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By Stuart Kaplowitz, LMFT
For many of us in private practice and for those considering it, there is so much to learn and know before hanging out that shingle. There is even more to be aware of if you plan to start a group practice, or even join a group practice. Sadly, many of us out there have been audited and fined by governing agencies that oversee all businesses, whether therapy businesses or not.
To help clarify and further discuss these issues, 6 California Group Practice owners, myself included, discussed a few pertinent issues to help fellow therapists understand the IRS's laws we must adhere to as well as how the EDD, and even California laws, guide the process to having your own practice or being part of another practice.
It is important to note that this article does not substitute for legal advice. We urge consultation with an employment attorney to best protect your business and license. CAMFT attorneys can help members in so many ways, but they are not employment attorneys, and they also encourage group practice owners and employees to seek employment counsel as needed.
For group practice clinicians, it is important to know that there are important distinctions between employees and contractors. If you have been hired as an employee in a group practice, this means the owners may have reviewed the IRS guidelines and various laws, and are attempting to adhere to hiring guidelines. If, however, you are not an employee, the owners are not paying employment taxes and are most likely calling you a contractor. Please know there are expectations of true contractors. The IRS’ 20 Factor Test and SS-8 form can educate you and help you to discern whether or not you are being misclassified by the owners of your group practice. True contractors pay for everything (furniture, supplies, promotion, etc.); they wouldn’t be highlighted on a company’s website; they would get their own referrals; have insurance contracts in their own names vs any outside company; be part-time / temporary; would not be covered under a group’s Worker’s Comp policy; and many, many other things the IRS outlines.
The different group owners in discussion here, each from Southern California, share some of the hardships and realities of beginning a group practice. Group companies and even individual practices are indeed businesses. Many of us did not receive this knowledge or training from graduate school. We all have engaged employment attorneys to guide us and consult with us on staffing / employment-related issues.
The group practice owners in conversation here are Alison Johnson, Cynthia Anderson, Krissy Martinez, Dr. Megan Phillips, Dr. Ivanna Turckel, and myself, Stuart Kaplowitz. You can read our bios below.
Discussion Point 1: From your own learning (and even mistakes), what do you think Private Practice clinicians need to know, especially if they are working in or thinking of starting a group practice?
Alison: I was once taken advantage of by a group practice who paid me as an independent contractor. Due to their billing department not being on top of billing and the practice being poorly run, I didn’t get paid for thousands of dollars in services I provided. When employed as an employee, you’re guaranteed to be paid for all hours worked, and not burdened with the risk of doing business or with self-employment tax (which is more than double what I would have paid as an employee). The burden was passed along to me as an independent contractor where as if I was an employee, I would have been paid for all hours worked in a timely manner, paid half of what I paid in taxes, and would have been entitled to certain benefits such as sick pay.
Krissy: Private practice clinicians often don't realize that their tax situation changes significantly. If you are a 1099 or in business for yourself, you have to account for the self-employment tax, in addition for being pushed into higher tax brackets. Also, a huge thing that 1099 therapists forget is that they need their OWN malpractice insurance because they are not covered under the group they are contracted with as a separate entity.
Stuart: What I see happening, too often, is that we look to our social media peers to ask questions our employment attorneys are best suited to address. Guidelines are different in private practice and, like most of you, I didn’t get a lot of business training in my Master’s program (smile). Most of us come from non-profit, internship backgrounds. There are indeed more laws we need to be aware of in private practice. Thinking back, I wish I understood the IRS’ 20 Factor Test. I bought into the fear of how difficult it would be to change from our independent contractors to employees. For the rare few that are true contractors, any insurance contracts you choose to have go in your name vs. someone else or another entity. That way, if you change work sites, the contracts stay with you vs another group practice or other entity.
Megan: Private practice clinicians need to get an understanding of how to conduct business in a legal and ethical way through reading materials or even free classes through places like the SBA. We are not trained in business, but we become instant business owners when we open up shop. We then wing it when it comes to marketing, infrastructure, and procedure, and sometimes we get it wrong. Getting help with this from the start from either a mentor, book, or class can save you time and money and headaches.
