eight total. So these are just things to be aware of if you’re thinking about taking insurance for testing.
Now, the other big question that you have to consider is whether you use a tech model or not. When I say tech model, I mean a model where a psychologist conducts the initial interview and the feedback and the interpretation, but a psychometrician is [00:27:00] administering the tests and scoring the tests.
Now, those are different codes. So for psychological testing, it’s 96102, which is psychological testing by a technician. Neuropsychological testing it’s 96119- neuropsychological testing by a technician. So again, there are a lot of details to consider here in terms of who is a technician, who can be a technician, how to figure out what you do if a psychologist interprets the testing that the technician administers, which is always the case, but what specific time you can count or not in a 96101 versus 96102.
So anyway, getting into a lot of detail here, but again, I’ll say, go read through Tony Puente’s presentation on billing through insurance and it will help you a lot. The other piece is testing with a computer, so that’s 96103. And that’s [00:28:00] what you would use when you bill testing for like a CBT. Some of the personality measures are on the computer now as well.
All right. So again, private pay is a little bit of a different story. In fact, it’s a lot shorter story, although it raises other questions. With private pay, you tend to, of course, set your hourly rate and go from there. A lot of folks I know who do private pay, if they do a fixed battery or an assessment package, will set a flat rate per assessment.
In my practice for anyone who’s paying cash out of pocket, I give a 20% discount simply because I don’t have to deal with all the insurance billing and paperwork, which is a huge hassle. That’s the kind of bonus that I give clients here. And a lot of other folks, like I said, will set a flat fee. So maybe a [00:29:00] flat fee of $500 for an intelligence assessment with a report or a flat fee of $2,000 for a comprehensive evaluation with a report. So that’s something that you could consider.
I mentioned payment plans earlier. That’s also something to really think about. Also, will you take credit cards? Will you be open to something like CareCredit, which is a consumer credit account offered by a private company to pay for basically expensive medical procedures like dentistry or Pet Care, things like that? I’ve had folks ask if I take CareCredit, I don’t, but it is an option to allow for financing for folks.
And like I said, with the payment plan, typically what we do is collect half when the client comes in for testing, which is the second appointment in our process, and then half when the report is delivered. That keeps people [00:30:00] prepared and allows them to budget a little bit for that larger outlay of expense.
Something that helps me a lot with the billing because we do take a lot of insurance in our practice for testing is my billing software or EHR. I personally use TherapyNotes. I found TherapyNotes to be very comprehensive. The reason I really liked them and gravitated toward them back in the beginning when I got an EHR system was that their template for psychological evaluations or neuropsychological evaluations was really comprehensive. So it breaks down each of the components that you need in a note primarily for insurance verification. Were insurance to audit you, it has all that information right there.
It gives you spots to note each of the different measures that you use, how much time you spent on them, how much time you spent on the report [00:31:00] writing, of course, the diagnostic code, the referral question, all those important pieces that you need. It also lets you specify the time of the appointment. So it has all those important details there that you need in case you get audited by insurance companies, which has happened. I’ve had several instances where insurance companies have requested records of testing appointments and have been able to just print off that information and send it in when appropriate.
So, that’s our deep dive into the finances of a testing practice: How do you buy the materials? What materials do you buy? Where do you buy them? How do you bill for testing? How do you keep track of all this in your practice management system?
Now, I’m aware as we’re going along then I could have talked at length about many more of these pieces, but these are the basics and [00:32:00] hopefully can get you started in thinking about how you might finance your testing and how you might continue to pay for ongoing overhead with testing.
So thank you as always for listening and tuning in this time. I’m just having a great time putting these podcasts together and talking with you all about these different aspects of testing. If you want to learn more or take some really concrete steps to start building your testing practice or growing your testing services, you can go to our website, thetestingpsychologist.com.
And if you’re interested in, like I said, really taking some concrete to build some testing services, you’ll see on there, you can sign up for my four-week email check-in. Go to the testing psychologist.com/fourweekblueprint. The idea is that you get a weekly email that will help guide you over the course of a month to put in place all the pieces you need to really start or grow your testing services. [00:33:00] So, check that out.
Otherwise, you can always check out our Facebook group as well where there’s some discussion and commenting and just community support from folks who are doing testing and needing some guidance around that. And that is The Testing Psychologist Community on Facebook.
I look forward to talking with you next time when we’re really going to dive into marketing; what that looks like and how you get your testing clients. Until then, take care.