How to Minimize Legal Risks for Your Private Practice

When I started my private practice in 2006, a lot of what I did were practices I learned from supervisors and colleagues. That’s normal—it’s how a professional culture gets carried forward. But the more I’ve taught law and ethics, the more I found several commonplace practices to be legal liabilities that could place your business at risk. Things like fee splitting, out-of-state telehealth visits, and package rates are common practices, yet raise some legal concerns. 

It’s worth noting here that I’m not a lawyer and this is not legal advice. If you’re engaging in any of these practices, consult an attorney. If you don’t have one, your liability insurance company or professional association may provide you with no-cost legal consultation. State laws can vary widely, so pay attention to applicable laws in your area. 

Here are three common practices that may land you in some hot water—and many therapists are guilty of doing them.

Fee-Splitting in Private Practice

Splitting fees on a percentage basis is quite common in private practice. This is so common that a lot of new therapists who work under supervision in private practice expect to split fees with their employers, and seek to negotiate what their percentage will be. But as an employer, you may be better off hiring employees at an hourly rate instead.

Fee-splitting risks violating anti-kickback rules that are detailed in ethics codes and many state laws. Depending on how a fee split is structured, and how the fees are charged to clients, it also can leave the employee receiving less than minimum wage. This would be a potential violation of labor laws. Employees must receive at least the minimum wage for all the hours they work—in all pay periods. An hourly rate can help alleviate the risk of any kickback-related violations. 

Telehealth with Clients Temporarily in Other States

There’s a lot of misinformation out there about this issue. Simply put, most states don’t care about the residency of a client. The way the laws are written, they care about where the client is physically located at the time of service. 

Rules about telehealth have become more complicated due to COVID-19, as many states temporarily loosened or waived telehealth restrictions across state lines. But as those state waivers end, some therapists may find themselves practicing in another state without a license.

Historically speaking, it’s reasonable to say this practice is low-risk. Clients tend to be grateful for the continuity of care, and complaints are rare. But when things go sideways, they can go really sideways. If another state does go after you for practicing there without a license, there’s no administrative action they can take, precisely because you don’t have a license there that they could discipline. So they would have to come at you with criminal charges.

If you see clients in different states via telehealth, there are some ways you can protect yourself from the risk of discipline from your licensing board or criminal charges. 

• Make sure you document the physical location of each client at each telehealth session.
• Do your homework on the laws in your state as well as the state your client is in to make sure you have all of the necessary qualifications to provide treatment there. 
• Contact the state board—and consult an attorney if needed—if you have questions about the telehealth rules in your state or another.

Session Packages

At first glance, it seems like everybody wins when a client purchases a package or bundle of sessions at a discounted rate. As the practitioner, you get cash in hand. Your client gets a reduced rate, and they’ve demonstrated a commitment to the therapy process.

But as a number of state insurance commissioners have pointed out, this potentially makes you a health insurer in the eyes of the law. You’re absorbing a loss relative to your regular fee when your client uses their full package. And your client absorbs a loss if they don’t use or don’t really need the full number of sessions they bought. This structure operates similarly to regular health insurance, where the insurance company makes money when its members are healthy, and loses money when members make use of more services.

In addition, if you’re in-network with any actual insurers, and they learn about your package rate, they may demand that any payments they’ve made to you be reduced to match that rate. Carefully review your contract language, as you may be obligated to provide insurance clients with the lowest rate you offer cash-pay clients.

Thankfully, all three of these practices are relatively easy to avoid. On the flip side, if you’ve been engaging in any of them, they’re easy to correct. Doing so may reduce risk to your practice, and give you some added peace of mind.