Clawback or Claw Your Way Out: Why Private Pay Is a Decision You Won't Regret Making

I closed my group practice because of clawbacks. That is the short version.

The longer version is that I built something, staffed it, saw clients, submitted claims, got paid, and then watched insurance companies come back and take that money. Not once. More than once. And by the time I understood the full picture of what I was dealing with, the math on keeping that practice open no longer worked. I had to downsize. I had to make hard decisions. And eventually I made the decision that private pay was not optional for me. It was survival.

I have since talked to hundreds of therapists across the country who have versions of the same story. And what I keep hearing is that most of them did not see it coming either.

So let me be direct about what clawbacks actually are and what they can actually do to a practice.

What Is a Clawback?

A clawback happens when an insurance company demands repayment of money they already paid you for sessions you already completed. Not future sessions. Past ones. Work you did, notes you wrote, clients you helped. Money you already spent paying your rent, your staff, your software, yourself.

The reasons vary. Sometimes it is a billing code dispute. Sometimes it is a documentation issue, a missing signature, an incorrect timestamp. Sometimes the insurance company made the error in the first place and still comes after you for the money. Sometimes a client's coverage changed and you had no way of knowing, and now you owe back every session you were paid for under the wrong plan.

None of that matters in the moment when the letter arrives. The letter just says you owe them money.

How Bad Can It Get?

Bad enough to close a practice.

A provider in Washington state had her firm taken apart by a single insurer over billing code disputes and documentation issues, including clawbacks for small clerical errors like a missing signature or an incorrectly written timestamp. Instead of allowing corrections, the insurer demanded all the money back. She estimates the firm lost approximately $1.5 million. She had to take out loans to pay her staff. She eventually closed. At the end, it was just her.

A community mental health center in Massachusetts received a single clawback demand for over $137,000.

A therapist in Georgia was blindsided by a demand covering six months of sessions with one client, issued a full year after the fact, because the insurer had paid out of the wrong plan. She had no way of knowing which plan was primary. She got the letter anyway.

In 2024, Optum began seeking repayment from clinical social workers across the country who had been paid at 100% of the Medicare physician fee schedule when the correct rate was 75%. That was the insurer's error. Therapists still got the recoupment letters. Solo practitioners reported being on the verge of closing because of the financial burden.

One therapist received a $189,000 repayment demand after an insurer requested two years of notes and deemed the documentation inadequate, without having reviewed a single note first.

These are not edge cases pulled from message boards. These are documented and reported.

There Is No Clock Working in Your Favor

Here is the part that does not get talked about enough.

You have billing deadlines. Usually 60 to 90 days after a session to submit your claim. Miss that window and the claim is denied, full stop.

Insurance companies do not have the same deadline to come after you.

States have different laws governing how far back an insurer can pursue recoupment from a provider, ranging anywhere from six months to a couple of years. But some states have no laws limiting clawbacks at all. And when it comes to Medicare, the lookback period for errors and recoupment can extend as far as six years, and state law would not apply, meaning your state insurance commissioner would not have the power to help you.

You are held to a strict timeline. They are not.

That asymmetry is not an accident. It is a structural feature of the system.

This Is Not a Billing Problem

I want to be careful here because I know some people will read this and think the answer is better documentation or better billing practices. And yes, clean notes matter and accurate coding matters. But the therapists I mentioned above were not sloppy. They were practicing in good faith inside a system designed without meaningful protections for providers.

One Georgia therapist described it this way: imagine it is payday and you are expecting your check to look a certain amount, and then your boss comes in and says you are not getting paid this week because they are unhappy with the job you did two years ago. And when she called the insurer to sort it out, she was sent in circles for hours of unpaid time trying to get answers from people who had no authority to give them.

This is a structural problem. And private pay is one of the only real protections against it.

When your income is not routed through a third-party payer, there is no mechanism for retroactive recoupment. The session happened. You were paid. It is done. You can build a budget around that. You can plan. You can breathe.

That is not a luxury. That is what a sustainable practice requires.

Where Do You Go From Here?

If you are still on insurance panels, I am not telling you to quit tomorrow. I know the financial reality of making that transition is real and it takes time. I have spent years helping therapists navigate exactly that process.

But I am saying this. Every therapist on an insurance panel right now is carrying financial risk they may not fully see. And the moment a clawback letter arrives is not the moment to start thinking about your exit strategy. That moment is now.

Private pay is not a dream. It is a decision. And for a lot of us, it is the only decision that makes a practice actually survivable.

References

NPR / ProPublica — Washington state practice closure, Anna DiNoto
https://www.npr.org/transcripts/nx-s1-5028551

Commonwealth Beacon — Massachusetts $137,000 clawback demand
https://commonwealthbeacon.org/health-care/clawbacks-threaten-mental-health-services/

Georgia Public Broadcasting — Georgia therapist Tracy Hooper, March 2025
https://www.gpb.org/news/2025/03/04/so-called-insurance-clawbacks-are-driving-georgia-mental-health-therapists-private

ClearHealthCosts — 2024 Optum Medicare clawback wave
https://clearhealthcosts.com/blog/2024/04/medicare-clawbacks-strike-therapists-nationwide/

Navigating the Insurance Maze — $189,000 demand, Medicare six-year lookback
https://theinsurancemaze.com/clawbacks/

DJ Burr, LMHC, LPC, Founder, Private Pay Practitioners
www.privatepaypractitioners.com