341 Transcript

Dr. Jeremy Sharp Transcripts Leave a Comment

[00:00:00] Hello everyone. Welcome to The Testing Psychologist podcast, the podcast where we talk all about the business and practice of psychological and neuropsychological assessment. I’m your host, Dr. Jeremy Sharp, licensed psychologist, group practice owner, and private practice coach.

This podcast is brought to you by PAR.

Use the Feifer Diagnostic Achievement Test to hone in on specific reading, writing, and math learning disabilities, and figure out why academic issues are occurring. Learn more at parinc.com\feifer

All right y’all. I am back with a very interesting episode for me to tackle.

Today, we’re talking about why work in a group practice.

Now, I obviously advocate for folks to launch their own practices and speak frequently on the podcast about how to do that. That’s the [00:01:00] bulk of my coaching. That’s all of my coaching: How to do private practice.

That said, I’m a group practice owner with many employees, and I spend a lot of my time on this side talking with employees about why group practice is a better choice than going out on your own.

What an identity crisis, right? But only if you look at it in completely concrete, black-and-white terms. The truth is that private practice fits better for some folks when it’s not all about finances and group practice employment works better for others.

There are plenty of folks out there for whom one will fit better than the other. I’m going to break down both sides today.

[00:02:06] All right, y’all. Glad to be digging into this. Like I said, this is an interesting episode to put together. So let’s see where it goes.

On the surface, it would appear that being on your own in private practice is the best financial move, right? I think everyone has that assumption. In a group practice, you’re getting paid anywhere from, well, there’s a huge range, anywhere from 40% to 70% of collected revenue depending on whether you’re an employee or a contractor, private pay, insurance, et cetera. And it may not be a strict percentage. We might be talking about an hourly rate or even a salary, but for simplicity’s sake, I’m just going to quantify it as a percentage of collected revenue.

[00:03:00] So, if you’re getting paid 40% to 70% of collected revenue, then I think people go to this place of, well, it must be more financially sound to be in private practice, right?

Well, maybe not, and here’s why. There are two main things to consider in this conversation. One is, this is hinging a bit on the difference between revenue, which is everything that you bring in, gross revenue- that’s all the money that you collect and what we’ll call profit, or in this case, everything that you take home as well as how many hours you’re actually working in both settings. Those are the two things: revenue versus profit and how many hours you’re working in each setting and the kind of work that you’re doing, what those hours look like.

[00:04:00] Let’s start with the revenue. Revenue is likely going to be similar actually. Seeing 20 clients a week in a group is going to bring in the same amount as seeing 20 clients a week in private practice all things being equal. And when I say clients, I just mean billing 20 hours. You might be doing 20 hours worth of testing, but we’ll just say, billing 20 hours is billing 20 hours, whether you’re in a group or you’re in private practice, all other things being equal.

There are two exceptions though. The first one is if you move from an insurance-based group practice to private pay, and two, on the flip side, if you go from a private pay group or an insurance-based group to your own insurance practice, you’re going to bring in less revenue in your own practice.

I’ll say that one more time. If you move from an insurance based [00:05:00] group practice to a private pay, private practice, or solo practice, then you would likely bring in more revenue in your solo practice. On the other hand, if you transition from private pay or insurance-based group practice to your own insurance-based solo practice, you will likely bring in less revenue.

The private pay-to-solo makes obvious sense, right? If the group is a private pay practice and you move to take insurance, well, you’re likely going to make less from insurance than private pay.

The second example is what people don’t consider a lot. Something people don’t often consider when they might go from an insurance-based group practice to an insurance-based solo practice is that your group practice owner or billing department, or whoever may have negotiated higher rates with insurance panels than are typically [00:06:00] available to solo practice owners. So even though you might stay on the same panels in private practice or solo practice, you could potentially make less simply because you have a solo contract that does not reflect the higher negotiated rates.

That’s not always the case, but it is a factor to keep in mind that you might move from group practice to solo practice thinking you’re going to get reimbursed a certain amount, but that may not be the case because reimbursements are often different for larger groups. Often higher. But let’s move to the real factor. So revenue is one factor. There are some variables there, but it’s probably going to be pretty similar.

Let’s move to the real factor though. What are your responsibilities financially? How many hours are you working in each setting, and what kind of work are you doing?

Let’s [00:07:00] assume that revenue is the same in each setting, and we’ll just say it’s $100 an hour. In a group, you’ll take home, let’s just say $50 of that just to keep all this nice and even. So $50 out of every $100 you’re going to take home. The natural question that comes up is, where does the rest of it go?

Let’s take a break to hear from our featured partner.

The Feifer Diagnostic Achievement Tests are comprehensive tools that help you help struggling students. Use the FAR, FAM, and FAW to hone in on specific reading, writing, and math learning disabilities, and figure out why academic issues are occurring. Instant online scoring is available via PARiConnect and in-person e-stimulus books allow for more convenient and hygienic administration via tablet. Learn more at parinc.com\feifer

[00:08:00] Alright, let’s get back to the podcast.

That’s an interesting question. I say it’s natural. I don’t know that it’s natural in other lines of work. I don’t know that Apple employees are asking where does the rest of my money go? That whole question of why is the company keeping my money? I don’t think that’s a thing that happens in other businesses, but it’s one of those weird quirks of mental health that I think originated from a percentage model. I did an episode on that if you’re curious. But let’s stick to the script here.

