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Starting a Psychiatry or Therapy Practice

New beginnings are a roller coaster. Whether it’s the birth of your first child or the adventure that comes with a new clinical rotation, there are many unknowns. Just as you may consult family members on caring for your newborn or tap into gossip from clinicians familiar with your new work environment, it’s helpful to lean on the experiences and expertise of those that have successfully launched their own practice.

One key difference between clinical training and starting a business is that you are in charge. You decide (within some limits), how progress notes are written, how often and what type of patients you will treat, what hours you’ll work, the location of our practice, whether to accept insurance or not and a myriad of other choices. The responsibility can be overwhelming, especially for those leaving the structured setting of medical school and residency programs.

But, rest assured, many have come before you, and many have been successful in their endeavors. So, we’ve tapped into a variety of resources, including feedback from practicing clinicians, to build a comprehensive outline to starting a private psychiatric practice. While our goal is to create a single resource that can answer all of your questions, we recognize this means the article you are about to read will need to evolve along with the questions posed by readers like you. To that end, we hope you’ll reach out to ask those questions, suggest additional topics and provide feedback on the content below.

Disclaimer on variability

Some circumstances will vary depending on the location and scope of your practice. For example, decisions for rural and underserved areas are different from those in highly competitive urban areas. These differences will be explored as we go forward but know that analyzing and factoring variables specific to your situation will be perhaps the most important factor to your success.

You’ll also note, as you move through the sections below, that you’ll rarely find one decision that is not reliant on the others. For example, decisions on clientele, services, location, etc. cannot be made in a vacuum as they each impact the other. Thus, we encourage you not to see this as a linear checklist but as a set of variables that should be studied and weighed against each other.

The mindset of a business owner

Clinical education is oriented, as it should be, towards diagnosing and treating patients. Starting a business requires a different mindset. A business’s purpose is to provide a good or service and to make a profit. The boundaries on that purpose are the laws and regulations that govern the location of your business along with your personal and professional ethics. To have your business run effectively, you either need a team of experts or your own expertise in many areas outside of your clinical training, e.g. legal advice, continuing education, banking, electronic health records, practice management, marketing, etc. The owner of a business must be prepared to take responsibility for the successes and failures of their business. Once you’ve committed to the road ahead as both a clinician and a business owner, it’s time to dive into the details.

Who will you serve?

Among your first decisions is the need to decide what patient population you are going to serve. This is inevitably tied to your interests as a clinician, your location, the competitive landscape and the needs of your community. Depending on how you weigh these factors, this may mean you need to think seriously about changing your location or the patients you choose to serve.

If you’re in a very rural or underserved area, you may end up treating all who seek care by default. If you are in a very competitive area you may do well to focus on a niche population such as panic disorder, geriatric psychiatry, LGBTQ clients, etc. As you narrow in your chosen patient population, now would be a good time to investigate the amount of services available in your chosen location.

Of course, searching the internet will give you an idea what’s out there but you should also consider other resources such as Community Health Needs Assessments which all not-for-profit hospitals are required to conduct and share online. You can also find a wealth of information on your state and local health department websites that will call out areas of need in your community. If you’re not networking with your peers and colleagues, consider joining local professional groups and look for guidance on needed services in your area. Also, consider contacting potential referral sources such as school guidance counselors, the local department of family and children, hospital discharge planners and/or mental health clinicians that may not offer the specific services you plan to provide.

The services you provide

In addition to clientele, you’ll have to make decisions regarding which services you’ll provide, including but not limited to; medication management, psychotherapy and specialized treatments such as ECT, Transcranial Magnetic Stimulation, etc. You’ll also have to decide how you’ll deliver care. Will you provide in-person, face-to-face treatment only or will you offer telepsychiatry via video chat and phone consultations? Keep in mind, many of these decisions will grow or shrink your potential market and require additional start-up capital for specialized equipment and software.

Location, location, location

Where to locate your office will vary by the population you wish to serve and whether you are in an underserved or competitive area. In an underserved or rural area, it may be desirable to be located near the regional hospital or a larger outpatient clinic. Patients will be familiar with the location. In a competitive or urban area, there are multiple considerations, such as transit, parking, disabled access and so on, which can be important factors in keeping your calendar full. Not to mention the need to understand the competitive landscape and local access to ancillary services such as a pharmacy and other mental health providers. You’ll also want to look at zoning, tax laws, cost of utilities and the ability to expand in the future.

Consider connecting with your local chamber of commerce to gather some basic demographics on the area you are researching, paying special attention to things like population growth or decline, average income and population density. Your local realtors are a great resource for information on the amount of available office space in a particular area, average cost per square foot and recent turnover. If you’re considering renting a space formerly used for patient care, you may want to do some research on why it has become available.

