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.[The following information does not represent any specific counseling practice; however all items are common expenses encountered by a private practice in counseling, social work, or psychology. For the ease of creating examples in this article, a counseling session fee of $100 is used and numbers are rounded to the nearest dollar. ]
Costs and Expenses in a Counseling Practice
The “50 Minute” HourLearn More
Professional StatusLearn More
Ongoing Education and TrainingLearn More
Office Space and UtilitiesLearn More
Business Equipment and Office SuppliesLearn More
Licenses, Fees, and InsuranceLearn More Like any business, counseling practices must pay common business fees, but will also additional expenses specifically related to their professional status. In order to “conduct business” they pay fees to obtain “privilege licenses” from the state and sometimes the city. They must pay a fee each time they renew their professional license. Most professionals also belong to at least one professional association, with annual dues. Each of these fees are usually modest by themselves, but combined they will typically add up to a $400 – $1000 dollars each year. Increasingly, counselors are likely to require guidance from attorneys, accountants, or billing specialists and have the expense of their hourly fees. Another significant expense is malpractice and liability insurance, which any professional in private practice should carry. Such insurance is not only important for the counselor, but it also provides assurance they will be able to remain available to serve their clients in the case of a false claim. Again, the costs for this insurance varies by location and professional discipline, but usually is in the range of $500 – $1000 or more annually.
Administrative ExpensesLearn More
Self Employment TaxLearn More
Advertising and Marketing ExpensesLearn More
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.
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.