To preface this post - having had this blog up for several years now, and having helped a couple dozen people realize their dreams, if you're looking to create a money mill, I won't be giving you any secrets to the trade, any shortcuts to retirement. The truth is this business is hard enough. Can you make a living that exceeds your salary as a BCBA? Absolutely. As a director? Probably. Are you going to retire in five years and ride off into the sunset with buckets of cash? No.
Before reading this post, you should have read a couple other posts of mine first, because I will not be digging deep into codes or explanations for a lot of things that I am about to mention.
Without a strong core understanding of the practice of ABA, CPT codes, and to a lesser degree, business planning, you will likely be unable to follow parts of this post.
ABA Rates
start with rates. How much do we charge per code? BCBA codes typically charge double tech codes. Every insurance is different. Every state is different. Every medicaid is different. You should set your own fee schedule before you contract with insurance companies. They will not use your rates but it's important to show them what you consider fair. They will assign you rates based on the size of your practice, your experience and availability of other providers in your area - or they'll just assign you whatever they want and tell you to deal with it.
Can you negotiate rates? Yes, you can try. I am not here to explain that process. Should you try? Yes, what does it hurt. Try again in five years.
But back to rates. You can't even begin to calculate your Profit Loss / projected balances without knowing what your rates are. We're not supposed to discuss rates. So for the examples below, I am going to use the publicly posted Louisiana Medicaid ABA Fee Schedule (posted here).
Let's look at the two core codes - 97153 and 97155.
You will like be billing these concurrently, as that is widely accepted. Let's pretend you have 1 comprehensive client who comes for 30 hours per week. You've requested 5 hours of 97155 / week to go along with those 30 hours (again, fairly typical request). Your authorization will last 26 weeks (6 months).
Quick Math:
97153: 26 x 30 x $50 = $39,0000
97155: 26 x 5 x $90 = $11,700
Total: $39,000 + $11,700 = $50,700
This is for one client. Extrapolate across 6 clients - say 1 caseload for 1 BCBA (hopefully you).
6 Client Caseload: $50,700 x 6 = $304,200
Across 1 year instead of six months...
Annual: $304,200 x 2 = $608,400.
Wonderful. Let's just say $600k. But wait, we have not looked at any costs. If you are running 97153 then you have an approved technician (6 of them in this scenario). In Louisiana, the average cost per hour is $17. Most of these folks work 30-40 hours per week. To make this fair, we'll just say 30 hours since our clients are also 30 hours.
The quick math says about $27,000 (without tax). Don't forget about all of the taxes you now pay as the employer. In most cases, we're looking at around 15%. That puts us at $31,000. You'd also need to factor in health insurance, PTO, 401k, and any other benefits that you may choose to offer your employees (and you will need to offer those things if you plan on competing with big brother).
RBT Cost: $31,000 x 6 = $186,000
"Awesome, we're still net 422k - we're going to make so much money!" you say behind your keyboard. Man, I wish you were right but we haven't even dug into the trenches yet with cost.
ABA Business Costs
A lot of this has been touched on in the business plan article.
Let's rattle some off really quick: liability insurance, rent, utilities, subscriptions, services (cleaning, water, etc.), health insurance for employees, internet, cable, phone, workers compensation, software costs, rentals (i.e. copy machine, modems), business service fees, banking fees, payroll company fees, supplies (paper, toilet paper, snacks, toys, etc.), a biller, a receptionist, a lawyer, an accountant, a CPA, furniture, computers, chairs, tables, shelves, cubbies, gym equipment, rolling carts, picture cards, manipulatives, interior repairs, exterior repairs, plumbers, electricians, gutter installation, roof repairs, grass cutting, changing locks, repairing air conditions, maintaining air conditions, replacing air conditions, renovating, replacing carpet, etc.
Lots of stuff right there and honestly, that's probably just half. Owning a business is expensive.
But this is what it comes down to - how much revenue will you generate and then how much turns to profit following all of your costs? What other pitfalls are there?
Missed therapy: Let's dig into the example above where we $608k in revenue with just six kids. In that example, I plugged 52 weeks in, as if the kiddo wasn't going to miss a single session, as if my organization is open every single day. That's not usually the case. You can count on your clients missing 3-6 weeks of therapy per year due to vacation, sickness, travel conditions, and life in general. So let's reduce that immediately.
After taking out 5 weeks per client, we're somewhere around $483,000 in revenue. Damn.
Billing Errors and AR: Well with billing, you can count on two things: your own mistakes and insurance companies playing games with you. You're going to lost 5-10% of what you bill to denials. Even when you're right. No matter how hard you fight, they just won't see it your way and you're going to lose that money, even when it's their fault. But if it's your fault, if you've made a mistake, you better believe it's getting recouped.
After factoring in a loss of 5% (low side), we're somewhere around $450,000 in revenue.
Using a 3rd Party Biller: You probably don't know how to bill. And chances are you cannot find someone in your town who knows how to bill ABA. You will likely get a 3rd party company to handle your billing. They all charge differently, but in most cases it's around 6%.
After factoring in a loss of 6% (average), we're somewhere around $423,000 in revenue.
Do you see what's happening here? Our revenue is being chipped away like an ice sculpture. A lot of people see the rates and think business owners are raking in hundreds of thousands, possibly millions per year. I am not saying that there are not organizations doing that, but most businesses are not.