Cynthia: I think it’s important to always look at how we can improve, and our improvement process. Our practice promotes self-compassion, we are not perfect, and can’t know everything, all the time. We do the best we can, with the best of intention, and change course as needed.
Ivanna: For those wanting to join a group private practice, it is important to understand your rights as a licensed therapist. You didn’t work hard for your degree and your license to get taken advantage of. I suggest understanding the difference between being a 1099 contractor versus a W2 employee. Many group practices have converted to providing W2 employment, adding wonderful benefits you'd get working at an agency. There are still some group practices that have decided to rebrand themselves as a practice management company while still operating as a group practice. They've possibly done this as a way to avoid paying for added benefits they'd be responsible as an employer while profiting off of your hard work.
Discussion Point 2: How do you follow labor laws and hiring within the guidelines (especially through COVID)?
Megan: I ask my peers about updates to the labor law since it is confusing to navigate. I try to be flexible with changes and try to be as on top of it as I can. And I give myself grace and space to mess up and regroup as needed. We are all trying our best, and I think our team understands that. We have moved to operating virtually for safety, and we hope to move back into in-person options when it is safer to do so. We also stay on top of county and state data to make sure we are adjusting our course as needed.
Cynthia: It takes effort and investigation to gain intelligence on labor law. Labor laws exist to protect the employer and employees, and inform many business decisions. As a newer employer, this is a process. There is a lot to stay on top of, especially when wearing multiple hats. Being proactive and consulting with other employing private practice clinicians on a similar path is beyond helpful, and government websites are a start. While following COVID guidelines in our state, I have offered Associates flexibility in how they’ve wanted to conduct sessions in environments they’ve felt safe. Whether that has been at home via HIPAA compliant video sessions, or in person, with safety measures in place. It has worked out organically, that everyone has been able to be comfortable with individual choices. I personally have been conducting sessions online in my private practice office.
Ivanna: I read up on current Federal, California, and BBS labor laws, reach out to others when I have a question, or contact my attorney.
Krissy: I don't really see this as a huge issue. For me, I want to be able to provide a solid and established work environment for therapists where they have the autonomy of private practice without the worries of overhead, health insurance, and support from colleagues. The law is clear- that can't be done if my therapists are 1099 contractors. They'd have to take care of all of those things themselves.
Alison: Insightful Matters (IM) employs clinicians as W2 employees as we have group contracts that we utilize for our clinicians to see clients. Our legal team advised that if we were to offer therapy services by having our clinicians on our group contracts, this would make them employees. Also, due to us marketing and advertising for our clinicians' services, such as on our website and directories, this calls for our clinicians to be W2 employees. Our employees use our EMR, submit timecards, and follow IM’s policies and procedures. For clinicians who feel strongly about remaining in employment for themselves and do not want to be an employee, we are able to offer our services through our sister company, Mind Over Matters (MOM) Practice Management Services. Our MOM clients (licensed clinicians) have their own contracts, or we provide the credentialing services so that they are utilizing their own contracts. The MOM clinicians receive payment from the insurances directly and pay MOM for the Practice Management services we provide. We do not issue them a 1099, and we do not advertise them for their services. We may provide advertisement services for them, but they’re paying for this service of ours and the fees for their own website/ directory. Our MOM clients also have their own EMR that they’re paying for. We do not manage the MOM clients (licensed therapists) for how they do their notes, when they do their notes, billing codes they use, and how to charge their clients. MOM is much like how we know a billing company to be. I also want to note that when credentialed with insurances through a group practice or agency and wanting to have your own insurance- based practice, you will need to go through credentialing of your own to have your own insurance contracts. When no longer employed with the group, the insurance credentialing does not follow you to your practice. If your agency has a non-compete clause, this likely is not legal. Do consult with an attorney if this is what is holding you back from going on your own.
