Calculating What Rate to Charge for Therapy

Hi! I see other therapists ask a lot about what to charge for their services, so I put together how I decided what to charge. This is based on my experience and research and should not be construed as legal advice. I hope it helps, and good luck with your new practice!

Base Formula for Calculating Therapy Rate

Formula for what your base rate per minute will be: =[(a+b)/c]/60

1. a: Annual business expenses divided by 52

2. b: Annual desired gross take home pay divided by 52

3. c: Desired number of sessions weekly

Then, determine what services you wish to offer, and how many minutes each service will, on average, take. Include both client time and time outside the client, such as to write the SOAP note or evaluation report, for the initial free consultation, room set-up/clean up, PPE rotation time, or time to calculate test scores. 

Once you have the service time, multiply that amount of time by your base per minute rate. This base amount is the lowest amount you accept for this service. If some services require specialized equipment or supplies or PPE, you might want to add that cost into your service rate on top of your base minute amount. 

Congrats, now you know how much your absolute minimum service charges should be! You can of course adjust if you think the rates you calculated are different than you want to charge. If you want to offer a sliding scale, accept insurance, charge less to private pay clients, or need help figuring out what your expenses are, read on. Calculating your therapy rate will be easier with this information.

Calculating Business Expenses

First, you will need to determine what your annual expenses are. Below are some ideas for what business expenses you might have, but you might have all of these expenses, or have expenses not listed here. You may have legitimate business expenses that the IRS doesn’t allow as deductions, but you should still include them in your calculations. There will be expenses you won’t anticipate, so I recommend rounding up or adding some cushion.

Example Business Expenses

• Advertising: domain name, website host, digital or print advertisements, printed materials (brochures, business cards)

• Continuing education: cost for CEUs that earn you certifications you can use to attract customers, to keep up with your field, or to meet your license requirements

• Bank, credit and collection fees: Cost for hiring an agency to help you collect past-due balances, bank account fees, credit card fees

• Dues and subscriptions: subscriptions to publications related to your industry, membership dues for state or national organizations, costs for required certifications (such as ASHA CCCs), annual licensure fees (one or more states)

• Employee benefit programs: 401k, health insurance, etc. and their corresponding administration fees

• Insurance premiums: liability insurance, worker’s compensation, disability insurance

• Maintenance and repairs: to maintain your therapy materials and workspace

• Office expenses and supplies: office supplies such as printer paper, writing utensils, ink cartridges, and tech such as a printer or headphones. This may include services from a company, such as having someone send past due invoices for you.

• Postage and shipping: Packaging and postage costs to mail invoices or products

• Workspace cost: Your home office or rented community space rent or mortgage. The IRS has instructions for figuring out if you actually have a home office to claim, but even if you can’t claim it you should still include an appropriate share of the rent or mortgage, property taxes, utilities (water, gas, electricity, street service), and other expenses related to the space. If you’re going to provide anything to clients or employees in this space, such as snacks or filtered water, include that cost as well.

• Salaries and other compensation: Employees besides the business owner, if any, such as a receptionist or other therapists. 

• Telephone: office phone, cell phone, fax number or virtual fax service

• Transportation: Work travel expenses, mileage

• Professionals to help you set up and run your business, such as accountants, lawyers, or janitorial services

• Initial business set up costs, such as fees to file for a business license or register an LLC, equipment and furniture to set up your space, lighting, a computer, webcam, etc.

• Digital or physical therapy and evaluation supplies you’ll use during sessions: online subscriptions for materials, cards, books, tests, PPE, specialized equipment (such FEEs), and consumables used during therapy

• Software or online programs to run your business: Quickbooks, Electronic medical record systems, teletherapy host

• Uniform: For example, if you’re required to wear scrubs

• Employer share of taxes for employees, and self-employment taxes for you. Once you have determined how much you want your gross take home to be, calculate the correct percentage, which may or may not be 15.3%, and add it to your business expenses to cover your employer share of your taxes.

Calculating (Realistic) Desired Take Home Pay

Next, you need to figure out how much you want your gross take home pay to be. If you’re not sure, compile a personal budget that also includes long-term expenses such as retirement and emergency savings. Then calculate what your gross income needs to be after taxes to match your personal budget. For example, if you pay 25% of your income to taxes, 75% of your gross take home pay would need to equal your budget.

Your desired take home pay theoretically has no bounds, but for those of us choosing to serve a marginalized minority population, we need to balance personal financial goals against the good of our clients. That is where personal budgets can help balance desires for altruism against the need to make a living wage. If we pay ourselves less than our expenses we will not be able to stay in business, and will therefore help no one.

The Complexities of Setting Up an Income-based Sliding Scale Fee Schedule

Calculate Your Retail Rate

To determine what sliding scale rates can be, you first need to determine what you want your retail rate to be. You might consider benchmarking your price. That means you do research. For example, what do other service providers in your area with similar qualifications and expertise charge? What does insurance reimburse for services in your area? What do family, friends, or clients say they would be willing to pay for the services you plan to offer? You also can just pick a random magical number that sounds good to you. Sometimes it makes sense to adjust it to a round number.

Calculate Your Sliding Scale Rate

Now you need to set your base rate for clients who make <100% federal poverty level (FPL) for their family size. This is the lowest amount you're ok with working for.

