The Therapy Business Podcast
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The Therapy Business Podcast
Transitioning from Insurance to Private Pay
Are you ready to break free from the constraints of insurance-based therapy practice? Imagine a world where you can serve clients more effectively while ensuring your own financial sustainability. In this episode, we explore the strategic shift from insurance-based clients to a thriving private pay model.
Join us as we guide you through the process of transitioning gracefully and smartly. Whether you're considering quitting insurance cold turkey, phasing out providers, or patiently building a robust private pay client base, there's an approach tailored to your unique situation. We'll provide insights on how to manage this transition with confidence and care, emphasizing the importance of patience and allowing growth to unfold naturally.
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*Intro/outro song credit:
King Around Here by Alex Grohl
A lot of therapists want to make the switch from insurance to private pay only when we get started in therapy, it's really common to take insurance because it can be a really great source of leads. It's a great way to serve people of all income levels. But oftentimes we feel trapped and you get trapped in that cycle of not being able to release the insurance clients and move solely into private pay, worried that we might not be able to bring in enough clients to offset the loss of insurance clients and move solely into private pay, worried that we might not be able to bring in enough clients to offset the loss of insurance clients. Well, today I'm going to talk through the way to transition from insurance into private pay so that you're doing it effectively and doing it in the best financial way possible. My name is Craig and I'm the CEO of Desi Financial Coaching. Our goal is simple to help you run a therapy practice that is permanently profitable. If you own a solo or group practice, we're here to help you build a business that creates more time, makes more money and serves more people.
Speaker 1:This is the Therapy Business Podcast. There are a lot of pros that come with taking insurance clients, especially if you are new in private practice. If you've just started your own therapy practice and you are trying to get off the ground, maybe you don't have a ton of marketing efforts there. You don't have a lot of word of mouth being generated about you and your business, and so taking insurance clients is a great way to get your foot in the door. You're going to be able to attract people who take that insurance. You're going to have probably a higher close rate when you're meeting with these people and taking on new clients, because the cost of therapy is not going to weigh as heavily as a factor for them. Now also, there's the opportunity to work with all income levels and you're not limiting yourself to just high income earners or people who can afford that private pay fee that you would likely charge. So taking insurance is not a bad thing necessarily, and I've worked with a lot of practices who that is their long term plan. They don't want to ever stop taking insurance because they like being able to reach people of all sizes, of all income levels. But typically in most practices we talked to, they want to shift into private pay. They want to make that transition into either fully private pay or at least a majority of their clients being private pay, and it can be a scary and daunting task. Where do we find those clients? Where do we find those leads? Will people be willing to pay us our full fee without the support and help of insurance? Well, let's talk through this and talk through some of the mental blocks, and then I'm going to give you some steps you can take.
Speaker 1:If you are taking insurance clients whether it's you're primarily in the insurance world and you're trying to switch completely out, or maybe you are halfway through, you got half and half and you're deciding is this the right time to transition away? I'm going to guide you through some steps you can take to do it effectively. We want to make sure your business is financially healthy. We don't necessarily want to just stop taking insurance out of nowhere when we don't have a game plan for taking on new clients, because that can potentially hurt you, the business owner. It can hurt your business. It can hurt your employees if you have clinicians working with you.
Speaker 1:First of all, there is this mental block with insurance. We're afraid of switching to private pay, that it's going to be a selfish thing, that we are money hungry, that we are greedy. We're just trying to take more money and we're trying to keep more for ourselves and turn away people who are looking for help that maybe can't afford our private pay rate. Well, first of all, I want to address this. It's not selfish. It is absolutely not selfish. You are focusing on working with a certain type of person, you are focusing on serving people and you're focusing on taking care of you and your business. That is not a selfish thing. That's an important thing.
Speaker 1:Oftentimes, the people who I meet who are stuck in this insurance trap they're only working with insurance providers. They feel stuck, they feel burnt out because they can't make it up. They have an insurance company dictating how much they can charge and how much they can make per session and then introducing employees into the mix where you're maybe giving them 60% of whatever insurance is paying, which is not as much as you would typically charge. You can start to feel trapped. Your personal life can suffer financially, your mental health can suffer and we can start to feel burnt out and this often leads to eventually maybe even just letting go of the practice and going to work for somebody else or regressing into just I'm just going to take less people or I'm going to not hire as many people or move away from that groove practice, mentality, point being it can take away from your long-term goals. So it is not selfish.
