This is an exclusive BHB+ story
The American dream was once made up of health benefits, paid time off and the promise of a secure retirement.
Prompted by the Great Recession of 2008, Millennials (which, as my side part may reveal, I count myself among) disrupted the status quo with 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.
While master-level therapists rarely came to mind as gig workers, since the rise in digital companies, more and more startups are hiring mental health workers as contract employees. This has prompted clinicians to pick up several contract roles and join the gig economy.
Contract work comes with certain flexibilities for both workers and employers. Many therapists on 1099 contracts enjoy making their own schedule and could earn higher per patient rates. Operators often opt for hiring contractors or part-time workers because they provide a more affordable way to scale an organization quickly.
Still, contract and part-time work often lack a sense of security, which can make it difficult for providers to create a cohesive workplace culture. And many therapists have publicly criticized providers who rely predominantly on contractors, citing unrealistic session expectations and productivity demands.
What’s right for the organization really comes down to the mission. Providers pushing the collaborative care model may want to have those W-2 employees. Meanwhile, providers looking to scale fast may consider the 1099 model.
In this exclusive BHB+ Update, I will explore:
– Why some providers are turning to contract models
– What W-2 providers say they can exclusively offer
– Why many providers are changing their hiring practices
The allure of the 1099 model
For startup organizations, a 1099 model gives them the ability to scale quickly while saving money related to staffing. This has been especially true in the years since the pandemic, as the behavioral health industry has faced a workforce crisis.
“One of the most surprising developments in 2024 was the significant shift in staffing models across many behavioral health companies,” Natalie Schneider, CEO of Fort Health, told me at the end of last year. “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.”
This pivot was driven by several factors, Schneider explained, including financial pressures, a tight labor market and the changing preferences of behavioral health providers.
New York-based Fort Health is a pediatric virtual care provider. It has raised $16 million for its collaborative care model. It offers W-2 employment to therapists.
Several organizations have transitioned some or all of their clinician workforce to a contract or part-time model. For example, in 2021, digital mental health unicorn Cerebral began to hire a mix of 1099 and W-2 employees. More recently, Headspace announced that it would move all of its staff therapists to a “flex network” of contractors and part-time roles.
While organizations utilizing the W-2 employment model often contend it enables stronger quality control, some push back on that assessment.
“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,” Dr. David Mou, chief medical officer and former CEO of Cerebral, told BHB in 2021. “If you think this is about [care] quality, let’s just measure quality.”
Cerebral is a mental digital health provider. Cerebral has raised $462 million and in 2021 had a $4.8 billion valuation. The company has come under fire for its controlled substance prescribing.
And while working for a specific practice is one way to be a contractor in 2025, many third-party providers such as Headway, Alma and Grow Therapy have built a business model to facilitate more therapists getting in-network with payers.
Although therapists affiliated with these practices are classified as independent contractors, these systems were designed to preserve clinicians’ professional autonomy while facilitating streamlined access to insurance networks — a significant administrative hurdle for solo practitioners.
In this way, therapists bring their own practice and values to the client. Therefore, many of the larger conversations around the importance of W-2 employees in creating a comprehensive culture are moot.
The case for W-2
OK, so we’ve gone over the pros of the contract model: financial efficiency, scalability and administrative simplicity. Still, many providers swear by a W-2 model.
Two Chairs CEO Alex Katz told me the company has employed clinicians on a W-2 model for eight years. He noted that therapists prefer to work in an environment where they have a salary, financial security and benefits, while working as part of a team.
He cited the W-2 model as why the organization can recruit and retain talent. Additionally, longer-term staff are able to work in a collaborative model.
“We have found that W-2 enables us to build a clinical culture and to build a collaborative working environment that is very, very different versus a network of effectively gig workers,” Katz told me. “It has meant we can not only hire high-quality therapists, but we can train them in things like measurement-based care (MBC), and we can support them in the utilization of MBC and hold them accountable to using MBC and delivering on outcomes.”
At Two Chairs, 100% of the company’s clinicians utilize MBC, he explained.
“We’re collecting that data on 99% of our patients, and these are numbers that are unheard of in behavioral health, right?” Katz continued. “And out in the wild west of the industry, less than 20% of therapists … are practicing in this way, and we have found it has taken a W-2 model to get us there.”
Two Chairs is a hybrid mental health provider. It has raised a total of $103 million and operates in 19 state markets.
Two Chairs recently expanded its business models to include more acute care services. Specifically, it now includes psychiatric services. The expansion into more conditions is enabled by the team approach to care, which could only be done by having clinicians on staff, Katz said.
“Therapists and psychiatrists rarely talk,” Katz told me. “They rarely collaborate. And so we wanted to build on the strength of our W-2 model, where we’ve got 600 W-2 therapists now; they’ll be working side-by-side with psychiatric providers and collaborating with them day in and day out to make sure that our patients’ care journey is well integrated and, therefore, more effective.”
While I see the case for W-2 employees in therapy, as the funding dries up for digital behavioral health companies, I could see the operators begin to take a hard look at what each model means from a financial well-being perspective and a patient well-being perspective.
Companies featured in this article:
