This is an Exclusive BHB+ Story
The American dream was once characterized by health benefits, paid time off, and the promise of a secure retirement. However, the landscape of work has dramatically shifted, especially for Millennials—myself included—who have disrupted the status quo with the rise of the gig economy. During my local reporting days, I documented this transformation extensively: Uber revolutionized the taxi industry, Airbnb reimagined hospitality, and DoorDash redefined food delivery services.
The Rise of Gig Work in Mental Health
While master-level therapists rarely came to mind as gig workers, the emergence of digital companies has led to an increasing number of startups hiring mental health professionals as contract employees. This shift has prompted many clinicians to take on multiple contract roles, effectively joining the gig economy.
Contract work offers certain flexibilities for both workers and employers. Many therapists on 1099 contracts enjoy the freedom to create their own schedules and can earn higher per-patient rates. For operators, hiring contractors or part-time workers provides a more affordable way to scale an organization quickly. However, this model often lacks a sense of security, making it challenging for providers to foster a cohesive workplace culture. Many therapists have publicly criticized organizations that rely predominantly on contractors, citing unrealistic session expectations and productivity demands.
Ultimately, what’s right for an organization depends on its mission. Providers advocating for a collaborative care model may prefer W-2 employees, while those looking to scale rapidly might lean toward the 1099 model.
In this exclusive BHB+ Update, I will explore:
Why some providers are turning to contract models
What W-2 providers claim they can exclusively offer
Why many providers are changing their hiring practices
The Allure of the 1099 Model
For startup organizations, the 1099 model allows for rapid scaling while saving on staffing costs. This trend has become increasingly pronounced since the pandemic, as the behavioral health industry grapples with a workforce crisis.
“One of the most surprising developments in 2024 was the significant shift in staffing models across many behavioral health companies,” said Natalie Schneider, CEO of Fort Health. “Many organizations moved away from the traditional full-time W-2 employment model in favor of more flexible 1099 contractor arrangements and part-time W-2 positions for therapists.”
Several factors have driven this pivot, including financial pressures, a tight labor market, and changing preferences among behavioral health providers. Fort Health, a pediatric virtual care provider based in New York, has raised $16 million for its collaborative care model and offers W-2 employment to therapists.
Organizations like Cerebral and Headspace have also transitioned to a mix of 1099 and W-2 employees. Cerebral, a digital mental health provider, has raised $462 million and has a valuation of $4.8 billion. Despite facing criticism for its controlled substance prescribing practices, it has embraced the flexibility of the 1099 model.
While proponents of the W-2 employment model argue that it enables stronger quality control, critics challenge this notion. Dr. David Mou, chief medical officer and former CEO of Cerebral, stated, “From a philosophical perspective, I think there’s been historically this idea that somehow W-2s are correlated with higher quality than 1099 because, theoretically, you can ‘control them.’ I find that philosophy to be very outdated.”
The Case for W-2 Employment
While the contract model offers financial efficiency and scalability, many providers advocate for the W-2 model. Alex Katz, CEO of Two Chairs, has employed clinicians on a W-2 basis for eight years. He notes that therapists prefer working in an environment that offers salary, financial security, and benefits while fostering teamwork.
Katz argues that the W-2 model is crucial for recruiting and retaining talent. “We have found that W-2 enables us to build a clinical culture and a collaborative working environment that is very different from a network of effectively gig workers,” he explained. This model allows for training in measurement-based care (MBC), which is essential for delivering quality outcomes.
At Two Chairs, 100% of clinicians utilize MBC, collecting data on 99% of patients—figures that are remarkable in the behavioral health field. The organization has also expanded its services to include psychiatric care, facilitated by the collaborative environment fostered by the W-2 model.
“Therapists and psychiatrists rarely talk,” Katz noted. “They rarely collaborate. We wanted to build on the strength of our W-2 model, where we’ve got 600 W-2 therapists working side-by-side with psychiatric providers to ensure that our patients’ care journey is well integrated and more effective.”
Looking Ahead
While the case for W-2 employees in therapy is compelling, the financial realities of the digital behavioral health landscape may prompt operators to reevaluate their staffing models. As funding dries up, the balance between financial well-being and patient care will become increasingly critical.
In conclusion, the evolving landscape of mental health care reflects broader trends in the workforce. Whether through the flexibility of the 1099 model or the stability of W-2 employment, the future of mental health services will depend on how organizations navigate these complexities to meet the needs of both providers and patients.