Speaker 1:Truthfully, you can serve more people in a way if you only do private pay, and that is because you can do private pay and that's gonna afford you more funds to hire, to reach more people, to serve more and to expand your practice into something that can work with hundreds of clients, versus if it's insurance and it's just you and maybe one other person. You're going to be limited on how many clients you can take. You only have so many hours in a day and when it comes to therapy, it is a one-on-one setting for the most part, and so you're limited in how many clients you can take and if we're not maximizing the funds in that, it can limit the number of people that you can serve. Now, the other thought here as far as that selfish block is you can serve lower income people in different ways without taking them on as a client, and we're going to talk through with marketing strategies, but that's huge.
Speaker 1:You can serve people in a lot of different ways, and one of those being content that you're creating blogs, videos, podcasts, being guests in other realms, serving people in a different way. And sometimes serving them is pointing them in the direction of somebody who does take their insurance or who does work with people of that income level Maybe a therapist who has lower rates that is still serving them. You don't have to take people on as a client. A lot of times we look at it and say I don't want to be turning people away. They need help. They came to us for help. So I feel like if I stop taking insurance, then I'm not giving them the help they need. You don't have to be the person who works with them. So keep that in mind.
Speaker 1:You can help them without taking them on. You can help them by pointing them in a different direction, and we can always down the road, set up a system where you can take on some lower paying clients. Maybe you have a fund set up to offset and have a sliding scale where you say you know what. We can maybe take five clients on who are going to be at this lower rate, so this much lower rate than our typical. So there's ways to do this without letting insurance play into the factor. You have the control in that realm. If you decide, I'm going to go to a sliding scale that gives you control of if they're lower income, we're going to charge them less. If they're higher income, we might charge them a little bit more. So just keep that in mind.
Speaker 1:Now, a lot of people don't like the sliding scale because they feel like that's crossing ethical boundaries in different ways. So you decide what's best for you. Again, one way we've seen it done is having a fund set aside, almost like a. It's a scholarship in a sense, where if somebody comes to you and you're like I really think we can help this person, we want to serve them. Maybe we pull from this fund to. So they pay us. If our rate is 200. They pay us 100. And we pull 100 out of that fund every time that they go through a session. So there's different ways to do it.
Speaker 1:Now there's a lot of benefits to switching to private pay. So we've kind of talked through some of the challenges and even some of the benefits of insurance. But the benefits of private pay really is that you are not dictated. Your practice, what you charge, what you do, is not dictated by an insurance company. They have their own rules, they have their own standards. They have different things that you have to do in order to get that reimbursement from them and for that therapy to be covered.
Speaker 1:And sometimes it can feel like you work for these insurance companies. It takes away a lot of that ownership of your business. Now you are still a business owner. So those of you who are maybe all 100% taking insurance clients, you still own your own business. I'm not saying you're an employee of theirs, but it can feel that way sometimes.
Speaker 1:When you're at their beck and call you have a lot of paperwork. So when you move to private pay there's less paperwork to do because you're not submitting those notes and the claims and into the billing and all those things with insurance. So there's a lot less you having to submit to insurance. It's mostly just your own internal paperwork and practices that you're taking and keeping track of. You get to dictate your rates and it gets to be consistent.
Speaker 1:That's one of the big challenges with insurance. Each insurance varies what they pay out, what they reimburse for therapy and they can be really really inconsistent. It can fluctuate. This way you can say here's our rate, here's what we charge, and it's consistent. It's very consistent, very predictable. And then the other side of that coin is insurance can take weeks sometimes to get your payment to you, that reimbursement to you. You have to submit the notes, they have to be approved, they have to send it in so you might see a client today. You might not get paid for them for a couple of weeks and if you have an employee who's providing that session today, it can cause a cashflow mess as a couple of weeks later you're trying, you've already had to pay them for a service or for their session and maybe you haven't received the funds from insurance. It can sometimes cause a stressful cashflow situation. So you don't have that with private pay A lot of times, depending on how you want to set it up.
Speaker 1:I know for my therapist I get auto-charged after our session's complete. So pretty much we have our session and he's paid for it. It's as simple as that. So you can set up that system that we bill right before the session, at the end of the session, but at the same time that's happening so you don't have that lag and clients are typically a better fit when they're private paying. I'm not saying insurance clients are going to be bad, I'm just saying that they are typically a better fit A lot of times when they are willing to pay your full rate. They're going to be a better fit for you. They're going to be more engaged. This is not a hard fast rule, but I think a lot of you already kind of know that vibe and that feeling.
