When it comes to your private practice, you have free reign to (theoretically) do whatever you wish. You can choose what type of therapy you want to practice, you can determine what your hours of operation will look like, and you can decide through what means you’d like to receive payment from your clients.
Making the decision to receive cash payments, or choose to work with insurance companies both come with benefits and downfalls.
So, which is best for your business?
What are the benefits of only taking cash payments? What about the benefits of working with insurance providers?
Here we will discuss the most important pros and cons when choosing your financial options for your private practice.
When it comes to taking insurance, psychiatrists are one of the least likely mental health professionals to work through insurance providers. Therapists, psychologists, and other mental health professionals quickly follow in numbers. But, why is this so?
Well, let’s start off with the benefits to taking insurance within your private practice:
Benefits of Insurance Payment:
Providing More Access To Mental Health Care:
In a country that suffers from an extreme lack of available mental health resources, choosing to take insurance helps alleviate this struggle. This, in turn, means more clients for you. This is especially important for clients that are lower income, as they need mental health services just as much as the middle and upper class does. It could be said, due to stressors and discrimination that come with being a part of the lower socioeconomic class, that those who cannot afford mental health care are often those who need it most.
Can Diversify Your Client Base:
If you choose to accept insurance, you will undoubtedly have more access to various types of clients. This means you’ll have more variety in not only your patient demographic, but in the types of problems clients may be seeking help for. Many patients that need services but cannot afford it without insurance, are often minorities, and by taking insurance you have the chance to converse, and work with people who may be unlike yourself.
Insurance Carriers Can Refer Clients To You:
If you’re just starting out on the journey of opening your own private therapy practice, you may be struggling to find a solid stream of clients. By working with insurance providers, your practice can end up on their referral list and be found by clients looking for assistance. This undoubtedly will bring in larger numbers of clients.
Staying Within The “Norm”:
It’s the societal norm in most countries for a mental health practitioner to take insurance. If you choose not to, be prepared for some backlash, or frustrated clients.
It’s more likely for clients to stay throughout their entire treatment course if they know your services are covered. For private practices that do not accept insurance, clients going through a job loss, or other financial situations may have to end their treatment prematurely.
Gives You Credibility:
New, potential patients may feel more confident knowing you’re on the referral list with their insurance provider. This builds your private practice’s reputation in a positive way, coming across as trustworthy to clients.
Downsides Of Insurance Payment:
When choosing to accept insurance, there is the tedious work of applying to each and every insurance provider panel. This can take up a great deal of time you may not have. If you decide not to apply to each provider panel, you may have to do copious amounts of research to determine which ones to apply to, which in turn, really doesn’t save you all that much time. Mountains of paperwork are going to be in store, no matter if you choose to apply to all, or a few.
If you choose to work with insurance providers, keep in mind the reimbursement rates may not be what you wish them to be. Some insurance providers only pay out $60-$80 in reimbursement rates to your practice. Ultimately, you are stuck with relying on an insurance company’s determination of your payout.
Rejected claims are bound to happen. In the event you and your client experience a rejected claim, this can greatly slow down your ability to be paid in a timely manner. In general, an insurance company must pay a claim within 30 days. However, if a claim is denied or stalled, this could take much longer.
Not all services within mental health are covered by insurance. While the Mental Health Parity and Addiction Equity Act requires insurance providers to cover mental health services at similar rates as physical health services, disparities can arise. You may find yourself having to fight with insurance companies over coverage for a client.
Due to the strenuous amounts of paperwork required, you may end up having to hire a medical billing company specifically to handle this workload. This can incur extra costs to you. If you choose to handle the billing paperwork yourself, insurance companies are extremely rigid on the way forms are coded. This can greatly set you back.
While some people may feel as though mental health professionals who don’t take insurance are ‘elitist’ and don’t care about making mental health services available for everyone, this is far from the truth. There are reasons why many private therapy practices choose the ‘cash pay only’ route.
Benefits of Cash Pay:
By accepting only cash pay, you can work with the clients you WANT to work with. Being able to choose your clients allows your work to be more enjoyable for you, while being able to maintain a healthier work-life balance. You can decide what your workload limit is, and stick to it.
Between having to hire a medical billing company, the possibility of insurance denying a claim, and insurance providers only paying a fraction of your set rate, you will find your income is higher, with less work. You may have to compensate with more clients if you run an insurance based practice in order to make what you could in half the amount of time in a cash pay practice.
Specialize In Your Niche:
By only taking in clients that you agree to take on, you can set your standard as an expert in your scope of practice. An insurance accepting private therapy practice may receive many calls from insurance panels requesting services on an array of different issues. This can greatly reduce the number of clients you may not be specialized or well equipped to handle. Being able to establish yourself as an expert can quickly specify your potential clients.
You Can Set Rates:
No longer will you have to worry about what an insurance provider is willing to reimburse you for. When it comes to a cash only practice, the freedom that comes with setting your own rates is undeniable. This can be particularly useful if you’re trying to attract higher socioeconomic clients.
Downsides Of Cash Pay:
Without the luxury of an insurance provider doing all your marketing for you, this can make referrals much more difficult to come by. You’ll have to step your marketing game up on notch through other means such as social media, or word of mouth. This can often take up valuable time you wish to spend on your business. Hiring a social media account manager can take this load off your back, however, and is often cheaper than hiring a medical billing company.
Learning The Business:
Since you won’t have anyone above you when it comes to the financial portion of your private practice, you’ll have to do some in-depth knowledge on how to run a cash only business. There are still laws and regulations required to ensure you aren’t taking advantage of your clients.
Smaller Pool Of Clients:
This may only come at first, but there’s no doubt you may feel as though your client base isn’t growing nearly as fast as you would wish. This is often due to clients taking their business elsewhere in search of a therapist that will take insurance. There can be a steep learning curve when it comes to opening, and running a successful private therapy practice. Don’t lose heart. Slow and steady wins the race.
When choosing to opt out of using insurance providers, this will evidently affect your client diversity. Many lower-socioeconomic clients that rely on insurance to pay for their mental health services will be unable to use your practices. This ultimately may lead to similar patients in similar situations, without much variation.
So, Should I Choose Insurance Or Cash Pay When Opening My Private Practice?
All in all, the choice comes down to what matters to you the most.
Are you dedicated to providing mental health access to even the poorest of communities?
Do you have a passion to reach the more rural parts of your community?
If so, taking payment from insurance providers may be your best option.
If you want to hone down on your niche and become known as the leading expert in your field of practice, opting for a cash-only financial system could be the best route to take.
Do your research so you can be fully informed and confident when making this big decision.