Training Staff: Payroll is your biggest cost. A good culture and staff will make or break your company. If your techs are not lasting at least 1 year, you are ultimately bleeding cash from the hiring and training processes. Depending on your own ethics, which I hope are in line with the BACB, your new staff should not be working directly with children until they show some levels of competency. This means being overstaffed at times - possibly always- to train staff and to handle staff calling out (we'll get there). Let's say your tech takes 1 month to be competent - that means that you eat that salary for 1 month. Let's say they don't like it and quit. You paid that salary for no reason and will need to train a new tech and eat it again - and in the meantime, whichever client you are hiring them for is likely not being seen and you're not bleeding. This is a vicious cycle many clinics find themselves in. I have been there. We all have been there.
Staff Calling Out / Vacations: Your average staff member is going to miss 2-4 weeks of work per year. The good news is that they don't get paid when they don't work, right? Kind of. If you're going to compete with other ABA facilities, then you will need to offer PTO and that means paid time. What is competitive in this field? Probably 10-12 PTO days per year. That's about $2000 per employee (times 6 = $12,000). Then factor in what happens if they are not there - do you have a floater tech to fill in that spot or does the client go home? If the client goes home, you lose that revenue as well. The slipperiest of slopes.
Other Considerations:
Now are there hundreds of other things to consider? Yes.
Don't forget about other billing codes like 97158, 97151 and 97156 - you will likely be doing assessments and parent training and groups. Maybe you do things after hours. Maybe you do parent training on the weekends or at nights. There are things that YOU as the BCBA can do for your business to offset the costs, because at the end of the day, you are your businesses most important asset.
I mentioned it above, but you will likely have a receptionist. That's a cost that you don't get back, since they don't generate any revenue.
Credentialing and contracting costs - if you outsource someone to do it, it will cost you thousands. Fortunately you only need to do it once. But do not overlook that cost.
Audits and clawbacks - insurances will audit you and if they find issues with your notes (even the smallest ones) they will as for recoupment. These will be as small as a few hundred dollars to hundreds of thousands of dollars.
Synopsis - TLDR
How much money a business makes depends on several factors - size, location, negotiated rates, billing practices, employee retention, frugality, and general costs.
You can expect to take a loss during your first year, and possibly your second if you do not figure out the business quickly.
But if you plan well. If you have good policies and procedures in place for your clients and staff. If you grow at a pace that doesn't cripple you. If you're lucky... You can expect your margins to be somewhere between 10 - 20%.
Size matters - there is a hump, persay, that you need to get over and it's somewhere around 6-7 clients. Once you exceed that, and get to 8-10 with 1 BCBA, your margins are MARKEDLY better. Again, writing a business plan for this will help you immensely. Just remember, there are safe thresholds for a BCBAs caseload - exceeding it will obviously help your margins but it will also lower morale and damper results (in most cases).
Are you a BCBA? - seems like not a big a deal, but it is the biggest of deals for so many reasons when starting a business. But in regards to cash flow, I am going to touch only a one: if you are not a BCBA that means that you will have to hire a BCBA and pay them. Look at the average salary cost in your area (~60k - 90k) - that money would have been yours, but now it's not. It is an ABSOLUTE cheat code when running an ABA business. You as the BCBA generate the MOST revenue. If you can bill while running the business, it is pure profit. And when you grow and add BCBAs, you will inevitably bill less and less until you may not bill any more. Your business would be able to withstand the hit of you now building because of the scale. But even if you billed for let's say 5 hours per week - pretend you had 1 client left.
Quick Math:
BCBA: $90 x 5 hours of 97155 x 46 weeks (let's say you don't work 6) = $20,700
Tech: $50 x 30 hours of 97153 x 46 weeks = $69,000
Cost: No BCBA cost + $17 x 35 hours of work x 46 weeks = $30,000 (with tax included)
Remaining profit: $41,630 before tax
Pure profit. Your BCBAs cost has been covered by the increase in 97153 hours across the board, and your profit margin is back to where it was when you were smaller…but now let’s pretend that you have 18 kids and 3 BCBAs, not including yourself. Imagine each BCBA has 6 kids.
Quick Math:
Revenue: $50 x 30 hours of 97153 x 46 weeks x 18 kids = 1.25 million
Tech Payroll: $17 x 35 hours of work x 46 weeks x 18 techs= 566k w/ tax
BCBA Payroll: $70,0000 x 3 BCBAs = 250k with tax
Profit before other costs: $434,0000
Pretend you had 1 extra client for yourself and add $41,000. Pretend you had 2...
Is this a perfect science? Absolutely not. Consider all the costs I listed above. Understand that these will depend on what city / state you are, how frugal you want to be, how large your facility is, how bad your luck is, insurance costs, rent and hundreds of other things, but more than likely you're looking at another 200k removed, leaving you with $234k before tax. Imagine for a second that you are one of the BCBA pumping out a full caseload of billable hours. One of those 70k salaries becomes yours. Add it to that 234k.
Yes, you can make a very nice living owning an ABA company. It will not be easy. It will be full of risk. You will struggle during your first 2 years. The amount of time that you will drain into it may not be worth it to you. The important thing is to love what you're doing and to do it ethically. The moment your angle becomes: how much can I make? You will fall apart. Your business will too, in time - due to the corners you will inevitably cut, the bridges you’re going to burn, the revolving door of staff and clients, and the time the disappearing in front of you. Focus on great care, small caseloads, happy parents, happy employees, and you will do well.