Speaker 1:There are some people who go through insurance who are amazing, amazing clients. They're bought in, they're engaged, they're ready. But then there's also some people who maybe aren't there. I see this in my business. We serve people on personal finances and we help them with budgeting, helping them get out of debt. As you know, we also help business owners. That's a huge part of our business, but we do focus a lot on personal finances and we serve people who don't own businesses in managing their finances. Now, the people who pay for themselves see great results, the people who invest in it. They're usually really bought in.
Speaker 1:Once in a while we might have a parent who wants to pay for their child to go through, or we might have somebody who knows somebody at their church that they're wanting to cover the cost of going through that coaching. We've had an employer do it for their employee before and the results aren't as great. The client is generally not as invested or as engaged, and that's because they don't really have the financial skin in the game. There's just something about I'm paying money to be here, I'm paying money to do this that a lot of times will put some fire in you to engage, whereas if it's free or super low cost, okay, they may not be as engaged. Again, not a hard fast rule. We've had some amazing clients, amazing amazing clients who their coaching was covered by somebody else, and we do a really intensive vetting process now before we'll even accept that. So if somebody comes to us like I want to pay for my kids to go through coaching, we're like we need to meet with them first. We want to make sure they're a good fit, because we don't want to waste your money by you paying us and them not showing up to calls. So all I have to say typically, private pay is going to be a better fit. They're investing the money, they are pulling that cash out. It's probably stinging a little bit, and so they're going to lean in and most likely engage a lot better.
Speaker 1:So now that we know the benefits of it, I want to walk you through some methods, some ways to make that transition, because this is the scariest part transitioning from insurance into that private pay. It's terrifying. It's terrifying letting go of, maybe, a consistent lead source. Letting go of that and really relying on yourself. That is what private pay is going to be. It's going to be relying on you and your marketing efforts, your team, word of mouth, your clients sharing with their friends and family about you. That's what you're depending on and you don't have a blue cross, blue shield to help lead people in on you. You don't have, when you're on psychology today, people who are checking that accepts insurance button as a filter and you're not popping up. That can be scary.
Speaker 1:So there's a few ways to do it. The first one is leave cold turkey. That means you just say you know what we're done with insurance period and you cancel terms with all your insurance providers. Now let me put this caveat Every insurance provider has a different process for how to terminate your engagement with them. So I really recommend doing some research on that and just know that it might take some time. So for those leaving cold turkey, it's gonna take some time for that engagement to dissipate. So just a heads up on that Usually we say pick one that's like your least favorite and start with them. Go through that process and then work on the other ones and start to let go of them. Cold turkey is typically not recommended Usually. I would say this is best for you. If you are at capacity, you have maybe a waiting list of private pay clients. You're getting a lot of private pay people coming in and you're noticing that the percentage of insurance clients is dwindling.
Speaker 1:So I was a part of an organization for a while. I was part of the Dave Ramsey group where they would people would go to their website for help with coaching and we would get those leads and we would start serving those people. When I first started my business, that was a huge. That was probably 90% of my leads. I was incredibly dependent on that and I didn't want to be dependent on that. I wanted to be dependent on my own marketing efforts. So over time, as we started ramping up, our marketing started getting our things down, we noticed that started to dilute and it became, you know, once it got to about 25% of our lead source. I was able to step away from it and I was able to cut it off. And now we've been. We haven't been a part of it for years and we're self-sustained, but it wasn't something.
Speaker 1:If I would have day one like you know I don't want this and quit cold turkey I wouldn't have had the leads to support my finances. So really making sure you have that strong client base of private pay clients maybe a waiting list, or you're looking through and saying the people who are coming in, how many of them are private pay? What's that percentage? Is it high? Or, if that's not the case, so let's just say you are still at 90% insurance leads coming in, are you dependent on the income? So what I mean by that is maybe therapy is something you're doing part-time, maybe it's you have a spouse who makes an income that can cover your personal expenses. It's just you in the therapy practice and you're going. You know what I could afford to do. A reset makes an income that can cover your personal expenses. It's just you and the therapy practice and you're going. You know what I could afford to do a reset. I could afford to make low income for a while while I ramp it up. So again, cold turkey is not going to be the best bet for most people, but there are a few circumstances where it might make sense.
