The Legal and Ethical Issues to Consider When Working with a Practice Management Company

by Alain Montgomery, JD
Staff Attorney
The Therapist
November/December 2022

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Introduction

For those who are newly licensed or thinking of pivoting from one practice model to another, determining which type of practice to join and/or form can be daunting. Whether you choose to work in an agency setting, a private practice, or a group practice, each model provides certain advantages depending on your values, financial goals, and professional interests. Figuring out which setting will provide the most personal and professional fulfillment can be difficult, especially for those who are newly licensed. The practice management company model is becoming more popular among healthcare providers, including MFTs and other behavioral healthcare providers. This article will discuss the advantages and disadvantages of working with a practice management company.

What Is a Practice Management Company?

A practice management company provides administrative support services to its network of licensed mental healthcare providers who own and operate their own professional businesses. A practice management company allows licensed providers to render services to clients as part of their own private practice under the brand of the practice management company.

Advantages and Disadvantages of Working with a Practice Management Company

One advantage of working with a practice management company is the administrative infrastructure it provides to its network of providers. This means that providers who contract with a practice management company are not burdened with managing the legal, financial, administrative, marketing, and promotion responsibilities that are associated with establishing and maintaining a business. The removal of administrative burdens allows providers to focus on providing mental healthcare services to clients.

For example, the practice management company will generally provide access to administrative and billing support that frees the provider from responsibility for everything from scheduling appointments to invoicing clients to insurance credentialing to maintaining health insurance contracts and to handling insurance claims and disputes. Also, the practice management company will generally offer its network of providers access to a fully integrated electronic health record (EHR) system, intake paperwork, and access to client referrals. Additional benefits include built-in or scheduled opportunities for providers to network and consult with eachother. Given the benefits and advantages a practice management company offers to its network of providers, one may ultimately be able to structure a simplified work life unhindered by many administrative tasks so that they can truly focus on providing mental healthcare services to clients.  There may be certain disadvantages of working with a practice management company. The practice management company may charge the provider a management fee for the administrative services it provides, which could be costly. For example, the practice management company may engage in expensive marketing campaigns, maintain office space for its providers in high-rent districts, and pay for the services of thirdparty vendors and experts such as lawyers, compliance consultants, information technology, support staff, and accountants. These are costs that are likely passed on to the providers. Some practice management companies may require the clinicians to pay the management company a percentage of the client fees. When this is the case, it’s important for therapists to understand the legal and ethical considerations of fee splitting.

Legal and Ethical Considerations of Fee Splitting

As noted, a practice management company will generally charge a one-time or monthly fee for the services it provides. In circumstances where a therapist arranges to give the practice management company a percentage of client fees, there are legal and ethical implications.

Under MFT licensing regulations in the California Business and Professions Code, it is a form of unprofessional conduct to pay, accept, or solicit any consideration, compensation, or remuneration, whether monetary or otherwise, for the referral of professional clients. All consideration, compensation, or remuneration shall be in relation to professional counseling services actually provided by the licensee.1 The CAMFT Code of Ethics mirrors this legal prohibition. Under CAMFT Code of Ethics, Section 12.1, marriage and family therapists do not offer or accept payment for referrals whether in the form of money or otherwise. Essentially, the law and ethics prevent referrals from being induced by a promise of remuneration or payment.

However, there are exceptions in the law that allow for payment of services that don’t involve the referral of clients, that are not unlawful. California Business and Professions Code, Section 650 states in part, “the payment or receipt of consideration for services other than the referral of patients … shall not be unlawful if the consideration is commensurate with the value of the services furnished.”2 California courts have interpreted this to mean that the law permits arrangements where there is payment to a management company for management services so long as the payment is commensurate with the value of the services provided. Hence, paying a management company for management services, even if referrals are provided, is not prohibited.3

Considerations for the Practice Management Company Model

It is important to consider the level of transparency and amount of detailed information that the company offers to prospective providers. Make sure the values of the company and the support services it offers align with your professional and personal values. Remember, you want to make an informed decision to join a company that will partner with you, support you, and help you achieve your personal and professional goals based on your shared values and the sense of community you want to foster and be a part of. Working with the right practice management company could lead to a very rewarding and fulfilling career.

How Working with a Practice Management Company Can Help Licensed Providers Grow Their Private Practice

A practice management company affords licensed providers the ability to maintain full control of their independently owned businesses. Depending on the practice management company, the company may offer additional support and resources to help providers optimize their relationship with the company. For example, the company may provide access to provider relations specialists who can offer practice strategies that include caseload management, scheduling optimization, and professional profile enhancement.