TIP: Get updated traffic patterns near your chosen location(s) by requesting a proposal from your local billboard vendors. This is great information that may unlock hidden potential along a commuter corridor.

Business policies

It may be tempting to create business policies on the fly, but it’s extremely wise to make them in advance, particularly if you are hiring any staff. These policies can be updated at any time, as you gain experience, but minimally they should include legally required policies (e.g. HIPAA), and how emergencies, payments and controlled substances are handled.

If you do hire staff, you’ll want to make sure you have HR policies clearly defining any benefits you offer, business hours, dress code, non-discrimination, time-keeping, internet and email usage, purchasing, exempt/hourly status, etc.

TIP: Social media policies that address both in-office and personal use of social media are becoming standard as they cover topics regarding sharing patient information, identifying yourself as an employee of an organization in your profile and making disparaging remarks about your employer. Without a strong social media policy, you face a heightened risk of exposure to polarizing and charged comments made by your employees.

Which payers to accept

The basic choice is between accepting insurance versus being paid directly by your patients. If you decide to accept insurance, then you will need to decide which insurances to accept, go through credentialing and consider negotiating rates with insurance companies. You will also need to set-up electronic billing and payment processing. Getting paid directly by patients is much simpler but cuts you off from a major referral source and limits your pool of potential clients.

Regardless of if you choose insurance, self-pay or a combination of the two, you’ll also need to decide which payment methods you are going to accept for co-pays and self-pays. Cash, credit, debit and checks are all still considered standard options with more and more businesses now accepting mobile payment options such as Apple Pay and Google Pay.

Each of these options, except cash and check of course, come with additional expenses which range from hardware to fees depending on which you choose and the amount of individual and total transactions.

If your practice is based on intensive treatment such as psychotherapy and you see a smaller number of patients, the 3% credit card fee may be significant enough for you to decide not to accept credit cards. However, if you have a larger population and are mostly doing shorter appointments, the convenience of credit cards may improve your cash flow dramatically. This factor can outweigh the fees associated with accepting credit cards and debit cards. This is especially true if you or your staff can avoid sending out invoices.

Start-Up Capital

Starting a business means money or capital to set up your practice. The amount of capital you’ll need includes pre and post opening costs along with one-time and on-going expenses.

Pre-opening costs include equipment, office supplies, utility deposits (and utilities during any renovation period), software licenses, business and professional licenses, rent/loan payments and signage. You may also have to budget for professional fees including legal advice, business planning, research, accounting, and more.

Once you’re open for business, you’ll want to have access to working capital which will be highly variable and dependent on your personal situation. Working capital is used to cover rent or mortgage payment, utilities, salaries, advertising, etc. while you ramp up your practice to the point that your income exceeds your expenses. Thoughts regarding the amount of start-up capital vary depending on the resource with suggestions ranging from 3 to 12 months. You may choose to cover that with personal savings, loans and business credit or a combination of all three.

Finding investors for your private mental health practice may be unlikely but not unheard of. However, it’s important to consider that you’ll be giving up a portion of your practice which means you’ll be giving up at least some control, profit or both.

If you’ve been working, you may be fortunate enough to start your business with self- funding, otherwise you may need to apply for business loans and credit or attract investors which will require a business plan. Loans or not, a business plan will exponentially increase your chances for success. Basic components of a business plan include an executive summary, company description, market analysis, competitive analysis, description of services, marketing plan, request for funding, etc.

In starting a solo mental health practice, it may be possible to minimize overhead by avoiding or postponing hiring front office staff. This means doing the clerical work, billing, scheduling, etc. yourself. At first, you may have the capacity to do so but you might find that without efficiencies, these tasks quickly cut into your patient time. Use of a good electronic health record and practice management software can help you streamline these tasks, delaying the need to hire additional staff.

Setting fees

Setting fees can be complex but the essentials boil down to:

  1. Start with your targeted Monthly Salary
  2. Add your estimated monthly Overhead Costs
    1. (remember to add 1/12 of annual fees and licenses)
  3. Divide the Total Costs by the Number of Hours you expect to bill per month


  • Monthly Salary:      $15,000
  • Overhead Costs:      + $2,500
  • Total Costs:        = $17,500

Fee Schedule:

  • Total Costs:          $17,500
  • Patient Hrs per Month:        / 130
  • Hourly Fee:            = $135

Note that, if you offer specialized, group or telepsychiatry services, you may charge differently.  For example, you may charge $150 per hour for one-on-one sessions and $50 an hour for group sessions. However, those group sessions may net several hundred dollars an hour depending on the number of participants allowed and scheduled for each session.