Speaker 1:The second methodology is to slowly remove insurance providers, so just to slowly and gradually let go of some as you ramp up your private pay. So typically I say look at all the insurance providers you work with and I would go through your clients and say, okay, in a spreadsheet or on a notebook how many are with each one, and kind of figure out, okay, which insurance provider is our biggest hitter? So let's just say, blue Cross, blue Shield is where a majority of your insurance clients are, and so that would probably be the last one we would want to let go of. Maybe there's a small insurance provider that has one or two of your clients You're going okay, I think that's the first one we're going to let go of. So you would let go of just one or two here and there, and then, as you start to build up your private pay client base, maybe you let go of one or two more insurance providers until slowly and eventually, you've let go of all of them. So that is the slow method.
Speaker 1:Another way to do it is to look at who's paying you the least Cause. Again, I know their reimbursement amounts vary and so finding the ones who have the lowest reimbursement and letting them go first we need to your clients who you have working with you, we want to notify them with plenty, plenty of notice. Ethically, you need to give them advance notice that you're going to be letting go of their insurance. Usually this is best done maybe at the end of one of your therapy sessions, just allotting five to 10 minutes either at the end, tack it on at the end, but some time to go over and let them know hey, we are going to be not engaging with your insurance company anymore, we're going to be breaking that, not working with them. Here's what that looks like over the next. You know that's going to be in effect, maybe 60 days. I would say usually 30 to 60 days notice minimum, letting them know that's going to be happening. So let them know, give them plenty of notice because they can choose then either go private pay or not. All right, we're going to slowly let them go, one or two at a time until all those insurance providers are off, or maybe you just keep one for the longer term. Maybe you're happy with just having less insurance while you build that up.
Speaker 1:This can be a process that takes a long time, and so just know that it just depends on where you are in your private pay client attraction. Are you attracting a lot of clients on your own? Yet If you're not bringing in hardly any, this could take a while. If you already are bringing in some and you're like, okay, if I just ramp up what I'm doing, if I have money to spend in advertising, just depending on where your business is, this can be a slower or a faster process. If you have funds to advertise, this can be something that can be expedited and happen a lot more quickly.
Speaker 1:All right, the third way is to build up your private pay clientele first. So and I typically say this goes in tandem with the slowly removing and this is just I'm going to before I let go of any insurance I'm going to focus on taking new private pay clients. So that's going to be our primary outward focus. We're going to be trying our best to really ramp that up revamping our marketing, revamping our website, creating a lot of content, being a guest on podcasts, starting our own podcast, starting our own YouTube channel, creating reels, running ads, whatever that is. We are going to focus our efforts and it may mean we are less profitable in this season. Maybe a lot of our funds are just going into this effort of building up our lead sources so that we can build up that private pay clientele, maybe get a waiting list going, and then we can turn and start nixing and letting go of these insurance companies. This again can happen in tandem with the slowly releasing. So you can be doing this and then, as you hit certain milestones, you start letting go of certain insurance providers. And that's typically what we see and typically what we recommend is let's focus on your marketing, your messaging, your niche, what are you going to niche down to, and then we can slowly let go of those insurance providers as needed.
Speaker 1:All right, now, as I was talking about earlier, letting your clients know that you're going to be making this change, I already said it we need to give them plenty of notice. So, whichever method you plan on doing cold turkey, especially if you're going to do that we still need to give them plenty, plenty of notice that you're going to be breaking that engagement with their insurance provider. If you've had somebody who's been with you for a long time, it's okay to give them a grandfathered rate. It long time. It's okay to give them a grandfathered rate. It's okay to give them a discounted rate. So you're charging 200 a month or sorry, 200 a session. Maybe they're coming in you're offering it to them for a hundred or 125, whatever you want it to be. Maybe it's the same that the insurance was reimbursing for. It's up to you. You don't have to do this.
Speaker 1:But if you want to as a thank you for them sticking with you and being with you for a long time and going through this transition with you, then that's something you can absolutely do. And I would just eyes open, be cautious how many you do that with. So you can a lot room for private pay, and I wouldn't go lower than probably what was being reimbursed from insurance, so that you're not taking a pay hit. The goal here would be because you're already going to take a little bit of an income hit as the ones who don't stick around drop off. So we know that some will probably stick. Some will have the means. Maybe they were just going through insurance because it was available, but they have the financial means to stay with you and they want to. They value that relationship. Others, I'm sure, still highly value the relationship, but maybe it's just not in the cards for them financially to stick with you and so they may choose to not stay around.
