Taking Only Cash May Improve Your Practice

I recently semi-retired from a highly-successful 45-year clinical, forensic psychological practice in Phoenix. While I accepted only cash for my forensic work, of course, I took insurance for therapy cases until about 2003. I had resigned from all but two insurance panels at that time due to especially poor remuneration and/or difficulty in billing or resolving billing issues. I considered going strictly cash pay and leaving the two remaining panels for some time but procrastinated—until this incident:

A client using insurance no-showed/no-called to a confirmed appointment. I had my secretary call the client. She reported that the client acknowledged the no-show, had “gotten involved in something else” but was prepared to pay the $15 co-pay. When my secretary reminded the client that he had signed a registration document (and was given a copy) noting that since a no-show could not be billed to the insurance carrier, the client would be responsible for the full fee. The client reportedly replied, “If I had known (remembered) that, I would have kept the appointment.”

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I recognized at that moment that this client valued his treatment at a paltry $15 per session and thus missing a therapy session was not a big deal. I proceeded to do a quick bit of data collection and learned that I had a 15% no-show/late cancellation rate for my managed care clients (with confirmation the day prior). The rate for my forensic clients, who paid $175-$275 per session was 1%; the rate for my cash clinical clients, at $125 per session, was 2%. It was clear that patients who paid substantially more for treatment valued that therapy more; were more likely to keep appointments; were better at following directions or suggestions; generally reported more positive outcomes; gave better final evaluations; and were more inclined to return for additional treatment. It was cognitive dissonance—if we pay a lot for something, we value it more—cars, shoes, dinners, and psychotherapy.

In my day-long workshop entitled “The Business of Private Practice: The Graduate Course You Never Had” I speak about developing a cash-basis practice. Inevitably, someone raises the issue that some needy clients cannot afford to pay cash and should be able to use their insurance. I am sensitive to that concern and spent 30 years working with such patients. At the same time, mental health providers need not take a vow of poverty, deserve to live well as we help others, and should be enabled to retire gracefully.

I submit that most people believe the adage that “you get what you pay for.” While it may seem a bit counter-intuitive, if you want your patients to value their therapy and fully benefit from it, have them pay cash for the service. When I left managed care and raised my cash rates my practice zoomed. If I charged $150 for 50 minutes of behavior therapy, in the eyes of most people, I had to be good!

Larry F. Waldman, Ph.D., ABPP is a licensed psychologist who practised in the Paradise Valley area of Phoenix for 45 years. He worked with children, adolescents, parents, adults, and couples. He also provided forensic consultations in the areas of family law, personal injury, and estate planning. He speaks professionally on marriage, parenting, private practice development, psychotherapy, and wellness to laypersons, educators, corporations, attorneys, chiropractors, and fellow mental health professionals. He teaches graduate courses for the Educational Psychology Department of Ottawa University. He also is a certified senior fitness specialist. He is the author of “Who’s Raising Whom? A Parent’s Guide to Effective Child Discipline;” “Coping with Your Adolescent;” “How Come I Love Him but Can’t Live with Him? Making Your Marriage Work Better;” “The Graduate Course You Never Had: How to Develop, Manage, and Market a Flourishing Private Practice—With and Without Managed Care;” “Too Busy Earning a Living to Make Your Fortune? Discover the Psychology of Achieving Your Life Goals;” and “Overcoming Your Negotiaphobia: Negotiating Your Way Through Life.” Click on Larry's image above to see his contact details.