Stuart: In placing ads on the various hiring sites (socialservices.com, Zip Recruiter, Indeed, etc), we make it clear from minute one that we adhere to employment laws in hiring therapists / employees. We live by the guidance of our employment attorney, CPA, and consultations with CAMFT. We outline these laws in our employee manual to help remind us all. Many candidates actually find us through various Facebook or LinkedIn posts / comments, sharing how they do not receive sick leave, vacation time, health insurance, and other benefits they need. They seem to appreciate previous groups supplying furnished offices and all of their supplies, but have heard remaining full-time as a contractor is problematic (to say the least as contractors need to be paying for all of those things). We share how supplies, paper, etc., are musts for us to offer employees. The safety issues we follow with COVID seem to go hand-in-hand with our vision of protecting our staff in their physical health as well as fiscal and emotional well-being. COVID seems to have left more of us therapists wanting to focus on our futures. We see that our transparency with our concern for the law and our clinicians’ well-being helps us build on this future focus as a group.
Discussion Point 3. What makes you stand out as a practice?
Krissy: Our practice really focuses on giving therapists who have been overburdened at agencies a new and healthy experience in the private practice world. We are transparent about money, about costs, and about helping clinicians be better clinicians. Even though our therapists are W2 employees, they really do have autonomy over their schedule. We also focus on making sure that therapists are seeing the kind of clients that THEY want to see, and foster their growth as experts in their preferred niche. Also, as my practice grows, so do my therapist's pocket books through bonus and profit-sharing programs.
Alison: Insightful Matters stands out in that we hire Associates that are almost complete with their hours, and licensed clinicians (even when newly licensed), and we are able to have our Associates transition from Associate to licensed! Our pay structure is competitive and beats the typical 60/40 split that independent contractors are accustomed to. Insightful Matters is attractive to clinicians who want to be employed or supplement their income when building a private practice, having a family, having other non-therapy employment positions, wanting to stay active during their retirement years, wanting to be in private practice without the headaches, continuing their education, etc. All of our clinicians are able to have a self-directed schedule and all referrals are provided. We have benefit offerings for our part-time and full-time clinicians. Although we are mainly telehealth due to COVID, our clinicians have access to 16 beautiful office spaces throughout Huntington Beach and Garden Grove to either conduct telehealth or face to face sessions. Insightful Matters provides feedback informed care to every client at each session. We allow for our clinicians to use their own theoretical orientation and use a simple and robust EMR that makes paperwork as easy and simple as possible. We try our best to accommodate our employees in every way possible.
Ivanna: I think what makes our group stand out is that we are diverse and rapidly expanding in the Inland Empire. Our pay is competitive. We listen to the needs of each employee and remain mostly flexible to their requests. Our stance with employees is to treat them how I always wanted to be treated by past agencies I worked with. We want our employees to feel valued and that their work is appreciated.
Megan: We are a specialty group practice that is pretty unique in what we are doing. We create a space for therapists to thrive and do good work, but where they are respected and treated like the amazing and competent clinicians they are. That respect helps create a great workplace culture that we all value.
Cynthia: As a fairly new business, creating a solid structure was important. Everything I’ve learned during my professional life has impacted my current business choices. Our clinicians have heart and are caring professionals, we have a welcoming office environment, and I’m being mentored to become an AAMFT certified supervisor. Our practice is able to provide client services to multiple family members, and the benefits of the family therapy experience. Internally, this gives our clinicians the opportunity to collaborate when providing treatment and learn from each other.
Stuart: Coming from DMH programs helped me see what good coordination of care looks like. At Serene, we interconnect on many cases. For example, I might work with a wife, a colleague might see the husband, and a third clinician might see the family. As appropriate, and with releases, we can coordinate care. Along with working closely with local PCPs, Psychiatrists, etc., I think we can take our clients that much farther in their treatment. My staff is a family, and I hope I show them the same support we do our clients - but without all the DMH documentation (smile). Besides, if we didn’t have employees, we could not have the comradery and staff activities we do now.
Discussion Point 4: Alison & Megan, you also run Practice Management companies which allow you to legally offer practice services to private practice clinicians that do not have any connection to your own group therapy practices. Can you please explain this further?
