How to Start a Psychiatry Private Practice

Last year my wife left her employed academic position and started a cash/direct pay solo psychiatry private practice. Despite how crazy 2020 has been, it’s been a great experience and we have no regrets. If anything, the flexibility of one self-employed parent was instrumental to our sanity as parents when all childcare options imploded in March. We’d like to share some of what we’ve learned in the process. This is absolutely not exhaustive.

I also used the royal “we” throughout this post even though I was mostly along for the ride.

(Disclaimer: there are a few referral links in this post. Your support is always a wonderful surprise, but as ever, feel free to ignore.)

Motivation

One of the big downsides of many physician jobs these days is that they are employed positions. When someone else is your boss, you have limited control. In general, you may not be able to control where you work, how much you work, with whom you work, what kind of patients you see, and how much your time is worth. That’s basically everything except for a steady paycheck.

Psychiatry is almost unique within medicine in its almost complete lack of overhead. While many practices will employ office staff, nurses, etc, they aren’t a requirement, especially if you don’t work in-network with insurance companies and instead choose to be directly paid by patients for your services. Billers, coders, admin, etc become largely superfluous.

The downside is that physicians in private practice need to work to generate revenue to “feed the beast.” Since you only make money when you actually see patients instead of a consistent salary, your income goes up if you work more, which can in some cases create an unanticipated drive to work harder. However, if your expenses are low (and especially if you have a working spouse with benefits), the flexibility is nearly unlimited. With one young child and another on way, her maternity leave was a great time to transition to and ease into a new practice.

If you’re doing a true solo practice, you can definitely be your own admin for a while. It has the added benefit of teaching you how to do what you need and what you’re looking for in an employee when/if you choose to offload these tasks to someone else.

Office

If trying to keep overhead low or starting very part-time, you might consider subletting someone else’s office for the time you need. Many people start a PP part-time as a side hustle or as a way to test the waters before leaving the security of an employed position. There’s nothing wrong with that, and there are plenty of folks out there with an extra empty office in their suite or who work part-time and don’t need theirs every day. Doing PP one or two days a week at first while still working a regular (or 60-80% FTE) job or making some quality of life cash by covering a variety of ER or CL shifts is a great way to make sure your business is viable and limit the financial pinch of a slow start. You need to be prepared for a slow and grow situation, especially if you’re fresh from residency or new to the area and therefore don’t have any contacts, referral sources, or old patients that might follow you.

Location is a big deal. I would encourage you to pick a place near your home that’s an easy commute. Part of the point of being your own boss is to enjoy the practice of medicine, and the data show that a long commute is consistently misery-inducing. It’s also important to figure out what location is right for the kinds of patients you want to see and their expectations. Not everyone needs a super swanky office, but certainly, the area of town, age of the building, surrounding commercial stock, and ease of parking are all going to play a factor in how your practice feels to potential patients (and how you feel about working there).

If you plan on actually charging what your time is worth (i.e. your current salary/benefits + what your employer is earning from your labor), then patients will likely appreciate both the location and the thought you put in your physical (and digital) presence. This is the world we live in.

When you find potential sites, there are lots of things to take note of for potential negotiation The obvious metric is price per square foot (+/- fees for utilities). But other important considerations are improvements (including but limited to new floors and paint, new partitions/walls) either performed by the owner or getting a lump of cash to make changes yourself, a signup incentive like a free month’s rent, the length of the contract, cancellation provisions, so on and so forth. Cancellation may not have been a big issue for a lot of folks, but I bet COVID has turned that into a top ticket item for others.

Get absolutely everything in writing in the contract.

Note that it probably won’t hurt you to use a real estate agent who might know the area, provide “comps” (valid comparisons), and help negotiate. Some buildings themselves prefer you don’t, but that’s because an agent’s commission comes from the building owner. If you know people who rent offices in the building or area, get their details to make sure you are getting at least as good of a deal.

Note you’ll almost certainly also need Business Insurance for your office as well, which covers the more mundane damage and personal injury type stuff not related to your practice of medicine. The minimum amount of required coverage is something you’ll often find in your lease.

Office Stuff

One of the most fun things about leasing your own office is getting to choose all the fun stuff to put in it. Chances are where you’ve worked in the past didn’t have the vibe you’d have otherwise chosen.

Some things to consider:

Furniture (duh), but do you want a desk and chairs or more of a seating area (or both)? If the latter, chairs only or chairs and a couch? Do you want the psychiatrist chaise or the ubiquitous Eames chair knockoff (um, who wouldn’t?)? How many bookshelves do you need in order to show off how learned you are? Do you want coordinating frames for all your diplomas so that you can intimidate patients with the sheer weight of your training?