Speaker 1:In this case, I recommend preparing a list ahead of time of other therapists that maybe you can give them, so a list of people who maybe take their insurance. If you don't know of anybody specifically, maybe give them just a tutorial or give them a sheet of how to find a therapist, because it could have been a while since they've discovered it. What are some resources that you recommend? Is it psychology today? What are some places you would recommend they go to seek that out? But always best is if you know some therapists who specialize in what that client is focused on, who takes their insurance, I would generate a list that you can hand them. That would really help with their process and their search, and that just means maybe now is you spend some time networking and getting coffee with local therapists. You can let them know I'm planning on letting go of this insurance plan and I'm just going to be looking for the clients who choose not to stay with us.
Speaker 1:I need a list of therapists who I know and trust that I can send them to. So get that list prepared and ready to go, and then you can always, of course, inform them about their out-of-network benefits. Teach them about out-of-network benefits they may have that and not even realize it's a thing. And so in this conversation at the end of their therapy sessions, you're talking about removing their insurance plan. Go through that, and how can they find out what their out-of-network benefits are? What does that process look like, so that maybe they can still get some coverage and be able to afford to stay with you they may not even be aware that that's a thing I and be able to afford to stay with you? They may not even be aware that that's a thing. I. Know that that's not in therapy world that's a common thing to know, but for your clients, they probably have no idea that that's even an option, and so I would recommend really going through those options with them, and by giving them plenty, plenty of notice, it's gonna give them time to look around, to look into these things before that deadline hits. That's what we want. We don't want to just pull the rug from under them and all of a sudden they can't come see you and they don't know who to go to. That is how we transition financially.
Speaker 1:It's not a bad idea to have an account. If you're thinking about this, I would open a bank account, nickname it private, pay transition and allocate a percentage of funds to that account so that you have a cash cushion because there is likely going to be a dip. You're going to have your client base and you're going to probably have a dip from the people who drop off. Maybe the leads are going to go down a little bit and then slowly it'll build back up. So to have a cash cushion to offset that is really important.
Speaker 1:If you have a team of clinicians, have these conversations early with them as well. Start to kind of notify them. Let them know where your, what your game plan is and let them know what kind of what the ramifications of that might be. But also the pros they're going to be making more money. If they're on a commission split, they're likely going to be making more. If they're on a flat fee, then you're going to likely be able to give them a pay increase because you're going to be making more on their fees. So it's a win-win. It's just that there might be some growing pains involved from when you decide to do it to when you go full private pay.
Speaker 1:At the end of the day, you have to decide what's best for your business. I don't believe there is a right or wrong way. Private pay, from a financial standpoint, is incredibly, incredibly beneficial. If I were going to recommend one or the other from the finances alone, I would say private pay is the way to go. That said, I do know that we need therapists who accept insurance out there, and I do know that you can grow a thriving practice accepting insurance. So you have to decide what is best for you and how are you going to approach that.
Speaker 1:Now, this is a transition we help clients with all the time. We know it incredibly, incredibly well. If you are thinking about going through this, you don't have to do it alone. If you want to know how to financially do this, schedule a free Q&A call with us. I would love to learn more about what you're doing and see if and how we can help you do this so that it is maximized, so that you don't feel a really, really big financial strain. That is the most stressful thing. That keeps us in this frozen mode of not pursuing. It is because we're afraid of the financial impact it's gonna have. So in the show notes always is a link to schedule a free consultation with one of our coaches to see how we can help you navigate this transition.
Speaker 1:All right, thank you so much for joining. I am pumped for you as you navigate this. Go in with confidence, go in with curiosity and be open-minded to different ways to approach it. And give yourself grace as you go through this. Don't beat yourself up. It's okay if this is a one, two-year process. There does not have to happen overnight, so give yourself time to really do it right and do it in a financially healthy way. Thanks for joining us on the Therapy Business Podcast. Be sure to subscribe, leave a review and share it with a practice owner that you may know If your practice needs help getting organized with its finances or just growing your practice, head to therapybusinesspodcom to learn how we can help.
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