Megan: I own the group practice and then a separate LLC consulting practice to help clinicians set up niche practices from the ground up. The LLC is not a therapy practice at all. It's a business consulting firm. So, we just provide legal support, marketing support, business plans, etc. to those who are not part of our group practice. Therapists within our group practice are not connected, in any way, with the separate LLC business.
Alison: Insightful Matters Family Counseling Professionals, Inc. is a group practice of licensed and pre-licensed clinicians. Our niche is to take insurance and to offer the array of services and specialties that our providers have to offer. Our sister company, Mind Over Matters Professional Services Management, offers management services for running a private practice to our clients who are licensed clinicians. We offer credentialing support, billing, and Virtual Assistant services.
Conclusion: So, what we see in these two above Practice Management companies is that these owners have their own groups with employees, where they appropriately offer staff benefits (with sick leave being a must in California), maintain offices/space for them, are responsible for supplies, furniture, and so forth. This then allows these staff to be either part or full time without the constraint of being contractors. It is not an issue with the IRS as to how long the staff stay. Insurance contracts are in the group’s name. Payroll and other legally expected taxes are paid by the owner / company.
For their separate management companies, they can offer to help outside clinicians whom they do not work with in any other way, with paneling, marketing, insurance issues and other aspects of the individual therapist’s business’ wants and needs. These individual therapists are contracting for a service and would have any insurance contracts in their own names, have their own outside therapy practice, with their own space, their own supplies and everything. These are just some examples of what would not be allowed for group therapy practices that have contracted with (1099) therapists.
As either a group practice owner, or a group practice clinician, it is important to know your rights and the regulations that govern employees. We hope this discussion has been helpful, and we encourage you to contact an employment lawyer if you have specific questions about your circumstance.
Group Practice Discussion Participants include:
Alison Johnson, LMFT is the proud President & Clinical Director of Insightful Matters Family counseling Professionals, Inc. and Mind Over Matters Practice Management Services. She started Insightful Matters FCP, Inc. about 5 years ago upon being a sole proprietor and receiving more referrals than she could keep up with individually. Alison began a group practice by bringing on Associates. Insightful Matters adheres to the W2 employment model and offers a variety of benefits to its full time and part time employees. They employ clinicians throughout the state of CA that hold a CA license for as long as insurances allow for Telehealth. Their main headquarters is in Huntington Beach, Orange County.
Krissy Martinez owns PAX Therapy and family services in Whittier, CA. She is an LMFT who has been working as a therapist since 2010 and in the psychology field since 2007 in various capacities. She gained most of her experience in DMH contracted agencies. It was this experience that informed her desire to build a group that treated employees with care and respect. In 2015 she started in private practice, and in 2017- PAX was born. It is a constantly changing practice that's aim is far more than providing therapy- it's about providing a dignified life for the therapists dedicated to working with her.
Dr. Megan Phillips is a licensed psychologist and Founder and Director of Cottonwood Psychology Center. She created her practice in 2016 to help new moms who may be struggling with feeling like they are overwhelmed and alone. With offices in Orange County, Dr. Phillips and her team provide specialized care to moms and dads throughout California.
Cynthia Anderson runs Forward Focus Counseling, Huntington Beach. Forward Focus is a group of four clinicians: one licensed, and three registered associates. They specialize in Anxiety, Depression, Grief/Loss, and Trauma, and use various modalities including EMDR. The clinicians at Forward Focus are thoughtful, caring individuals, and the business continues to evolve.
Dr. Ivanna Turckel is the President and owner of Wise Mind Counseling Services Inc. She earned her doctorate in MFT from Alliant International University and has been in practice for over 10 years. Wise Mind Counseling Services Inc was established November 2018 and has grown greatly since then. They have multiple locations throughout the Inland Empire.
Stuart Kaplowitz, MFT, runs Serene Pathways Counseling. Currently, our offices are in Chino and we have 20 staff with various clinical backgrounds and areas of expertise. Stuart also moderates the CA Group Owners FB Group.
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