How to start a cash-pay therapy practice

A cash-pay practice takes payment directly from clients and does not bill insurance panels. That removes claims, denials and contracts from your workload, and it changes a few of the setup steps. This guide walks through them in a sensible order.

1. Confirm what your license allows

Check with your state licensing board what you may do independently, and whether it has business rules for licensed professionals. If you are still working toward full licensure, ask about supervision requirements before you take private clients.

2. Choose a business structure

Many therapists set up a limited liability company (LLC), or a professional LLC where the state requires one for licensed professionals. The choice affects taxes and personal liability. A lawyer or an accountant can settle it in one short meeting, and checklists from GoodTherapy and other therapist organizations cover the same ground.

3. Get insurance and any local permits

Carry professional liability (malpractice) coverage, and add general liability if you rent space. Ask your city or county whether you need a business license, and check zoning if you will see clients at home.

4. Get your NPI

A National Provider Identifier (NPI) is a free 10 digit number. CMS says all health care providers are eligible to apply, and providers who are HIPAA covered entities must have one. Even if you never bill insurance, your clients' insurers expect your NPI on a superbill, so get one early. Apply through the National Plan and Provider Enumeration System (NPPES) at nppes.cms.hhs.gov.

5. Find out whether HIPAA applies to you

CMS says that providers who submit HIPAA transactions, such as claims, electronically are covered entities. A provider who never does may not be covered, but the answer depends on your exact practices, so use the CMS Covered Entity Decision Tool and check with an attorney. State privacy laws and your licensing board's rules can apply either way. Whatever the answer, treat client records as confidential and pick vendors that will sign a Business Associate Agreement. Our list of questions to ask a software vendor shows what to look for.

6. Set your fees and your policies

Decide your session fee, how you take payment and what happens when a client cancels late. The American Psychological Association's ethics code asks psychologists and their clients to agree on compensation and billing arrangements as early as is feasible, and putting your policies in writing before the first session is a good habit for any therapist. See our cancellation policy template.

7. Prepare for clients who want reimbursement

Many cash-pay clients still ask their own insurer for out-of-network reimbursement, and the document they need is a superbill. If your clients are uninsured or choose not to use insurance, federal rules also ask you to give a Good Faith Estimate before care begins.

8. Pick your software

You need scheduling, secure notes, payment collection and reminders, and for many practices, video. Read the first 30 days checklist before you commit to a tool. RafaNest has a free Starter plan for up to 25 active patients, and a Professional plan at $29 a month that adds telehealth, card payments, SOAP notes and superbills.

9. Tell people you exist

Set up a simple website with your booking link, and list your practice in the directories your clients use. Your first clients will most likely come from colleagues and people who already know you, so tell them you are open.

Sources are the CMS National Provider Identifier page, the CMS page on covered entities and the APA ethics code, standard 6.04. This is general information and not legal or tax advice, and the rules differ by state.