Strategic Positioning During Industry Upheaval

Why Practice Size Matters More Than Ever

Our mental health industry is experiencing significant consolidation, and if you’re a practice owner or clinician, you’re likely feeling it. In recent months, I’ve watched a well-established practice close its doors, received calls from experienced clinicians at respected organizations exploring new opportunities, and heard from colleagues across the region about fluctuations in referral volume and staffing challenges.

A prominent multi-location practice recently closed unexpectedly, sending shockwaves through our community. The common question, “What in the world happened, and could it happen to me?” Testing psychologists at established groups are struggling for referrals, and clinicians from practices that have been fixtures in our community for decades are quietly exploring their options.

What’s becoming clear through these conversations is that market disruption doesn’t affect us all equally. There’s a barbell pattern emerging: the smallest practices (solo and micro-practices) and some of the largest, most established organizations are facing existential pressure, while certain mid-sized practices are finding themselves in an unexpected sweet spot. But being in that middle ground doesn’t guarantee survival as much as it creates opportunity for those who understand their advantages and act strategically.

The Solo Practitioner Dilemma: When Low Barriers Become Liabilities

The telehealth boom during and immediately following COVID created what seemed like a golden opportunity for solo practitioners. Suddenly, you could hang a virtual shingle with minimal overhead. No office lease, no receptionist, no commute. The barriers to entry dropped dramatically, and many talented clinicians left secure W-2 employment to launch independent practices with genuine optimism about sustainable success.

Unfortunately, low barriers to entry can cut both ways. What makes it easy for one practitioner to start a virtual practice makes it easy for thousands of others. And it does so similarly for well-funded corporate platforms with venture capital backing, sophisticated marketing, and brand recognition. Solo practitioners who thought they were entering a stable profession found themselves competing on price and convenience against companies willing to operate at losses to capture market share.

Then the market shifted in ways that few predictable in 2020-2022. Clients have grown weary of Zoom fatigue and increasingly are seeking in-person therapy. What felt intimate and connected through a screen during lockdown has increasingly feel distant, flat, and transactional as we emerged from our isolation. Many practitioners who built entirely virtual practices are now competing for a shrinking pool of clients who genuinely prefer this modality.

Even with interstate compact developments (PSYPACT for psychologists, ASWB for social workers) theoretically expanding the market for virtual providers, that broader geographic reach hasn’t translated to a sustainable competitive advantage for most. The same platforms dominating local markets also operate nationally, with marketing budgets individual practitioners can’t match.

The more profound structural vulnerability, though, is the complete lack of an operational buffer. Solo practitioners absorb every fluctuation directly. One slow month can be a financial crisis, an illness means zero income, and a personal situation requiring time off has no coverage mechanism. There are no economies of scale for liability insurance, EMR systems, continuing education, or professional development. Every administrative task competes with billable clinical time.

The “Too Big to Pivot” Problem: When Infrastructure Becomes an Anchor

If solo practitioners are vulnerable because they’re too small to weather storms, some large, established practices face the opposite problem: they’ve become too big to adapt quickly when market conditions shift.

Strategic decisions such as expanding to multiple locations to serve different geographic markets, investing in comprehensive infrastructure to deliver high-quality care, building administrative teams to support growing clinical staff, and committing to long-term leases in premium locations are made based on the information available at the time. Just a few years ago, we appeared to be on a market growth trajectory with no signs of slowing. Fueled by a youth mental health crisis, many of us scrambled to grow as quickly as possible to help meet the demand.

But circumstances have changed since that pinnacle. When a practice as established and well-regarded as Chesapeake Center for ADHD, Learning, and Behavioral Health faces challenges that require closure, it signals broader structural pressures affecting our industry. This practice had a recognized name with multiple locations, strong referral networks, and presumed operational stability. Their experience is a reminder that scale itself creates both advantages and vulnerabilities.

Large practices incur high fixed costs that act as anchors during market contraction. Multiple office locations mean multiple leases, often long-term commitments signed when market conditions looked different. An extensive administrative infrastructure, such as billing departments, HR staff, and IT systems, all require consistent revenue to justify. Legacy commitments to specific service models or rate structures may not adapt easily to current market realities.

The organizational dynamics also often shift. As the C-suite or mid-level management grows, decision-making slows, requiring more buy-in and coordination. Pivoting a service line or adjusting strategy involves restructuring entire divisions rather than reassigning a few people. Downsizing is painful and complex. We can’t easily break leases, eliminate half our administrative staff, or close locations without significant financial and operational consequences.

When demand softens or shifts, the largest practices face difficult choices: maintain infrastructure and hope volume returns, or make dramatic cuts that may undermine their ability to deliver the comprehensive services that built their reputation in the first place.

The Mid-Sized Sweet Spot: Scale with Agility (If You’re Strategic)

Mid-sized practices, those large enough to have genuine operational advantages but small enough to remain nimble, occupy potentially the strongest position in this disrupted market. But “potentially” is the keyword. Being in this size range creates opportunity; it doesn’t guarantee our success.

The structural advantages are real. Unlike solo practitioners, mid-sized practices have economies of scale: shared administrative and other overhead costs, the ability to cross-train or shift resources between service lines, diversified clinical offerings resulting in multiple revenue streams that provide a buffer when one area softens, and infrastructure investments (testing materials, EMR systems, professional development) that benefit the entire practice rather than one clinician bearing the full cost.

Unlike large practices, mid-sized groups can make decisions quickly. Do you want to hire an excellent clinician who just became available? You can move on it within days, not weeks, of committee review. Do you need to adjust your fee schedule or pivot toward a high-demand service? You can implement it without restructuring an entire division. A partner conversation and some focused execution can replace more bureaucratic processes.

Physical space flexibility matters more than many realize. Practices that own their building or have favorable, manageable lease terms have a genuine competitive advantage. Our occupancy costs are largely fixed and predictable, while our competitors face commercial lease rate increases. Building ownership provides unique options: expand within existing space, consolidate if needed, and even generate additional revenue through selective leasing. Most importantly, we’re not locked into overhead that constrains our strategic choices.

But after considerable reflection on this over the last few weeks, here’s what I believe ultimately separates mid-sized practices that will thrive from those that will struggle: strategic discipline during disruption.

The temptations are real. Talented clinicians from prestigious practices are suddenly available. It’s tempting to hire just because the talent is there. When competitors are struggling, it’s tempting to expand aggressively to capture market share. If my wait list is growing, it’s tempting to add capacity beyond what I truly need.

Successful navigation requires asking hard questions: Do we have enough demand for this hire, now AND in the long term? Am I adding capacity beyond what we need? Will this expansion dilute my existing clinicians’ caseloads and risk harming the productive clinicians I already have? Am I protecting our core revenue streams, or am I chasing shiny opportunities that don’t fit our model?

I believe the practices that will emerge the strongest from this period will be those that:

• Maintain financial reserves and operational discipline rather than deploying all available resources during uncertainty.
• Stay opportunistic about talent acquisition, but only when there’s a genuine strategic fit. Meaning either that the clinician brings a substantial existing caseload or that they fill a specific gap in services with clear, long-standing demand.
• Protect existing team members rather than diluting their referrals to accommodate new additions.
• Understand their constraints clearly, such as our physical space limitations, consumer demand patterns, and staff capacity, and respect those constraints rather than forcing growth.
• Remain vigilant about market intelligence through professional networks, industry connections, and direct observation of what’s happening with competitors and referral sources.

What To Do Right Now: Strategic Moves for Each Segment

If you’re a solo practitioner or micro-practice:

This is the time for an honest assessment of sustainability and risk tolerance. Ask yourself: Can I realistically build sufficient volume to weather income fluctuations? Do I have financial reserves to carry me through slow periods? Am I competing effectively against platforms and larger practices for my target clientele?

If the answer to these questions creates genuine concern, consider your options proactively rather than waiting for a crisis:

• Explore employment opportunities with established practices or institutional employers before you’re forced to. Right now, quality group practices are selectively hiring, and coming from a position of choice rather than desperation gives you negotiating power.
• Develop a micro-specialized niche in specific patient concerns that larger practices don’t focus on, such as school refusal, OCD, addiction-informed couples therapy, complex grief, or other clinical presentations where deep expertise commands premium fees and creates defensible positioning. The narrower and more specialized, the better.
• Build strategic partnerships with other solo practitioners to share administrative costs, cross-refer, and create informal coverage arrangements. You maintain independence while gaining some operational advantages. Professional networking groups like the Maryland Mental Health and Allied Professional meet-up circle provide no-fee opportunities to build these connections and stay informed about market dynamics.
• Be realistic about the shifts in demand between in-person and virtual. If you’re virtual-only by choice rather than necessity, recognize that you’re competing in an increasingly crowded market. If you have the option to diversify by adding some in-person services, seriously consider it.

The worst strategy is pretending current conditions are temporary while hoping things improve. They may not.