Are you going to have a dedicated waiting room? If so, how big? If you offer beverages, is the coffee bar in the waiting room or your main office? Bottled water as well as coffee/tea, and if so, a small fridge or no? For coffee, the typical Keurig my wife and her partner purchased with its endless variety of dubiously tasty K-cups or upgrading to a luxe Nespresso that you know patients will make note of (and that I was advocating for)?

You’ll almost certainly be using a cloud-based EMR (see below), so you’ll need reasonable internet. For flexibility, a laptop will work well if you’ll be swapping around different spots in your office (and from home). If you’ll be at your desk a lot but are using a laptop, you might consider a dedicated monitor and keyboard to plug into for better ergonomics.

You’ll at least occasionally be scanning things, and while you could use an app on your phone, it’s much easier to get an all-in-one printer/scanner that has a document tray so that you can scan multiple pages at once. I am partial to this Epson, which we use at home, but for the office we bought this compact HP, which fits inside the shallow Ikea Billy bookcase, which we use with bottom doors (like this). You’ll also want a decent (at least cross-cut) shredder.

Don’t forget items for vitals/biometrics:

Business Prep

You’ll want to create an “entity” for your business that is separate from yourself for all your business dealings, which for a solo doc is generally a PLLC (professional limited liability company).

Many people hire a lawyer for this but you can also do it yourself and it doesn’t really require much information outside of your desired business name, address, contact information, and what your business does, like “practice psychiatry and psychotherapy.” In Texas, where we live, it takes a few minutes to do and a few weeks to get back.

State rules vary, but you should typically have an operating agreement on file even if the state doesn’t specifically demand a copy. If you’re doing it yourself, for example, you can get something that checks the boxes with a free trial of Rocket Lawyer. If you’re going into business with a partner or plan to have real employees, you might be better off making something a little more futureproof.

Please, please note that an LLC is not by default a “corporation” despite the fact that people sometimes call it “incorporating yourself.” You also don’t need an LLC in order to deduct business expenses; any sole proprietor (anyone with something they’re calling a business) can do that. It’s just important to form one so that you and your business are not one and the same, as you would be if you simply functioned as a sole proprietor. You don’t want to be using your personal social security number on anything (even if you get a separate EIN for your business as a sole proprietor, your business would still be you). An LLC also doesn’t have anything to do with malpractice, but it does mean if someone slips and falls in a puddle on the floor that the lawsuit won’t go after you personally. Separating out your personal and professional assets is important.

It’s also required if you end up wanting to be taxed as a corporation. Whether or not you choose to file taxes as an S-corp or C-corp or just have all that income go on your personal taxes (aka “a pass-through entity”) is a separate question from the general need to form an LLC, which will have its own EIN and give you the ability to open up business bank accounts, credit cards, etc.

As for actually filing with the IRS as an S-corp, the White Coat Investor has a nice post about it. Doing so, for example, would allow you to divide your revenues between salary and distribution (profit-sharing), the latter being exempt from payroll taxes. Whether or not filing as an S-corp is worthwhile for the extra hassle depends on how much money you make.

Most accountants will recommend you file as an S-corp, but that is in part because most people don’t think they are able to do that level of taxes on their own and will be locked into professional help forever. You’d need a salary of ~$150k to max out an individual 401(k), so underneath that the benefits are debatable. You can file as an S-corp later when you’ve grown, so you can wait until it grows or just keep things simple if your plan is to stay small with a part-time lifestyle practice.

Payment & Insurance

If you’re looking for how to apply to be on an insurance panel, you’re in the wrong place. There’s of course nothing wrong with taking insurance and doing so will open you up to a larger potential pool of patients. In some locales, taking insurance may be necessary in order to drum up business in the first place.

It’s important to realize that there’s no rule that says if you take insurance that you need to take all insurance. If there’s one decent insurer in your area you could apply to that insurer and take only them. Again, you’re one person. It’s not going to take tons of people to fill up your slots. If you’re full, you’re full.

Direct care, however, is very liberating, and there are many patients who prefer to pay themselves or have insurance plans that are unhelpful for routine psychiatric care (either high-deductible plans or ones that poorly cover mental health). Either way, what matters is that you’re able to find patients and fill your schedule.

If you have a strictly direct-pay practice, you will need to opt-out of Medicare. While patients with private insurance can submit out-of-network claims for potential reimbursement, Medicare patients cannot.

