What Does Sliding Scale Mean for Mental Health Practice Profits?

Believe it or not, introducing a sliding scale at your practice is a lot like doing the limbo: the key to success is balance.

Source: GIPHY
 

Mental health care providers must strike a balance between serving cash-strapped patients and earning a reasonable income. If they set treatment fees too high or too low, the practice’s profitability could take a tumble.

limbo
 

Luckily, we created a guide to help you understand and implement a sliding scale fee structure that helps—not hurts—your bottom line. Just click on a section below to get started:

What Is a Sliding Scale?
Advantages and Disadvantages
A Calculator Tool to Determine Your Minimum Fee
Case Study: Using Software for Sliding Scale Billing
Final Considerations

What Is a Sliding Scale?

A sliding scale is a pricing model mental health providers can use to treat people who can’t otherwise afford care, such as low-income or self-pay patients. Simply put, it allows patients to pay what they can afford for your services.

The less money a patient has, the less they’re required to pay, as long as they can meet the minimum fee (calculate your minimum fee here).

The Two Ends of a Sliding Fee Scale
 

sliding fee scale
It’s called a “sliding” scale because rates vary per person and are subject to change. For example: If a patient gets a higher-income job during the course of treatment, you may expect them to pay more per session. Thus, their spot on the scale would “slide” closer to your standard fee.

Sliding scales appeal to practices that want to grow their patient base and serve their community.

Advantages and Disadvantages

That said, sliding scales aren’t ideal for every practice. Here’s why some industry experts discourage it:

“It is discriminatory. A sliding fee scale charges people with larger incomes more for the exact same service that is being provided to clients with lesser incomes. [It] can come across as gouging—that you are looking to squeeze as much money as you can out of an individual.”
American Counseling Association“Once referral sources discover that you routinely provide services for a reduced fee, that is the idea that becomes attached to your name, i.e., you provide the cheap stuff.”
Private Practice from the Inside Out

“It may feel good to donate services to a particular client, but the psychologist who does so may be overcharging others in order to pay for that charity. It can hardly be called altruistic to donate someone else’s money.”
The Iron Shrink

These are all valid points, which may leave you wondering: When is it a good idea to implement a sliding scale?

Some providers work in large practices or non-profit organizations that accept patients regardless of their insurance coverage or ability to pay treatment fees. Many of these providers supplement their income through grants, subsidies and/or private donations.

Otherwise, sliding scales may appeal to solo or small group practice providers that are just starting out and need to build a client base from scratch.

Dr. Bobbi Wegner, a clinical psychologist in Massachusetts, explains the advantages of sliding scale counseling for any provider:

  • You can attract patients who can come in at off-peak times. Offering sliding scale payment is a better alternative than leaving large gaps in your appointment schedule.
  • You can see patients who are of professional interest to you. For example, patients who want a treatment you specialize in (e.g., biofeedback) who are hard to find.
  • You’re able to keep patients who’ve changed insurance plans. If a patient switches insurance plans mid-treatment and goes out-of-network, a sliding scale may enable them to continue seeing you.
  • You can feel like you’re giving back to the community. After all, you’re behaving compassionately by offering services to a person who would otherwise not have access.

That said, Wegner understands the criticisms against sliding scales. She says there is a way to remain profitable while offering reduced fees—a way that doesn’t involve overcharging others or overworking yourself.

“I balance out my caseload,” she says. “The way I think about it, there is an amount I need to make and I fill appointments accordingly. I’d suggest that clinicians do the math and figure out what they need to make and then assess if there is room to slide.”

A Calculator Tool to Determine Your Minimum Fee

If you’ve decided you definitely want to offer a sliding scale, this calculator tool can help you determine your minimum fee.

It is best suited for practices that are considering sliding scale payments as supplemental income, rather than relying on them to cover annual practice costs (e.g., rent and utilities). As Wegner advises, it is best to rely on your “full fee” patients to pay your bills and think of sliding scale earnings as extra money you don’t have to depend on.

For this reason, we designed this calculator to figure out how many sliding scale patients you need to see per month to earn a specific amount of additional income per year.