Even though a practice management company may offer an array of services to its network of providers, the provider should determine how working with the practice management company furthers their financial and professional goals. So it’s important to create a business plan to help you concretize your financial and professional goals.

What Is a Business Plan?

A business plan is a document that summarizes the objectives of a business and identifies the strategies that can be used to achieve them. It’s a roadmap that helps identify the financial resources and the other types of resources that are needed to achieve specific outcomes for your business. A business plan does not need to be a complex document. As long as it keeps you on track with your financial and operational goals, it serves its function. The business plan may include a specific time frame within which you expect your practice to achieve a certain profit margin as well as specific strategies you will implement in the event that the practice is no longer financially viable.

Setting Fees

Since a practice management company allows providers who opt out of accepting insurance to set their own cash rates, it is important to understand the laws and ethics around setting and raising fees. The law does not prescribe the amount or the range of fees that marriage and family therapists must charge clients. The law and ethical standards require that marriage and family therapists explain their fee structure before the commencement of treatment. This includes, but is not limited to, the fee they charge for their professional services, the basis upon which that fee is computed, an explanation of any fees that clients will incur for canceled or missed appointments, and any interest that will be charged on unpaid balances.4 For further information on the laws and ethics that pertain to fees, read CAMFT article, “Ten Reminders for Therapists About Fees,” by CAMFT Managing Director of Legal Affairs, Ann Tran-Lien, JD. When considering what fee to charge and how to raise your fees, set yourself up for financial success.

Tips for Setting Your Rate

Do not undervalue the importance of the service you provide. Avoid offering a low initial rate or pricing your services based on a random number that reflects the market rate.

If your tendency is to think that you should not charge a certain hourly rate for your services, take a serious look at what underlies that belief. Do you feel as though you do not deserve to charge a certain rate because you are newly licensed or a new business owner? Do you believe that charging a rate above a certain range diminishes the authenticity of the service you provide? Do you fear advertising or charging a certain rate?

Do not set a rate based on fear or irrational reasoning. Make an honest assessment of your unique needs and circumstances. Figure out the cash rate you need to charge that will allow you to maintain the work schedule you want, afford the costs of running and maintaining your business, take scheduled time off, be prepared for unanticipated events, and pay for or contribute to other potential necessary expenses such as health care and retirement. When setting your rate, it is okay to balance your need to make a living against what will keep your services accessible and affordable while meeting the therapeutic needs and interests of your clients. Get some financial advice if you need help doing the math to determine what an ideal income would be for you based on the number of hours of client contact you want to have each week.

Tips for Raising Your Rates

Raising your rates is part of maintaining a practice. Over time, the cost of doing business increases when inflation rises and overhead expenses increase. Neither the law nor the ethical standards prescribe the amount by which fees can be increased or the amount of notice required. However, there are things you can do to ensure that you increase your fees in an ethical manner and make the transition as seamless as possible for the client. First, have a clause in your informed consent that apprises prospective clients of potential fee increases and clarifies how you will inform them of your intent to raise their fee. Second, give as much advance notice as possible so clients feel as though they have the opportunity to prepare financially for the upcoming increase. Third, provide appropriate reminders of the effective date of the increase. Fourth, make sure to put the new fee schedule in writing. Fifth, let clients know you are open to discussing alternatives, such as eligibility for a sliding scale fee, if appropriate. A client may decide to discontinue services, and that is okay—that’s their choice and a reality you must accept. However, be open to the possibility that clients will be amenable to paying more for a service that is valuable, meaningful, and relevant to their life.

Conclusion

Know that the work you do, regardless of setting, is needed and valuable. Working with a practice management company offers a number of financial and professional rewards. Make sure that you choose a company that aligns with your values and offers the kind of support that will help you fulfill your professional goals.

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Alain Montgomery, JD, is a staff attorney at CAMFT. Alain is available to answer member calls regarding legal, ethical, and licensure issues.

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Endnotes

¹ Cal. Bus. and Prof. Code, Section 4982(o).

² Cal. Bus. and Prof. Code, Section 650(b).

³ 244 Cal. App. 4th 504 Epic Medical Management LLC v.Paquette, Court of Appeals California, Second District, Division Eight.

⁴ Cal. Bus. and Prof. Code, Section 4982(n), and CAMFT Code of Ethics, Section 12—FINANCIAL ARRANGEMENTS, Subsection 12.3—DISCLOSURE OF FEES.

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This article is not intended to serve as legal advice and is offered for educational purposes only. The information provided should not be used as a substitute for independent legal advice and it is not intended to address every situation that could potentially arise. Please be aware that laws, regulations and technical standards change over time. As a result, it is important to verify and update any reference or information that is provided in this article.