Malpractice Insurance

The two big categories to choose between are claims-made vs. occurrence policies. Claims-made policies are cheaper, particularly at first, because they only cover issues while the policy is in place. You would typically need to purchase a tail if/when you cancel unless you’re retiring. An occurrence policy is more expensive upfront because it covers the time period in question even after the policy has lapsed (i.e. no tail).

There are multiple companies that have good ratings, but the two we liked the most in our search were The Doctor’s Company and MedPro. Of the two, The Doctor’s Company only offers claims-made but had great reviews and slightly lower premiums. They also had a part-time discount if you only work up to 20 hours/wk on average. MedPro has both claims-made and occurrence options and was only slightly more expensive apples to apples. We went with The Doctor’s Company and customer service has been excellent; someone from risk-management is always available on the phone in just a few minutes.

Other Practice Stuff

If you’ve only been working as a trainee or in a university setting, you may have a restricted DEA limited to official institutional duties. You’ll need to pay for an unrestricted DEA.

You’ll also probably want some prescription pads for when e-prescribe isn’t working.

You’ll need to update your contact info for your NPI, DEA, and your state medical board. If you form an LLC, your entity is supposed to have an organizational “Type 2” NPI in addition to the personal Type 1 NPI you’ve had since earning your degree in order to interact with insurance companies.

Banking & Accounting

You’ll need a business checking account and credit card. There are many options. We used Chase because it was easy and they have two branches nearby.

You’ll probably be taking credit cards through your EMR, but you also need a way to track expenses, payments, send invoices, and basically generate profit and loss statements so you know how you’re doing (and can use said information to file your taxes). We use Quickbooks. It’s super easy, can link with your checking and credit cards to automatically track everything and categorize expenses. You can also use it to measure mileage if that’s your jam. The basic QB Self Employed is over half off for the first 3 months with a referral link and then $15/month after that. If you file your taxes with TurboTax Small Business, you’ll get it for free the following year. The other really popular choice is Freshbooks.

You’ll want to track expenses as soon as possible because chances are you’re going to spend a lot more money upfront getting started than you will later on. Try to avoid mixing business and personal expenses.

EMR

While you could decide to go old school and do everything on paper, as doctors of the modern era we wanted an EMR that let us write notes, use templates and some type of dot-phrase/shortcut, do electronic forms and signatures, bill patients and receive payments electronically, and send electronic prescriptions.

If you ask online, you’ll hear a lot of different names including Dr. Chrono and Practice Fusion, but Luminello was our pick for its psychiatry-focus, core features, and low cost. Luminello was designed by a psychiatrist specifically for psychiatry.

It’s browser-based so it works on every platform and device and you don’t want to worry about security (except a good password). There’s a handy free version you can use to see if it’s right for you. They also offer a “lite” (part-time) plan for $69/mo that allows up to 30/notes per month, so you’ll likely be paying less for a few months as you get started. The full price is $100/month, but you can save two-months’ worth if you prepay the whole year. You can also get a free month if you sign up with a referral link, like this one. If you are doing only therapy, the cost is even lower at $29-49/mo.

I will say that setting up the credit card processing and the e-Rx add-ons are a bit cumbersome and tedious and can take a couple of weeks to process, so don’t wait to set it up. All customer support is initially via email, but they can call you to work out kinks when necessary.

In the era of COVID-19, Luminello also added a discount to incorporate the Doxy.me telehealth platform, which has been useful.

In the year since we choose Luminello, a lot of folks have also started talking up chARM EHR. Their a la carte pricing makes it a little confusing at first glance but it looks overall analogous in cost and has a good feature set. I would definitely look at least both of these prior to making your pick.

Privacy Policy

You need to post these in your office.

(In Texas, you also need to post the TMB Complaint poster, so check your state rules)

Your patients should be signing your privacy and office policies before their first visit. In Luminello, for example, you can up upload the form for e-signature.

In general, we’d recommend uploading everything to the EMR so you can run a paperless office. If patients bring paper records, just scan and shred.

Other Technology

Note that for any HIPAA-compliant service, you will always need to sign some type of Business Associate Agreement (BAA) in order for everything to be kosher.

Phone

While you could get an office phone, it’s probably easier to just get some sort of internet-based phone number. There are lots of phone options, but we use iPlum, which is a HIPAA-compliant secure phone service that you can run as an app on your cell phone. It’s $5/month for 200 “credits” or $8/month for unlimited. We got to choose a new local number, and the software allows for creating office hours, phone trees, and secure texting etc.

Fax

Doximity is free and HIPAA-secure.