Just plug in your desired pre-tax earnings and the number of sliding scale patients you’re able to accommodate in your schedule to calculate your minimum sliding scale fee:

 

You may negotiate minimum fees at your discretion. You should always agree on a new patient’s reduced fee before beginning treatment and revisit the agreed-upon number at certain intervals (e.g., after a certain number of sessions or quarterly) to account for any changes in the patient’s finances.

Of course, not every sliding scale patient should get the minimum fee if they can afford to pay more. Once a patient has confirmed they can meet and exceed your minimum fee, you’ll need to figure out where to place them on your sliding scale. Here are some options for ways you can do that:

  • Use the following formula: .001 x Family or Individual Yearly Income (e.g., someone making $45,000/year would pay $45/session)
  • Come up with a pricing chart: Here is an example we’ve seen on practice websites around the web.
Income
Amount Reduced
$35,000 – $49,000
15%
$25,000 – $34,999
25%
Less than $24,999
35%
  • Ask clients to provide additional financial details: Income isn’t the only factor you may want to consider. Ask pertinent questions (e.g., their number of dependents, upcoming inheritances) to get a more comprehensive picture of an individual’s finances. This will help you find an appropriate fee for them on your scale.
Regardless of how you calculate fees, you should never use a sliding scale on patients who are covered by an insurance company you’re credentialed with.

Dr. Lauren Costine, Chief Clinical Officer at BLVD Treatment Centers, explains why providers are not supposed to slide clients’ co-pay:

“Co-pays are determined by the insurance company and expected to be paid by the insurer to the provider. This is particularly true if the provider is under contract or ‘in-network’ with the insurance company where contracts are signed and binding.”

Dr. Lauren Costine, BLVD Treatment Centers

Using Software for Sliding Scale Billing

If you’re doing your billing in-house, you may want to know how to enter sliding scale charges in a software system. We should note, most vendors can’t completely automate this type of billing, partly because charges may vary so much from patient to patient.

Practices considering a new or replacement mental health billing software should ensure vendors have capabilities to accommodate sliding scale charges. Top-rated vendor Kareo showed us how to use their system for this purpose.

Using Kareo’s practice fee schedule to adjust for sliding scales
 

Below is a Q&A with Kareo user Lyne Landry. She is the director of Guilford Youth & Family Services. Her organization has approximately 65 clients, four or five of whom pay on a sliding scale.

Q: How does software complement or simplify your billing process for sliding fee scale clients?

A: “It literally just takes a couple of minutes to input sliding scale charges. The encounter gets approved at the full rate, and we make a manual adjustment when the client pays. So, for instance, we charge $90 for a social worker visit and the client is given a fee of $20. We make an adjustment of $70 and charge the $20 balance to patient responsibility.”

Q: Some professionals worry that introducing a sliding scale will make their practice profits go down. How can practices set themselves up for financial success after introducing a sliding fee scale?

A: “Each professional has to decide whether it’s financially possible and then decide how many such clients they can afford. Since we are a town agency, I have to set a revenue goal each fiscal year. Our goal is high for a small clinic at around $110,000 per year. We always reach our goal around month #10 and we have four to five sliding scale clients. If you strike the right balance, the smaller amount of money collected from those folks should not be felt.”

Final Considerations

After reading this article, you may realize sliding scale isn’t the best option for your practice after all. In that case, you can still give back to your community by keeping some pro bono slots available in your schedule or offering half-priced 30-minute appointments.

However, if you’re convinced the advantages outweigh the challenges, follow these three tips to make sure a sliding fee scale model doesn’t negatively impact your practice’s profitability:

1. Ensure your practice costs are covered. The most financially risk-free way to offer a sliding scale model is to see it as a way to earn extra income. Make sure the bulk of your practice costs are covered before making room in your schedule for patients who need to pay sliding scale fees.

2. Be consistent and transparent with your fee calculations. To avoid the appearance that a client’s placement in your sliding scale is arbitrary, come up with a set methodology for determining individual fees. Make sure your patients are aware of your methodology.

3. Invest in billing software to keep track of charges. Software can help you organize all your clients’ billing information and make sure they’re charged correctly, regardless of the payment model used. Click here to compare dozens of systems and chat with a software expert for free advice.

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