Pretty accurate. You won't be able to get $420/hr as a gross revenue doing 2 patients per hour taking insurance in most markets, as there will be no shows, non-collections, etc. Insurance practices are reimbursed in a way that really incentivizes outsourcing to midlevels for therapy and even med mgmt with NPs. It's hard to get to an EBITA > 350k with only insurance as a solo practitioner work 40 hours a week. A single MD as a source of referral can probably fill about 2-3 FTE of NP, or 2-3 FTE of PhD. If you take a 20% profit margin off their billing plus you do 20 hours admin with 20hrs clinical for more challenging case, you can reasonably get to an EBITA > 500k. Seems more trouble than it's worth tho...I know people who are doing this and I personally am not envious of this type of arrangement.
Many cash solo practices have EBITA of >500k--which after paying a typical psychiatrist salary ~ 300k with fringe, end up with a net owners margin around 100-200k per psychiatrist, which is roughly the correct math. Many threads have been posted on this topic. IMO, most cash solo practices can have an EBITA ~ 250-350k at year 5, but I don't have data to back it up. A lot of solo cash people like variety so take side gigs.
Lets say you have two practices one takes insurance and has 1000 patients and a final owners profit of 100k, and the other is a solo practice that gets you the same numbers with 100 patients, the first practice will be much more attractive to private equity if you want to sell. Still, typical valuation in this industry is 2-3x revenue at most. So we are talking 500k net value at exit for building a practice with 5-10 employees, which takes about 5 years. You'd have to franchise to hope that this gets you to retirement. This is why this is not very ideal for most psychiatrists out there. If the differential is much larger (i.e. in surgical specialties), solo/small group would be very uncommon. This is also why even large hospitals mostly don't care about psychiatrists and have small psychiatry depts, and sometimes just 1099 psychiatry altogether. A single neurosurgeon can generate maybe 1M of profit margin all considered whereas a single psychiatrist can only generate 200k. Psychiatric services are a very tiny percent of a hospital system's overall budgetary consideration.
This is not true though for mental health as a part of total healthcare consumption, which is actually very substantial (something like 10%). Most of it is just scattered not in big systems. People have been trying to grow this (insurance-based mental health) more exponentially rather than linearly in other ways (i.e. telemedicine, etc) to capture value even before COVID--so far this seems to be a dud. This is also why at some frequency a solo psychiatrist can generate EBITA > one neurosurgeon--the money is outside of "the system". My conjecture is there's a big difference in quality in terms of customer service between the treatment models (NP vs. MD, etc), and the math just doesn't work out because of how low insurance is reimbursing. We are desperately in need of practice model innovation in this field, IMO.
This is the norm. Eventually, people exit facility jobs once their practice fills up. This HAS been the norm for at least 20 years, and I don't see how it will change. This is why most facility attendings are very young, and even in large systems it's hard to retain psychiatrists. Full-time facility jobs are usually unattractive--they can tag on a non-compete, but that just makes people want to leave faster. It seems that more recently the development has been facilities adding on cash-only components as a form of consolidation rather than the other way around. So if you successfully run a practice on your own, you end up more marketable later on if you want a facility job.
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