Faxes are stupid, and I can’t believe we’re still using them in the 21st century. There is no reason to pay for a separate fax line.

Email

We’ve purchased Neocertified for 100 dollars/year in order to send secure emails, which can run on top of Outlook, Gmail, etc., but we didn’t renew it because we never used it (because we strictly avoid using email for anything patient care related). You should never use a normal email for any PHI.

It is now possible to set up G-suite directly for HIPAA-compliant services like Google Voice phone and email as well, which may be a good solution, but we’re happy with our current setup.

Translation

Technically, you need to be able to offer patients services in their language of choice. If you end up with a patient that needs a translator, there are a variety of options. LanguageLine, for example, can charge you by the minute.

Check-in

If you end up with a waiting room and want to know if your next patient has arrived without physically checking, you could consider setting up a check-in iPad with a service like Envoy.

Marketing

Worth mentioning: patients can and will find you online, but you will need real-life referrals in order to fill your practice.

Digital Presence

You should make business pages for Google Business and Yelp. Know that when you create a Yelp page, you will be spammed repeatedly to buy advertising (for a cost of $2-10/day). When you Google “best psychiatrist” in your area, you’ll often see Yelp results very high up. But once we created our website and linked it up with our business profile on Google, local people started finding us in their searches organically.

You should also claim all your doctor profiles like WebMD, Vitals, ZocDoc, etc. WebMD actually seems to own several of the others anyway. It may take multiple attempts to claim and update pages because these sites also want to frustrate you into paying for advertising.

We were surprised at how many patients use Psychology Today to find mental health professionals. You can get a free six-month trial if you use a referral from a friend. Unfortunately, there’s no code or link, so if you want a referral email just drop a comment below asking (I can see your email privately) or shoot me an email (address located in the footer). It feels their referrals are overall more likely to not read the website, to be looking for insurance, etc, but it’s definitely been useful. You can choose to have calls routed through a special Psychology Today phone number so that you can count referrals and see if it’s worth the cost. It’s normally $30/month.

Business Cards

Are totally still a thing. One of the things you’ll likely want to do is send business cards to other folks in your area that might be a source of referrals like psychologists, therapists, PCPs, Ob/gyns, etc. Word of mouth may eventually be enough, but you need to put in the work upfront to make sure the professionals and their patients who need you can find you. Non-physician therapists of all stripes are a particularly important referral source (and it goes both ways; you’ll want to know good therapists to refer to as well).

We looked at several options including Canva (didn’t love the print quality), Vistaprint (very inexpensive), and Moo (awesome quality, expensive). We ultimately went with Moo (you’ll probably get ads following you around on social media once you visit them), and the paper and print quality were exquisite. People notice and comment on them all the time. Ultimately, you’re trying to give people the right impression about you and your practice, so I think a well-designed quality card is a no-brainer.

We also made cute stationery to write handwritten letters to send out with said business cards to potential referral sources.

Meeting with others

Some fraction of the people we sent our stuff to wanted to meet and learn about each other. We brought snacks or meals to some folks, and others brought stuff to us. It’s all part of the process, and referral sources are the lifeblood of a growing practice.

Website

Your website can be and do different things, but no matter what it’s a digital business card and represents your brand to prospective patients and referral sources. It doesn’t need to say much or be complicated (in fact, it’s probably better that it’s simple and straightforward).

A focused site will include your name, brief bio/mission statement/practice description, physical address, phone number, fax number, and a link to the patient portal of whatever EHR you choose. That’s all you really need.

I’ve written before about how to make a website, and I think that post will be helpful here as well, but the bottom line is that your website should try not to suck. You can use a website builder like Wix, a more robust hosted solution like Squarespace, or a more hands-on DIY solution like WordPress, but no matter what you pick you for hosting and design you need to have a good simple memorable URL–ideally your name–and you need to pick a clean non-tacky design. Most hosted solutions will include a URL for free with a paid plan, so you won’t need to buy one in advance. You should pay extra if needed to remove lame branding things likes “Created with Wix” or other less than professional looking inclusions.

Knowledge of Your Locale

It really helps to have a local network and be familiar with the resources available to patients. Who are therapists to refer to (including for DBT, CBT, etc), what to do for IOP, PHP, colleagues/specialists, support groups, and even book recommendations. What hospitals are around and which actually provide meaningful mental health services, especially after business hours. If you’re staying where you trained, crowdsource while you’re around a lot of people. When you work with anyone (other docs, social workers, etc), ask them about their experiences, practice parameters, how they do things.