Then, decide how many sliding scale levels you want, and where you want each level to fall as compared to the other rates. For example, here are four fee categories for a sliding scale:

•  <100 FPL

• 100-200% FPL

• 201-300% FPL

• >300% or doesn’t request sliding scale 

You will calculate different percentages between your base rate and retail rate, then round, until you're happy with the different service rates for different scale levels. Eventually, you may end up adding additional fee categories to serve clients who can't afford the full rate and don't qualify for the sliding scale rates, but are still relatively low income.

Determine Your Ideal Caseload Size

Next, you need to predict how many client visits per week you would be happy with seeing. Our work is closer to counseling than other types of SLP work, and our sessions are longer, so you may find that number is a lot lower than you're used to. Here at Harmonic Speech, 25-30 sessions per week is a common ceiling. There is no reason to burn yourself out working beyond your limit. Though, you may need to adjust the number up if you're accepting insurance, since insurance reimbursement is typically significantly lower than retail rates.

Now Math It!

• 100% retail rate clients: divide your post-tax desired take home pay by your retail rate. This tells you how many clients you need to see per week. If it's lower or higher than your ideal caseload size, look at your numbers and see if anything needs to be adjusted.

• Retail rate + sliding scale clients: decide how many sliding scale clients you would like to accept. This number cannot be infinite- sliding scale clients take more capacity than retail rate clients, so seeing too many will lead to burnout (unless you adjust down your caseload size accordingly). Multiple the lowest sliding scale rate times this number of clients (since not all will end up paying timely you don't want to over-assume income). Divide the remaining post-tax desired take home pay (after subtracting this amount) by the retail rate, and compare that number of clients to your ideal caseload size. Adjust rates as needed.

• Considering insurance: this is a similar process, but you'll need to know what insurance will reimburse in your area. See below for more details before deciding on your rates.

Setting rates when you accept insurance

Insurance companies set their own reimbursement rates. While rates may be negotiable with some insurers, it typically takes time for you to develop your relationship before they are willing to consider negotiation, if ever. I recommend only accepting insurance companies that offer reimbursement rates at or above the level you need for a sustainable caseload size. Remember, you will have to spend extra time and incur extra expenses for filing insurance claims, and some claims won't be covered (and therefore may never get paid). If the amount they’re offering is less than your base rate you either won’t meet your financial goals, or you'll have to see more clients to do so. Either way may make your business less sustainable, thereby limiting how many people you can help.

Learning From Hospital Billing

There is a whole song and dance that can happen when insurance only pays part of your rate, not the full rate. This dance is why hospital bills are outrageous- they set their retail rates so high to ensure they're higher than the maximum any insurance might offer them, even out of network rates, so that they avoid leaving any amount on the table. I've seen therapists have many different ways that they try to navigate accepting insurance without similarly overcharging private pay clients to compensate for the reduced reimbursement from insurance clients. For example, some providers offer discounts for same-day or time-of-service payments. For providers not offering sliding scale, that would be their base rate. Only some states/insurance contracts allow that, and you have to be really timely with your billing to make it work.

In this scenario, you end up with two rates:

• Same-day or time-of-service payment: base rate, possibly adjusted up if you wish to charge more than your base rate, or want a rounder number

• Retail rates: rate that is above what insurance companies out of network or top reimbursement rate is, as well as above your base rate

If you can find insurers who pay reasonably than you won't have to worry about your rates. This is the best option, as it's workable for you, and more clients can access services when you accept insurance.

If you want to offer a sliding scale, accept insurance, and not charge private pay clients more than you want, your rates could theoretically look like this:

• <100% FPL: base rate

• 100-200% FPL: base rate + % of difference between base and same-day payment rates

• 201-300% FPL: base rate + greater % of difference between base and same-day payment rates

• >300% FPL and clients who don’t request sliding scale, and pay same day: same-day rate

• Retail rate: higher than same-day payment rate, and above what insurance reimburses

You may run into issues with this type of system- insurance may not allow you to charge lower rates to some clients than you charge to their insured clients, even if it is same day payment or sliding scale. In that situation, they'll only reimburse you whatever the lowest rate you charge to anyone is. The best way to determine what your insurance allows for is to read your contract.

Pro Bono Clients

For those clients who cannot afford any amount whatsoever, or for whom even your base rate is too high, you can offer services pro bono. This is often done when clinicians are just starting out, but is not sustainable for an entire caseload forever. But there are ways to make this more workable.

For three years we had a contract with a local nonprofit that allowed us to see clients for no cost to them twice a week. Try networking with agencies in your area to see if they have funds for this type of program. They do typically involve accepting reduced rates for your time- less than you would receive to see a single client while working with multiple clients at the same time (group voice training). Since this is a different service than what you're offering to one-on-one insurance clients, this is less likely than sliding scales to be an issue.

Thank you so much for reading the notes I took about how to determine what to charge. I took these notes to help myself when I started my private practice back in 2020, and they are neither a legal nor a definitive guide, but I hope they're useful to you now.

Thank you for all the work you do, and best wishes on your new practice!

I am available to teach gender affirming voice workshops if you're looking to build your clinical skills, or to help you find YOUR voice. Please reach out if I can be of service!

-Tallulah