Recently posted on a mental health clinicians' online forum (reworded here for anonymity):
"I've been thinking about going into private practice, and have talked to a couple of practice owners about working for them. One of them will pay me 50% of my receipts, and the other will pay me 70%. Obviously, I'm going to go with the second one, who is less greedy."
Not so fast...
We'll address the greedy part in a minute. But first, getting paid 70% of what you collect from clients may seem like more than 50%. However, that's not always the case. For example:
Suppose at Practice A, which pays 70% of receipts, you work 100 client hours, all reimbursed by insurance at $90, for a total of $9000.
70% = $6300.
Compare that with Practice B, which pays 50% of receipts. But this practice does not participate in insurance networks. For 100 client hours at $185 per hour, the total collected is $18,500.
50% = $9250.
Thus, the percentage can be misleading. What's more important is how much you are likely to earn.
(BTW any percentage arrangement should be set up to avoid "fee splitting.")
Other factors to consider
Rate of referrals and number of clients
A practice that charges higher fees may seem like a better deal financially. But that's the case only if you see the same number of clients within the same time period.
Thus, if you see 100 clients in a month at insurance-based Practice A, your 70% of the revenue is $6300, as noted above.
Practice B does collect more per client hour. But if you fill only 50 hours per month at $185, your revenue will be $9250. 50% of that is just $4625.
All employers provide office space for office-based practice. But other expenses and perks vary. These include receptionist and billing service, health- and/or malpractice insurance, psychological testing materials, business cards, letterhead stationery, and other supplies. To the extent that you would pay for these yourself, your net cash flow may be higher if these expenses are part of the overhead percentage. And what if you work from home, doing telehealth exclusively? Does the employer offer a stipend for your home office, internet connection, and equipment?
Reputation of the practice
You've probably heard the adage that you are judged by the company you keep. Before joining a practice, ask around about the clinicians who work there. Check your state licensing board's website to see if there have been any complaints about any of them. If you discover anything shady, consider that it might affect your own professional reputation if you work in that practice.
Office environment and practice culture
You'll work best in an office environment in which you feel comfortable. Consider factors such as layout, smell, traffic flow, noise level and privacy. It also helps to have friendly colleagues in the office. A stressful office environment is bad for your mental health, regardless of how much you get paid.
Is a practice owner "greedy" for keeping a high percentage of your revenue?
Practice owners are free to set their own terms for compensation, and prospective employees are free to accept or reject those terms, or to negotiate the terms. If either person wants more than the other is prepared to give, the deal does not go through.
Each side is motivated to maximize their benefits. Thus, in a sense, both can be viewed as "greedy." But the greed needs to be distributed in a way that both sides feel that they are getting a good deal.
The practice owner provides not just a space for you to work, but also less tangible benefits that took years to build, such as referral streams and professional reputation in the community.
As a prospective employee or independent contractor, you bring your clinical skills and perhaps some potential connections for referrals. If you feel positive about working in the practice regarding everything except compensation, you can present a counter-offer and negotiate from there.