How To Start a New Mental Health Practice

So you’re thinking about transitioning from a group to your own practice.  You’re a licensed mental health provider who has been employed by an organization to provide behavioral health services, perhaps a group practice or an agency or a hospital.

Now you want to venture out on your own and transition from a group to a solo practice, make your own income, and perhaps offload the burden of mental health insurance by working with a billing partner like TheraThink.

You have clients who are eager to come with you as you move to your own gig and now you have questions on how to set everything up, handle insurance, and get started on the right foot.

Our group to solo practice transition guide will help you ensure your move to start a mental health practice is successful.

Start a Mental Health Practice Video Guide

new mental health practice guide

What you Need to Start a Mental Health Practice

Make sure you tick all these boxes when creating your mental health private practice.

private practice check list

Licensed Mental Health Provider(s)

Ensure you are working with licensed mental health providers.  LPC, LMFT, LCSW, PhD, PsyD, MD, etc

Your Own Office Location

You want your address to have access to a secure mailbox for your insurance checks and sensitive information.

Make sure this location is not a PO Box.

You cannot use your home address as a service location (99% of the time).  Ask each insurance company about their guidelines about home-offices.  Most require a separate locked entrance and secured mailbox.

Tip: Ask their provider relations department for detailed information on the requirements for establishing a home office.

Your Own Insurance Contracts

To bill insurance companies like Aetna and Cigna and Medicare, you need to establish your own contracts with these insurance companies.  Your agency or group contracts rarely transfer over to your new practice.  (This is a common misconception).

Data Management

You will need to find a way to safely store sensitive client and appointment data for record keeping and billing purposes.  At TheraThink, we offer our providers a free data management system for your practice as part of our mental health insurance billing service.

Other options include SimplePractice, TherapyNotes, AdvancedMD, Valant or other EHR (electronic health record) and EMR systems that require you to supply your own billing management solution.

And finally, it’s worth mentioning that many providers use paper records without problem.  While this method does create the most ‘drag’ in the data management and billing for the practice, it can work.

Billing Management

Some EHRs offer claim submission services for very very low fees because they do not offer any additional follow up, tracking, correcting and refiling, and EOB processing services.  That will be up to you at your new practice if you choose to work with a purely EHR/EMR system that helps you submit your claims.

If you decide to offload the burden of eligibility and benefits verification for your new clients, accounting, claims processing from start to finish, etc, to a billing service, make sure that service charges you based on paid claims and paid claims alone.

Some billing services charge hourly, and as such have no direct incentive to get you paid in full.  By ensuring your billing service contract is based on successfully submitted claims, you guarantee that they are going to work exclusively in your interest to get your billing done right the first time.

How Does It Work To Use TheraThink?

Here’s the basic steps to get started:

  1. Shoot us a call or an email to let us know your full legal name.
  2. We’ll draft your contract (3 pages in plain English) and business associates agreement (3 pages in more legalese English).   Our contract is a month in length and from there it’s month by month — we do so because we want to work together long term as a result of our service, not a contract that binds you to us.
  3. We need that initialed on each page and signed on page 3 and page 6.
  4. Send that back or fax it back (866.933.9622).
  5. Then we’ll create your custom username and password for our online portal / application.  (This is where we save your information and manually post our updates on your clients, appointments, and payments).
  6. From there, we will email over login instructions and encourage you to poke around.
  7. If things are super easy to use for you (this is the case for 70% of our providers), feel free to begin adding your provider, client, and appointment information.
  8. If things are a little confusing, no problem, we’ll schedule a phone call and walk through your account together.  That call takes between 15 and 40 minutes.

So!  That’s it.

We handle our contract and business associates agreement (taking care of HIPAA), we setup your account and send over login information, and then we begin gathering your session info and get started billing.  It’s really that simple!

Again, drop us a line if you’d like to get started.

Payment Management

Depending on if you are a group or individual practice, you’ll need a way to collect payments from clients and potentially a way to run payroll.

We recommend credit card processing services like Square and Stripe and Quickbooks Payroll for staff payment.

Legal, Compliance

Make sure you cover your bases, have insurance, and make sure everything you do is recorded transparently and clearly in an organized manner.

It’s easier to handle any sort of audit or question that might come up in a worst case scenario when you have clear and organized reference for services, transactions, agreements, etc.

Make sure you sign a contract and BAA with a billing service, if you work with one, for your own legal protection.  Consider working with an attorney at least at the outset of creating your practice to ensure your documentation and methods are appropriate.

Make sure to pay your city, state, and federal business and payroll taxes!

Solo vs Group Practice:  Which Do I Pick?