You need to know how to help your patients, and you also don’t want to reinvent the wheel when you don’t have to. (My wife was well-informed after being an academic for three years before opening her practice; she would also say that going out straight into practice is a bit more of a challenge as opposed to working first in a supportive environment. She had a great network of experienced colleagues to bounce tough cases on and grow. Given how many residencies are disproportionately focused on high-acuity inpatient and emergency care and short-term follow-ups, outpatient care [especially with an insured or otherwise high-functioning panel] may be a surprisingly fresh practice setting.)

Consider joining the “private practice psychiatry” group on Facebook, though be prepared for the usual bevy of less-than-useful advice and shared experiences.

Conclusion

It’s been a fun challenge and a joy to practice medicine this way.

11 Comments

  1. Thanks for the informative post, very interesting! How have you seen your income change in the midst of Covid with the transition to PP?

    Reply
    • She started the practice in November, so it was still a very new and growing practice when Covid hit. New patients slowed to a trick in April/May but otherwise steady growth before and then after the initial shutdowns.

      Reply
  2. let me save you all a lot of time and effort…why reinvent the wheel…join someone elses practive that is already set up and take 70 percent of what you bill for…your own practice is a hassle and you will make more joining someone else as they ahve the efficiencies already built in and you can spend your time billing and seeing pts

    Reply
    • There’s nothing wrong with being an employee. Not everyone wants to build something or be a small-business owner, and that’s totally fine.

      But for those with the disposition, there’s probably no already existing practice that is in the exact physical location you want and designed exactly as you want where you also get to choose exactly how to accomplish your job every day as well as who (if anyone) you get to work with. We’ve found it very liberating.

      After the initial set-up–which we found mostly fun and exciting–there isn’t that much work for the actual practice, and our overhead is way less than 30%.

      Reply
  3. Great article, and lots of good information that would have been valuable when I was starting out with a private practice a few years ago. Just one comment about insurance – it is not difficult at all to take insurance, and you are right, it’s easy to just take one type and that is plenty as a solo practitioner. You mention that private pay felt liberating – I find taking insurance to be even more so – it simplifies some of the patient-doctor dynamics, there are no issues about patients not paying their bills, you get a very nice cross section of patients rather than just the wealthy, and I also feel there’s a social responsibility to not make our already-broken insurance system even more broken by making it unusable for patients seeking psychiatric care. I use Office Ally as my EMR and it submits everything to insurance with one or two mouse clicks and then processes the insurance payments automatically when they come in; I’d imagine some other EMRs do this as well. I probably spend less than 10 minutes a week dealing with or thinking about it, after an initial time investment of a few hours when I was first starting out. In my area, the insurance reimbursement is competitive with what I’d charge for private pay – it doesn’t hurt to research this when you are starting out.

    Reply
    • I agree everyone should do their own research and make an informed decision about the kind of practice they want to have. There are a lot of places where private pay may not make sense due to competition or demographics.

      I respect the sentiment but I respectfully strongly disagree with the stance on social responsibility. We’ve both been in academics and private practice, and I don’t believe there is an obligation to be part of a broken system, and I think that logic can take you to a variety of ultimately untenable positions. Also, not all direct pay patients are wealthy; this is a misconception. They simply cannot or do not utilize insurance for mental health. But ultimately, if your clinic is full, your clinic is full, and that means you’re hopefully helping people.

      I support solutions that get physicians to stay happy and in practice and provide the best care for their patients.

      Reply
  4. Thanks for the great article. As someone that has always worked inpatient and therefore never had to bill, can you recommend a good resource (online course/books/etc) that can help me learn billing and coding? Due to my area, I have to take insurance. Thanks so much.

    Reply
  5. One small thing I’ve wondered about: you mention many services being HIPAA compliant. However, are you still considered a Covered Entity if you do not accept insurance? Do HIPAA laws still apply to the cash-pay practice? Not that you would want to intentionally put your patient’s information at unnecessary risk, but there are some service (I think of video chat for telepsychiatry) where a smaller company may not sign a BAA but I would feel like the information transmission is still secure (e.g. using a one of many video chat services that are end-to-end encrypted).

    Reply
    • Yes you are still a covered entity. The law was written such that if you transmit any PHI electronically ever, you’re covered. There is no way to practice medicine in this country without being subject to HIPAA.

      I belive the HIPAA requirements for video calls specifically were relaxed during the pandemic, but that’s probably not permanent. In real life, it’s hard to imagine a scenario where using a service you described would result in actual accidental disclosure of PHI, but there are enough compliant options (including now for free through Doximity) that there’s really no reason I see to not use something that’s kosher.

      Reply

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