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Psychotherapy Treatment Costs


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I would like to know exactly what factors are used by psychologists and psychotherapists to justify their extremely high prices.

Background / Assumptions ...

Prices

I've been quoted:

- Psychologist (PhDs) prices, in California, of $195/hour (Given this, I'm sure $150/hour is quite common)

- MFT/LCSW and graduated-but-not-yet-licensed therapists prices of about $100/hour to $150/hour

- MFT/LCSW/PhD intern prices of $50/hour to $100/hour

- Sliding scales taking the lower end of the above prices down to $35/hour

- A possibility of lower prices (maybe $100/hour?) from individual psychotherapists with just a small office and no administrative overhead

Service Costs

- We can assume there are relatively consistent costs for work space: commercial office space, typically costing about $2.50/square foot in a major city, such as San Francisco (verified online). 400sqft = $1000/month. Allow $200/month for utilities. TOTAL = $1200/month.

- A single therapist in a private office, with no admin has minimal administrative overhead. Can pay him/herself $25/hour to handle administrative duties (20 hours per month of phone calls & paperwork?) = $500/month.

- A group of therapists (say 4 of them) paying a receptionist/admin can share cost of hiring out for administrative overhead. Labor = $20/hour or $3360/month. Employee overhead (7.65% SocialSecurity/Medicare tax + $434 max FUTA tax per year + healthcare contribution) = $443/month. TOTAL = $3803/month, split among 4 therapists = $950/month/therapist.

- Shall we average the 2 versions of administrative overhead above, and say $725/month?

- Shall we assume that a therapist will do about 25 or 30 hours of therapy per week? That would be a standard 40 hours, minus 5 hours administrative work (less if they share a receptionist/admin), minus 5 to 10 hours downtime due to lack of clients. You know what, let's even be generous and assume worst case of only 25 hours per week.

Analysis / Questions

I'm a professional in IT, a systems engineer, with senior-level expertise, and probably the equivalent of a master's degree in training and experience. My work doesn't risk life and limb, but it gets pretty complicated, just as complicated as the work required to deal with some of the problems people bring to a psychotherapist, I'm sure. Do therapists have continuing training that they have to do periodically, which will cost money? (I do too, for sure.)

So, the above overhead ($1925/month average), for doing the assumed amount of revenue-generating work (25 hours/week), results in about $19/hour overhead.

Now, being a professional IT engineer, I'm pretty well-paid for what I do. And I'm sometimes an independent consultant, which means I have overhead, too. But even discounting the $19/hour overhead, the non-intern therapists are still making 2 to 3.5 times what I get paid. WTF?!!? Why?!?

I know, I know, the market allows them too, right? And it's for people's health, so it's "important", right? But I'm not asking how, I'm asking why. Why isn't it cost-based, or mostly cost-based? Why am I expected to pay so much when the work isn't much (if any) more complicated than the work I do? The importance of it can be expected to add some premium, but $100+ per hour worth? Come on, that's more per hour in just premium price than most other people make in base pay! Why does everybody allow this to happen?

© tk

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My cursory read and based on what I'm aware of too for California/Bay Area says that your numbers are probably reasonable.

You may be discounting a few things. For instance, you are assuming all cash payments and not taking insurance payments into account. I don't know how it all works not being in the position of trying to run a private practice, but adjust for some amount of the billable hours being reimbursed at the insurance rate and not the cash rate. And also adjust for the additional semi-skilled labor necessary to process the insurance paperwork. This doesn't change your overall conclusion I don't think but it should be taken into account.

You also do need to add in expenses and time away from work for continuing education in order to keep the license. in California, for a psychologist, I believe it is 36 credit hours every two years. A six credit hour class runs just under $200 plus the expense of the time away from work, travel, parking, etc.

and then there are administrative expenses including professional liability insurance (not cheap at all), and membership in professional organizations. I also pay a manditory administrative fee to my state psychology association for them to count my CEUs and report them to the state on my behalf

Otherwise, I'd like to take the question in a few directions.