This is purely a matter of preference.

  • Do you want to hire colleagues to work within a larger office space who can piggy-back on to the group-contracts you have with insurance companies?
  • Do you want to manage the costs, payment to, payroll for, other people in a space you rent?
  • Would you prefer to always work alone?

Both group and solo practices can become successful, so these (and many others) are your questions to answer.

While many might be motivated by the allure of added income from starting a group, it’s very important to note the increased complexities created by managing multiple people.

Tip:  Speak to other groups and owners to interview them, ask colleagues about their experiences, consider all the added work.

Perhaps a solo practice is your ideal size.  That is totally okay!

What is The Right Size of Group Practice?

We work with quite a few “super small” groups at TheraThink; often 2-4 providers maximum.

Maybe it’s a duo of significant others or a very experienced and up and coming therapist or three.  This size is often manageable, profitable, and doesn’t require a larger infrastructure and cost to become successful.  Often a billing team as a supplement to the group is enough.

If you’re trying to create a huge intensive inpatient treatment plan, your logistical requirements, staff, legal, etc, becomes increasingly complex.

So consider your “best day at work” scenario when choosing whether to start a solo or group practice.  You might find that it’s easiest to have a thriving solo practice or you may find you really want to be able to check in with colleagues on a regular basis.

Make your decision based on how you’d prefer to live, not what you’re trying to get paid, as that will help ensure you have the patience and grit to get through the initial bumps in the road.

Picking Your Tax ID for Your Mental Health Practice:  SSN vs E-IN

Whether you use your social security number (SSN) or employer identification number (E-IN) for accounting and billing is answered by two questions:

  • Are you creating a group practice?
  • Does this panel require an E-IN, even if you’re a solo practice?

private practice tax id

If you’re creating a group practice, you need an E-IN and you therefore need a licensed business like an LLC or Corp.

If the insurance panel that you’re looking to work with requires an employee identification number to get credentialed, you’ll also need your own business and associated E-IN.

Otherwise, if you’d prefer to be the only “employee” in your solo practice, you can skip the whole business side of things and just process your claims through your personal social security number (SSN).   This is the least complex way to process your billing!

How to get an E-IN for Your New Group Practice

Make sure you handle all of the above important aspects of your new practice and if you’re set to establish a group, you’ll need to do the following:

Establish a Business (LLC, PLLC, S-Corp, C-Corp, etc)

Go to your state’s business licensing website and apply to create a business of your choosing.  Perhaps consider consulting an attorney and CPA during this step to ensure you are doing so correctly!

Example Google Search:  “California Business License Website”


Establish an E-IN (Employer Identification Number)

Once you have a licensed business you can obtain the federally administrated “E-IN” for your business.   You can do so online via the IRS’s E-IN application portal.  Your CPA should also be able to help you with this process.

There are many other companies out there offering their services to help you start your own business, so feel free to google for them!

Create a Business Checking Account

You can now go to your local credit union or bank and establish a bank account for your new business, using your state business ID and federal E-IN.

We recommend non-profit credit unions to our providers in general because they tend to have the lowest (if not free) rates for starting a business checking account.

Get Your Credentialing Info Right for Insurance Billing

For the transition from a group to a solo practice, you need to have your own insurance contracts at your current service location under your own NPI (and/or your own group NPI).  This is important.

You need your own insurance contracts!

It is highly unlikely your previous org has credentialed or paneled you with the insurance “brands” you take under your own contract.  If they paid you directly from their business via W2 or 1099, you can almost guarantee you are not in-network under your own contract.

As such, it is mission critical to begin the credentialing process for your new practice if you plan to take insurance!

Do not rely on the group or agency’s insurance panels as they are highly unlikely to transition with you when you begin your own solo or group practice.

Use our free credentialing recommendation tool to get up to date suggestions on what plans to work with and avoid in your state:

Mental Health Credentialing For Your New Practice

Reach out to every panel that you’re on via their “provider relations” department.  Call and ask them how to apply to get re-credentialed with their company under your new solo practice or group practice.

Make sure to mention the address and tax ID updates that are required when starting your own practice.  Then follow their instructions on how to apply to get re-credentialed with their panel.

If you’re creating a group, you must use your E-IN during credentialing to get things set up perfectly; otherwise you won’t be able to bring on other providers.

Here’s a comparison of reimbursement rates across various commercial insurance policies:

mental health practice guide

How To Start a New Mental Health Practice (PDF Download)

If you’re looking for help with this process, you can reach out to us at TheraThink to discuss your credentialing needs.

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New Mental Health Practice Transition Guide [2020] PDF Download

Start a New Mental Health Practice Video Guide

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