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Fee Agreements: What Works, What Doesn’t— and How to Use Them

Fee Agreements: What Works, What Doesn’t— and How to Use Them

Many psychiatrists are faced with a variety of fee agreements. Some are relatively simple, others more creative and more complex, and still others may skirt the edge of ethical or legal boundaries. Thus it is critical for a practicing professional to be knowledgeable about the risks and rewards to adequately assess the differing opportunities that may unfold. This article reviews the many forms of fee agreement and notes the important factors to consider as well as questions to ask to properly assess and vet what may be best for one’s practice.

Perhaps the most traditional form of fee agreement is the rather straightforward fee-for-service model, in which a physician provides a service for a specified fee and is paid after providing the service or procedure. While this certainly still exists, there are many additional approaches that are helpful to be aware of, and in some cases, wary of.

Fee arrangements with individuals

Fundamental to the economics of sustaining one’s practice is ensuring that the fees charged are adequate to support the costs associated with the service. It is a common pitfall to spend too much on overhead (eg, rent, administrative support, furnishings) that may be difficult to recoup in the short term. It is useful to first do the math: calculate the annual costs associated with providing care and divide that by the number of hours that are devoted to clinical services. Appropriate margins should be added for profit and for bad debt as well. The result gives a figure used to gauge hourly (or annual) compensation across subsequent fee arrangements. Another variable is the marketplace in which one is practicing. If one’s fees are too high, it may be difficult to gain or sustain referrals. If they are too low, your services may be misperceived as being of poor quality.

Calibrate differential income depending on the nature of your practice (psychotherapy, medication management). Some psychiatrists prefer brief medication consulta-tion, which may be more profitable than 50 minutes of psychotherapy. However, demand becomes an important consideration as does burnout from stressful workdays. Paramount in decision making is maintaining excellence.

Arrangements with other mental health professionals (eg, social workers, psychologists) can be efficient and rewarding. These can be structured as a group practice with shared office space, or as strong and trusted relationships with a number of cross-referrals and consents to share information and coordinate care.

In addition, you may choose to have a sliding scale for those who are uninsured and cannot afford the usual and customary fee. Some physicians may find it awkward or uncomfortable to negotiate fees, both for themselves and for patients. However, it is important to have a fee policy before a patient asks for a fee reduction.

It may also be worthwhile to discuss with the patient the importance and therapeutic value of paying for services in the doctor-patient relationship. No fiscal involvement may diminish the value of treatment and can lead to inconsistent commitment by the patient. Establishing boundaries and expectations from the start will work to establish a better patient-therapist relationship.


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