So, revenue is about the same, $100 an hour in both settings. In a group, you’ll take home about $50 of that. That’s pretty common if you’re an employee. So where does the rest of it go? Well, the practice owner covers all the overhead, testing materials, rent, admin support, payroll taxes, benefits, [00:09:00] retirement, et cetera, continuing education. And on your own, you are responsible for all of those things.

That’s a lot that’s happening behind the scenes as a group practice owner that you may not be aware of or immediately think about. And when you go out on your own, you are responsible all of a sudden for all of those things. So you are all of a sudden taking care of overhead, testing materials, rent, admin support, taxes, and self-employment taxes, and if you choose to do health insurance, and saving for retirement, you can add those in as well.

In the end, you might actually come out ahead in terms of the “take-home” pay per hour of clinical time, even after you [00:10:00] pay for all of those expenses on your own. Maybe.

So, if we just say you’re bringing in $100 an hour, let’s assume that $35 goes to overhead. Okay? That leaves you with about $65 out of the $100 that you are actually taking home, compared to the $50 in a group practice. So right now you’re ahead, you’re actually bringing home about $65 an hour out of the $100 instead of the $50. You’re like, okay, great. I’m making more money.

The kicker is how many hours you are working. When you’re an employee, you should be getting paid for literally every hour that you work. Maybe there’s a different rate for clinical time versus admin time depending on the task or meetings and whatnot, but you should be getting paid for every hour that you are working.

When you go [00:11:00] into solo practice, you get paid for your clinical time and that’s it. You get paid for clinical time. You do not get paid for on average, 10 to 15 hours a week that you’re going to do on top of your clinical load to manage your practice. That extra 10 to 15 hours typically goes toward admin tasks like answering the phone, answering email, maintaining your website, doing marketing, purchasing testing materials, inventorying testing materials, and any number of other things that you are doing to make your practice run. So that typically adds up to about 10 to 15 more hours per week on top of the clinical load.

So then when you do the math, this comes out to a lower hourly rate than you would make in a group practice in the majority of cases.[00:12:00] Now for some folks, that’s okay. That’s a trade-off you’re willing to make, but the idea is that you know what you’re getting into before you get into it, right?

That raises a question, why go into solo practice?

Well, this is what I was just alluding to. For a lot of folks who do it, it’s not just about the money. The same reason that many of us grow into group practices, from solo, even though you make less for quite a while than you could make as a solo practice comes into play here too. It’s about creating a legacy. It’s about fulfilling a dream. It’s about being your own boss. It’s being completely independent, having total flexibility. So there are these intangible benefits of owning your own practice that drive a lot of folks. And those are 00:13:00] very powerful.

So as you consider, whether you want to do solo or group, just think about like, what are your motivations? Are you driven by those motivations? This legacy, this dream. Are you a business owner? Is there a family history of owning businesses? Why is this important to you?

If you are not driven by those motivations, and you shouldn’t feel like you should be, one is not better than the other, then solo practice may not be for you. Because like I said, a lot of the time the work that you’re doing is going to be more hours that you’re not getting paid for that then technically lowers your hourly rate than what you would make in a group.

So taking all of this into account, and I’ll circle back again and just say, this is a ballpark estimate. There are going to be so many factors that might influence things in one direction or the other. [00:14:00] The big one, of course, being if you go into solo practice that’s private pay and are able to charge a much higher rate than insurance is reimbursing in the practice that you’re leaving. That’s probably the main factor that will tip the scales here, but like with any decision the idea here is just to make sure that you are going into it deliberately with your eyes wide open, and not necessarily assuming that you’re going to make way more money per hour in solo practice compared to a group.

All right, y’all. Thank you so much for tuning into this episode. Always grateful to have you here. I hope that you take away some information that you can implement in your practice and in your life. Any resources that we mentioned during the episode will be listed in the show notes, so make sure to check those out.

If you like what you hear on the podcast, I would be so grateful if you left a review [00:15:00] on iTunes or Spotify or wherever you listen to your podcast.

And if you’re a practice owner or aspiring practice owner, I’d invite you to check out The Testing Psychologist mastermind groups. I have mastermind groups at every stage of practice development: beginner, intermediate, and advanced. We have homework, we have accountability, we have support, we have resources. These groups are amazing. We do a lot of work and a lot of connecting. If that sounds interesting to you, you can check out the details at thetestingpsychologist.com/consulting. You can sign up for a pre-group phone call and we will chat and figure out if a group could be a good fit for you.

Thanks so much.

The information contained in this podcast and on The Testing Psychologist website is intended for informational and educational purposes only. Nothing in this podcast or on the website is intended to be a substitute for professional, psychological, psychiatric, or medical advice, diagnosis, or treatment. Please note that no doctor-patient relationship is formed here, and similarly, no supervisory or consultative relationship is formed between the host or guests of this podcast and listeners of this podcast. If you need the qualified advice of any mental health practitioner or medical provider, please seek one in your area. Similarly, if you need supervision on clinical matters, please find a supervisor with expertise that fits your needs.

Click here to listen instead!

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.