1. one of the assumptions in the pay scale is that the more education you have (and experience), the more you should get per hour. But it isnt' clear that a therapist's educational background makes them better therapists all the time. I know there is a basic probably master's level education needed just to have the technical understanding of the different ways of proceeding, and hopefully a mastery of some particular way. Many of the best therapies today are trying to be manualized, meaning that the hard work of figuring out what to do at what time has been done ahead of time, and someone who is less well trained than a full on doctor of philosopy psychotherapist (e.g., someone who is supposed to have the technical mastery at the philosophical/scientific level sufficient to generate new techniques rather than just repeat established ones) can offer them just fine. In some institutional settings, the distinction of higher pay for doctoral vs. masters level psychotherapists has been collapsing I think for a while. During my postdoctoral fellowship year, I was just labled a clinician and treated the same as masters level clinicians who had the same title.

To expand the question, physicans get paid much more than doctoral level psychotherapists in general, and a fair number of lawyers get outrageous rates up to $600-900/hour in some cases. Typical is probably more like $300-400/hour, but even so it puts your salary question into perspective. People often justify physicians getting big salarys based on two arguments. One is that they have a lot of education, but that falls apart when you compare the education to get a ph.d. at a prestigious institution. The training ends up being more or less comperable, IMHO. Lawyers have far less training (they essentially have masters degrees). The other argument is that they have a lot of responsibility for life and death, and that is a better argument, but it is still doesn't go the full nine yards to justify the salaries in my estimation. A lot of what drives the salaries is guild anti-competative stances, and stuff like licenses which restrict practice, ostensibly for the public good, but sometimes just for the good of the guild practitioners. Only lawyers can practice law; only physicans can practice medicine. And both fields are high status becuase the stakes are very high. Life/death for physicans and big money for lawyers. When it comes to therapy, the stakes are lower.

It does come down to market forces; you can get what the market will bear. and these market forces are shaped by cultural forces, such as managed care and third party reimbursement trends, professions dualing for overlapping roles (such as when social workers, LPCs and psychologists all try to do therapy), and also the general economy. And now with globalization, all of these established niches are threatened. Anything that can be digitally transmitted including in some cases, medicine law and psychotherapy, will ultimately be conducted by the lowest paid people who can possibly be trusted to do it halfway well enough. I went to a conference recently and sat in on a class about how large corporations are using online therapy in place of face to face therapy in order for their employee assistance programs in part to save costs. Once it can fgo online and the culture becomes okay with it being online, national borders become kinda irrelvant.

With regard to paying for therapy, things get a little weird becuase the financial relationship and the emotional relationship seem to be at odds. People want their therapist to care about them, but the idea that you have to pay someone in order for them to pay attention to you seems to fly in the face of what we assume caring is about. So in many cases, you have people resenting their therapist when the therapist asks for weekly payment. Interestingly, it doesn't matter how much the therapist is charging. When I taught clinicial psychology years ago, I had demonstration clients through the psychology clinic where my students would observe through a one-way mirror, and those clients paid only a nominal fee sometimes as low as $5. I still got grief when I tried to collect that $5 from some of the clients. My own therapist once told me a story about a client of his who was a multi-millionnare who would get all crazy about having to pay his relatively modest fee. It's not always about not being able to pay - it's often about feeling that having to pay somehow cheapens the experience.

This is a very important and good questiont to raise and discuss. Thanks for bringing it up.

Edited by Mark
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Thank you for your extensive and thoughtful reply, Mark.

You raise a couple of good points I hadn't thought of. Namely, lower rates from health insurance reimbursements, and liability insurance. I did mention training....I do training too, but I've never added it up to compare with the 36 credit hours every 2 years that you mentioned.

I guess if someone were to do a thorough analysis, we'd have to know just what those insurance reimbursement rates are compared to the cash rates I've been quoted.

Here's a solution for the liability insurance, though: make it optional. I'd gladly sign a liability waiver (depending on my situation) to reduce the rate if it were substantial. I haven't yet dealt with an issue that I could imagine would suggest liability in a therapy scenario. We could sign a waiver, and then simply verify the therapist's certification with the licensing board to make sure we're dealing with someone reputable. I'm sure enough people would go for that to reduce insurance needs. Ohhhh, I bet the insurance companies would hate to read this part though, eh?!?