If your target hourly fee is out of sync with the general fees in your area you will either need to lower your salary or work more hours. Keep in mind, the billable patient hours used in the example above does not include time you’ll spend doing other administrative activities which underscore the importance of creating the most efficient processes you can.

Over time, your schedule may become full enough that you can raise your rates. On the other hand, avoiding burnout is essential for a sustainable practice. Fatigue and resentment can lead to poor clinical and personal decisions. In addition, you’ll need to decide whether to charge for non-face-to-face services and late cancellations/no-shows.

Managing business finances

One of the most important financial steps to opening your own practice is to separate personal and business finances which means separate bank accounts, loans, credit cards, etc. Doing this at the outset can simplify a number of processes in the future including establishing credit for your business, filing taxes and incorporating your business should you choose to.

Consulting with an accountant is extremely useful for information on tracking your cash flow, what amount or percentage of money you should set aside for taxes and information regarding incorporation. Rules vary depending on the state where your business is located, so be sure to consult with an accountant knowledgeable about your region and one who is able to demonstrate their experience advising small businesses.

Improving office efficiency

There are a number of administrative tasks that must be done on the business operations side of practice which do not directly produce revenue. This section will help you identify ways to get these done in the most efficient way possible. Creating efficient processes   ultimately means fewer hours spent on administrative chores and more time generating revenue by delivering clinical care.

Prior Authorizations

For a practice that files insurance claims for patients, this task can easily take more than an hour just waiting on hold and obtaining authorization. Though it’s not always possible, it’s ideal for the patient to obtain their own prior authorization before starting treatment. When patients are able to do so, it’ll save you or your staff valuable time and can actually bring your patient added peace-of-mind when they better understand what their benefits cover and what their out of pocket costs will be. Automation of prior authorization is in development, but it may take a number of years for it to be viable (as of 2020).

After Hours Services

Practitioners vary in how they choose to deal with after-hours services, from advising patients to go to the emergency room to providing a method of emergency contact via email, phone or telemedicine. A middle ground is to hire an answering service. Some practitioners want to take after-hours calls themselves while others have their office staff take them. It may seem like an obvious advantage to have someone familiar with the patient take the call, however that may unintentionally encourage unnecessarily long conversations with someone who has no training as a therapist. This can lead to staff or practitioner burn-out and even resentment towards patients.

An answering service can provide an in-between option and some of these services provide a written summary of calls. This tends to be much more efficient than having to listen to a recorded message. Answering services have the ability to curtail misunderstandings about appointment scheduling and refills for medications. They also provide patients with a live person to speak to, which helps reduce anxiety in a way that leaving a voice message cannot.


Scheduling is one area where practice management software really shines. Having the right tools makes it easier to look up a patient’s last appointment and locate their next one on the schedule. Automated appointment reminders and confirmations can be handled by email, with the consent of the patient, which cuts down on time consuming phone calls. The likelihood of booking errors is decreased and clinicians can consult their schedules from anywhere they have internet access. Likewise, it is easy to block off time or reschedule appointments and other commitments. For small practices, a paper schedule might seem adequate, but an electronic schedule, often part of a standard EHR, cannot be lost.  If you like, a daily or weekly schedule can usually be printed from an EHR.

Prescribing medications

Electronic prescribing has become the gold standard in prescribing patient medication. Many states have enacted legislation requiring controlled substances to be prescribed electronically and some national pharmacies, including Wal-Mart, only accept electronically prescribed controlled substances. To that end, new clinicians should check their state and local regulations to ensure they meet the requirements to avoid penalties.

Not all EHR software has electronic prescribing capabilities and a stand-alone e-prescribing system may not interface well with your chosen EHR. If you plan or are required to e-prescribe and will be using an EHR, be sure to do your due diligence to ensure they work together seamlessly, or you find an EHR with integrated e-prescribe.

Pre-authorizations, refills and cancellations of medications are also handled more efficiently and safely through an electronic health record than through a paper script system. An EHR allows you to monitor compliance with medication refills and the prescriptions patients are receiving from other providers. (The last relies on insurance records and if your state has a prescription drug monitoring program). This can ensure that you are not inadvertently over prescribing medications, whether they are controlled substances or not. An automated interaction checker is another feature you’ll want to look for if selecting e-prescribe or EHR software.

Screening new patients

Initially, it may be tempting and even appropriate to treat any patient who calls to schedule an appointment. Over time, you will likely find that there are some patients you treat more successfully than others. When this is the case, pre-screening may be helpful. Pre-screening forms, rating scales and patient histories are all helpful ways to begin assessing a patient, their needs and your ability/desire to treat them. Once you have your initial information and both parties decide to move forward, you may find it helpful to utilize additional screening and rating scales.

