Why does counseling cost so much?

Based only on what clients usually observe in their counseling experience, the cost for counseling might seem quite high. Clients will usually enter a modest and simply furnished office and engage in a dialogue with the counselor for 45 to 50 minutes. Then they pay the counselor their fee for the session, which commonly exceeds $100 these days. It would be easy to conclude from this experience that the therapist must be getting rich from such a deal; however very few therapists are getting wealthy from their counseling practice. So where does all that money go?

A large portion of the session’s fee go to “hidden expenses” that are necessary to create the opportunity for that 50 minutes in the office. Understandably, clients generally think of their counseling as being a “helping relationship”. And of course, that is the primary purpose of counseling. The vast majority of therapists have chosen this profession out of a fundamental desire to be of help to others. But in order to make that help available, the counselor in private practice must also be a business person, just like the person who is a home builder, or has a landscape business, or owns a restaurant.

In keeping with the spirit of full disclosure, I believe it is important that clients have information available to better understand why their counseling costs what it does. Therefore, I have prepared the following article to explain some of the typical expenses associated with a private counseling practice. Of course, every practice is different and may not have these exact costs or may have different amounts. But, most counseling practices must address these issues and they are factors that contribute to your counseling fee.

Costs and Expenses in a Counseling Practice

The “50 Minute” Hour

Professional Status

Ongoing Education and Training

Office Space and Utilities

Business Equipment and Office Supplies

Administrative Expenses

Self Employment Tax

Advertising and Marketing Expenses

Hidden Time: an Example

As noted previously, counselors will usually spend about 75 minutes of time related to the 50 minute session. However, counselors may spend significant amounts of time assisting their clients outside of the sessions, especially regarding issues associated with insurance. Here’s a very common example of a counselor assisting his client with insurance reimbursement and how it influences what he actually “earns” from the counseling fees.

Counselor Sammy receives $100 per counseling session. He has an average sized practice, but his “business expenses” are fixed costs – that is, he has to pay them regardless of how many clients he sees. So, expenses take 40% of each hourly fee, leaving him $60 per session after paying the bills. He pays his self employment tax, which is $9.20 per session.

So for each session Sammy has earned a little over $50 an hour, right? Well, not quite. Remember, he will use about 1 1/4 hours of his time for each of those sessions, making his earning rate is closer to $40 an hour. At least when everything goes smoothly…

Sammy meets with client Sally and they resolve her issues in 12 sessions. Sally has paid $1200 in fees and Sammy has $610 after paying $590 in business expenses and tax. He spent 15 hours between the sessions and doing the associated documentation, so he’s earned the average $40 per hour.

That is, until Sally’s insurance company denies her claim. Sally calls and talks with Sammy about why the insurance didn’t pay. Sammy calls the insurance company, negotiates the voice menus, sits on hold, and finally talks with a representative who informs him they determined Sally’s treatment was not “medically necessary”.

Sammy calls Sally back to explain this and she decides to appeal the decision. As part of the appeal process Sammy talks with the insurance company’s clinical staff and argues for Sally’s claim being valid, but it is again denied. Sally appeals to the next level and Sammy spends an hour completing his section of the appeals form.

Finally, after 3 months Sally wins her appeal and is reimbursed. Sammy is pleased for her, but he still has only earned the original $610, despite him spending an additional 3 hours of time related to the original 12 sessions. So Sammy actually spent 18 hours on the 12 counseling sessions, resulting in $33.80 an hour in real income.

This is a fairly common scenario and used to demonstrate the hidden time often encountered by counselors in the service of their clients; and also the type of “real income” counselors earn from their work. Of course, there are many clients who don’t require any additional time beyond the sessions and the related documentation. On the other hand, many counselors accept managed care rates or reduce their fees to match a client’s managed care option. In that case, the counselor will receive much less than $100 per session, usually in the $50 – $75 range. Since their fixed business expenses stay the same, it simply means the counselor earns that much less per hour.

Summary

Hopefully this information provides some insight into the unseen expenses a counselor must address in order to provide counseling services to clients and also helped to explain why counseling costs what it does. Most counselors entered this profession from their desire to be of assistance to others, not become wealthy from their profession. And most counselors don’t become wealthy, at least not unless they develop other professional services beyond meeting with clients. As shown by the information in this article, counselors typically earn between $30 – $60 an hour in real income from their session work with clients. And most counselors are not naturally inclined toward business, or they likely would have entered another line of work. But, counseling in private practice does requires a solid business foundation in order to provide a safe, reliable, and professional service to the clients. And a large portion of each sessions fee goes to build and maintain that foundation.