Your comments about lawyers and physicians certainly speak to the situation we're in with income disparity in the capitalist economic system. That's a large topic, but we certainly seem to be seeing an increased attention being paid to it, and will soon see it addressed, I believe.

Well, so, if we were to guestimate an appropriate rate for therapists, I would think about $60/hour, in actual therapy time, would give them a fair income, which includes an appropriate premium for the importance of the work. And we could say they should get the equivalent of $20/hour for 10 hours per week of admin work. That yields an effective rate to the client of $68/hour, exclusive of overhead costs. Now, if we use that same ratio on the real world, they're currently getting an effective cash rate of $98/hour. (Based on an average of 5 quotes from private practice therapists.)

So is the insurance-reimbursement rate really low enough to justify that? Do enough insurance plans even cover therapy to make it a substantial issue? Is that rate, plus liability insurance, etc., really worthy of $30 per hour in overhead? Considering what we really get for paying for that overhead cost (liability coverage, therapists' association fees, etc.), isn't that kinda high?

Boy, finding my way is right I guess...I need to start demanding higher pay! "Uh, sir, you need to pay me more so I can pay for my membership in the local programmer's association! Oh, and training is getting pretty expensive these days, too!" :)

Edited by smarTpants
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The site does bring in income, mostly in the form of advertising revenue. It is variable, however, and seems to run in cycles. We're in the lower part of a cycle right now and things have been better in the past (lots of people are saying that right now :)). The site is owned by my company CenterSite.Net which also offers internet/website consulting and hosting services for the behavioral health and employee assistance market, so the site remains more stable on that basis regardless of the ad cycle. This community portion of the site doesn't pay for itself in an economic sense, but it is, IMHO, an important and even vital part of the overall mission of what we do as a mental health website. It's all about trying to help people. That is part of what makes going to work mean something, and that is an important source of "payment" for many people who do clinical or social work or allied fields.

I'm not at all sure that it is possible to handle the liability issue generated by doing therapy by having patients waiving their right to sue in an absolute enough manner to make it safe to proceed without liability insurance. I think people would do that if they could. Nobody wants to work under the threat of clients possibly suing them if it could be possible to not work under that threat. Maybe if someone is a lawyer familiar with USA federal/state law on this issue, they can comment?

If you are wanting to change careers to make more money, you can do a lot better than to be a doctoral level psychotherapist.. While you may disagree with what the going rate is, no one goes into this field to get rich. I know that much for a fact.

Edited by Mark
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If you are wanting to change careers to make more money, you can do a lot better than to be a doctoral level psychotherapist.. While you may disagree with what the going rate is, no one goes into this field to get rich. I know that much for a fact.

Maybe not, but I bet your not short of a Bob or Two! Unlike some of us on here!

You may not get rich. What are you calling rich! I know that my rich won't be the same as your rich, thats for sure!

Lets face it Mark, It can't pay all that bad, otherwise you wouldn't still be doing what your doing?

We all might have mental problems on here, but were not stupid! Well I would like to think that I'm not anyway! And keep your opinions to yourself. Like I've mentioned previously, opinions are like arseholes, everyones got one!

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Paula,

Your last message here is attacking, and, IMHO, inappropriate and uncalled for. I'd appreciate an apology, please.

Mark

I think I've missed out on something here?

Why is it inappropriate! I am just stating facts! They might not be the right facts, but I'm not far out?

The message that I left, was NO WAY meant to attack you like you've implied! I was clearly giving my point of view! I am SORRY IF MY MESSAGE HAS GIVEN OUT THE WRONG VIBES! It wasn't meant to! It won't happen again!

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oooops! Sorry Mark!

I have just read over my messageand can see where your coming from, I think?

Just out of curiosity, which part of my message are you suggesting is inappropriate? All or just some? I would like to know if you don't mind? The only part that I can see is inappropriate is the opinions and arseholes bit, And what I was referring to was;

We all might have mental problems on here, but were not stupid! Well I would like to think that I'm not anyway! And keep your opinions to yourself. Like I've mentioned previously, opinions are like arseholes, everyones got one!

Meaning: that keep your opinions to yourself about me thinking I'm not stupid, Having a bit of a laugh. But I can clearly see that I have worded this wrongly, and again SORRY! It was never my intention to attack you Mark HONESTLY!

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