There’s no need to recreate the wheel on this one.  There are a number of printed and electronic resources out there that already have some outstanding screening tools to build from. If you find yourself in need of a slightly modified form, it’s helpful to work from an existing resource, use practice management software or select an EHR with the capability of creating custom forms.

If you are using electronic forms, a patient portal can allow patients to fill out histories, sign releases for past records and complete diagnostic questionnaires. Managing these interactions with your patients via a patient portal is far more efficient at moving the process along quickly than utilizing paper forms over several in-person meetings. Not every patient will have the wherewithal or technology to do this. Even this is clinically informative.

Hiring staff

When starting a practice, you’ll need to consult advisors, but you may be able to handle billing, organizing and other administrative tasks on your own. However, as your practice grows, tasks may interfere with your billable hours and hiring part or full-time staff may be sensible. Generally, it is less expensive to outsource some work, such as using an answering service to take and screen after hours calls; or hiring a billing service to process billing with insurance companies. However, accepting payment, scheduling and dealing with general telephone calls can become overwhelming in a busier practice. At that point it makes sense to hire an office assistant. There are many important considerations in hiring an assistant. It is a position of trust and responsibility that can make or break your practice.

When considering hiring an assistant, don’t forget to factor in any extra equipment and/or software licenses you’ll need to purchase along with the added time and expense of managing payroll and benefits if you offer any.  Early on, you may want to explore the option of hiring an independent contractor rather than directly employing someone. For a small business, this may give you both more flexibility.

TIP: Consider hiring remote workers as it opens up the pool of candidates and eliminates the need for additional office space and equipment.


In an underserved market, there may be little or no need for advertising or establishing your brand as a psychiatrist. You will be “THE” psychiatrist and within six to nine months your schedule will be full. However, some simple marketing strategies you may want to incorporate are networking with local referral sources, putting up clear and concise signage, building a simple social media presence and launching a limited website. These small steps will help get your name out in the community and make it easier for people to find you in person or online when they start looking.

In more competitive markets, patients will have more options, brands will have developed loyalty and clinicians will have established referral patterns. Marketing and branding then become even more important to set your practice apart from others. At the very minimum, a profile through the APA and or AMA becomes essential. Creating a more robust website is good practice and gives your prospective patients a place to learn more about your areas of specialization, policies, fees, location, hours and any other advantages to pursuing treatment through you rather than your competition. Be sure to focus not only on your education but also your care philosophy. Patients will want to know more about you than where you got your degree and completed your residency.

Within your website, you may want to consider blogging as a way of distinguishing yourself and providing free, useful information. A blog can further convey your approach to treatment and areas of expertise and begin the process of creating engagement with your prospective patients. Make sure you include an email address or contact form and encourage questions on the material you provide. This takes engagement to the next level and will help you establish relationships and drive volume.

Outreach opportunities provide great potential to expand your practice organically. Networking with physicians and therapists who might want to refer to a psychiatrist is a start. An open house for your practice can be a good way to advertise or introduce yourself to the referring community and provide them with a chance to meet you face-to-face. Offering to give talks to local professional groups, especially other mental health practitioners or providing topics to local hospitals for CMEs can open doors into other networking opportunities. Speaking to community groups such as NAMI, schools, retirement communities, social groups or local medical societies can increase awareness of your services.  Don’t forget that networking doesn’t mean you always have to be the star of the show. Attend other open houses, lectures and presentations and follow and engage your colleagues and referral sources online.

Digital marketing can be expensive, especially in the healthcare field so focus on your practice website and creating a strong social media presence. Don’t be shy about asking patients, friends and colleagues to provide online recommendations or reviews.

TIP: Your local chamber of commerce is usually happy to host an open house for you. Usually this is a free service that may or may not require membership. Send out invites and a press release to help drive attendance.

Maintaining perspective

Finally, there are two important keys to keep your practice afloat and to protect your own well-being: continuing educational and involvement in your professional community. Some of these can be done simultaneously, as when you form or join a local journal club. It’s vital to have contacts with mentors and colleagues to keep a sense of perspective, to consult on difficult cases, and to simply share fellowship. Private practice can be an isolating business and few people understand both the stresses and rewards of psychiatry like other psychiatrists. Involvement in local or national professional organizations in small or large ways can be very rewarding as well as provide opportunities for finding work to supplement private practice or to enter into new areas of psychiatry. Since life circumstances change, these opportunities are invaluable.

An evolving resource

As mentioned at the outset of this piece, this information is intended to grow and evolve with the input of those who’ve read and are pursuing their own private practice in mental health. I encourage you to reach out to us at Luminello and let us know if you have any questions regarding these or other topics. With your help, we hope to make this the go-to resource for all those starting the adventure of private practice and delivering mental health to their community.


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