If you’re running a large, established practice:

Your challenge is fundamentally different: you likely have strong brand recognition, established referral sources, and an operational infrastructure that works well when volume is sufficient. The question is whether your fixed costs and organizational complexity are sustainable in a contracting market.

Strategic options to consider:

• Evaluate your physical footprint honestly. Are all locations genuinely profitable, or are some being subsidized by others? Satellite offices that made sense during expansion may now be anchors. Early, strategic downsizing is less painful than emergency contraction.
• Review your service mix for margin and demand. Not all services are equally profitable or sustainable. Double down on what’s working, consider sunsetting what isn’t.
• Accelerate decision-making processes wherever possible. In volatile markets, the ability to respond quickly is a competitive advantage. Look for bureaucracy you can eliminate without sacrificing quality.
• Consider strategic partnerships or affiliations rather than trying to weather this alone. Sometimes consolidation with a compatible practice creates a stronger combined entity than two separate struggling organizations.
• Communicate transparently with your clinical staff about market realities. Clinicians who understand the strategic challenges facing the practice are more likely to be collaborative about solutions than those who only learn about problems when positions are eliminated.
• Consider your long-term ownership transition early. Complex practice transitions benefit from extended timelines and thoughtful planning. Having multiple potential pathways forward, rather than relying on a single succession scenario, provides necessary flexibility as circumstances evolve. The emotional and financial stakes of these transitions are high, and allowing time for careful consideration serves everyone involved.

The trap is assuming that because you’ve been established for decades, you’re immune to market forces. None of us is, no matter how big or successful our practice may be. Recognizing that early creates options.

If you’re in the mid-sized sweet spot:

Your opportunity is real, but so is the risk of squandering it through undisciplined growth or complacency.

Do:

• Build financial reserves now while you can. This market won’t stay disrupted forever. Practices will stabilize, new competitors will emerge, and conditions will shift once again. Cash reserves buy you options.
• Hire strategically and selectively. When excellent clinicians become available, evaluate them against your actual capacity constraints and demand patterns, not just their credentials. Protect your existing team’s referral volume.
• Strengthen referral source relationships. When competitor practices are closing or contracting, their referral sources need reliable alternatives. Be visible, responsive, and consistent.
• Document and systematize what’s working. Your operational advantages only scale if they’re reproducible rather than dependent on your or a key employee’s personal effort and institutional memory.
• Stay connected to market intelligence through professional networks, industry groups, reading industry newsletters, following group practice coaches, innovators, thought leaders, and practice buyers on LinkedIn, and maintaining direct relationships with colleagues. Early information creates an early advantage.

Don’t:

• Don’t expand just because you can. Empty offices and available talent don’t create demand.
• Don’t assume your current position is permanent. Markets shift. What’s advantageous today may not be tomorrow.
• Don’t neglect the culture and relationships that make your practice work. In the scramble to capture opportunity, it’s easy to neglect team cohesion and the current culture that makes your team so effective.

The Landscape Is Reshaping – Position Accordingly

Market disruption is not a temporary blip we can wait out. The mental health industry is undergoing fundamental restructuring driven by post-COVID demand shifts, platform competition, new technology, broader economic uncertainty, and changing client expectations. In markets like DC, federal workforce reductions and economic volatility are creating additional headwinds that affect household budgets and discretionary healthcare spending. Some practices will close. Others will merge or be acquired. Many will continue operating but in diminished form.

The practices that emerge stronger will be those whose leaders understand their structural position clearly and act accordingly. Solo practitioners who recognize when employment offers better sustainability than independence. Large practice owners who make difficult decisions about footprint and succession before crisis forces their hand. Mid-sized practices that exercise strategic discipline rather than opportunistic overexpansion.

There is no single right answer about optimal practice size or structure. But there is clarity to be gained from honest assessment: What are your genuine competitive advantages? What are your structural vulnerabilities? Additionally, what market forces are working for you versus against you? Finally, what decisions do you need to make now, while you still have options, rather than later under duress?

The clinicians and practice owners I speak with who feel most confident about their positioning aren’t necessarily those in the “safest” segment. They’re those who see the market clearly, understand their own situation honestly, and make intentional strategic choices rather than hope things stabilize on their own.

This disruption is reshaping our professional landscape. Are you positioned to benefit from that reshaping or become a casualty of it?

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Dr. Elizabeth Carr is the founder of Kentlands Psychotherapy. In her current leadership role, she enjoys writing about the mental health sector, the current state of affairs, and the industry’s future direction. Visit our podcast appearance page to hear more about her thoughts on these issues and follow her on LinkedIn to join the conversation.