Physicians sometimes unwittingly run afoul of Medicare legal rules by not knowing the difference between non-participation, their default status short of participation, and opting out, which requires doctors to take specific action steps.

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This article summarizes participation (par), non-participation (non-par status), opting out, and the difference between these three situations for physicians in the Medicare system.

As a caveat, note that Medicare rules are complex and constantly changing, so this should only be a preliminary guide.  For specific questions relevant to your situation, contact a healthcare law attorney familiar with the latest Medicare legal updates.

Medicare Stopgap Legislation

At present, about 38% of Medicare Part B’s budget pays for physician’s services. 

Many physicians are choosing to “Opt out” of Medicare Part B altogether because of the complex reimbursement rates and governmental oversight. 

Most Medicare payments are simply adjusted for inflation annually, but not Part B physician payments.  As in past years, annual stopgap legislation to prevent cuts in physician reimbursement is on the table again this year.  Without new legislation, Part B physician reimbursement will drop by almost 30% on January 1^st.  This can shock a practice’s revenue flow for treating Medicare patients.  

In past years, Congress has extended the stopgaps at the 11^th hour, but the ultimate size of the Medicare budget is always in contention.

When treating Medicare beneficiaries, physicians have three options available at this time, each one with different requirements and revenue consequences for their practice. 

So what does it mean to be Participating, Non-Participating, and Opted Out?

Here’s a quick overview of the three options.

PARTICIPATION: Accepting Assignment for all Services.

By participating in the Medicare program, you (the physician) agree to ‘accept assignment’ for all services furnished to Medicare patients.  Put another way, participating (PAR) physicians agree to ‘accept assignment’ of 100% of Medicare’s allowed charges as total payment in full for all of their Medicare patients’ claims. 

Accepting assignment also means Medicare or its contracted carrier will pay the physician directly for the assigned claim.

Specifically, Medicare will reimburse the physician directly for 80% of the allowed amount, and 20% coinsurance must be collected from the beneficiary or their insurance plan.  

Assignment is an agreement by the doctor, provider or supplier to be paid directly by Medicare, to accept the payment amount that Medicare approves for the service, and not to bill the patient for any more than the Medicare deductible and coinsurance (if applicable).

Practical tip: Obviously, your collection of the 20% coinsurance is key to your revenue stream.  This system allows the physician greater discretion and control in managing revenue. 

Medicare beneficiaries are advised that utilizing physicians who accept assignment will reduce their out-of-pocket costs.  This means that patients are asking their physicians: ‘Do you accept assignment?" And they expect their doctors to have an answer.

Benefits: Accepting Medicare assignment can ensure a solid patient base with insurance to pay at least 80% of Medicare’s allowed amount.  The unknown here is whether the allowed amount will be sufficient to sustain your practice. 

Note: Some states require you to accept assignment to maintain your medical license. 

NON-PARTICIPATION: Accepting Assignment on a Case-by-Case Basis.

Non-Participating (Non-Par) physicians may choose to ‘accept assignment’ on a case-by-case basis.  In other words, they can accept or refuse assignment depending on the patient.

As a disincentive to non-participation, Medicare reduces the Non-PAR allowed charges by 5%, to a total of 95%; effectively, this means that Medicare will pay you 80% of the allowed amount a PAR physician receives (i.e., 80% of 95% of the PAR rate). 

If you plan to open a private practice but are already on the staff of a local hospital, have an academic medical affiliation, or have affiliation with other physician groups and practices, then before assuming that you are non-par, be sure that your contractual arrangements with hospitals and other entities do not require you to participate. Otherwise, you may be surprised as to your Medicare status and obligations!

When a Non-Par physician ‘accepts assignment’, Medicare will pay that physician  directly (i.e., 80% of 95%), and 20% coinsurance (i.e., 20% of 95%) must be collected from the beneficiary or their insurance plan. 

The choice between par and non-par can have revenue consequences.  The chart below provides a helpful example of how the practice revenue can change depending on a doctor’s Medicare status. 

When a Non-Par physician does not ‘accept assignment,’ the total patient charge is called an ‘unassigned claim.‘  In this case, you bill the patient for the full amount and file the claim with the Medicare carrier.  Medicare then reimburses the patient for it share of charges.

The good news is you may bill the patient up to 115% of the Medicare allowed charges (115% of 95%).  The 115% limit is also referred to as the “Limiting Charge.”  In other words, you may not bill for more than the Limiting Charge.  The limiting charge applies to certain services and not to some supplies and durable medical equipment.

As to the financial consequences, your practice may need to collect the full limiting charge amount for more than 35 percent of services billed, in order to exceed the revenue of PAR physicians.

Here is an example from AMA of physician payment for a Medicare $100 allowed charge, for PAR, Non-Par Assigned, and Non-Par Unassigned claims.
Payment Arrangement	Total Payment Rate	Amount from Medicare	Payment Amount from Patient
PAR (Physician/always accepts assignment)	100% Medicare –Fee Schedule = $100	$80 (80%) carrier direct to physician	$20 (20%) paid by patient or supplemental insurance
Non-Par/assigned claim	95% Medicare fee schedule = $95	$76 (80%) carrier direct to physician	$19 (20%) paid by patient or supplemental insurance
Non-Par/unassigned claim	Limiting charge of 115% of 95% Medicare fee schedule (effectively 109.25%) = $109.25	$0	$76 (80%) paid by carrier to patient + $19 (20%) paid by patient or supplemental insurance + $14.25 balance bill paid by patient

                                                           

 

OPT – OUT (or Private Contract Physician): Never Accepting Assignment.

 

Physicians who have opted out of Medicare cannot submit a claim for their services to Medicare for any of their patients for two years** (Click here to see specialties and services that may not opt out).  **The only exception is for emergency services provided to a patient that has not entered into a private contract with the physician.

Opt-Out physicians may enter into Private Contracts with Medicare patients for their services.  Regarding private contracts with patients, federal regulations establish detailed rules regarding the necessary provisions.

The private contract requirements are governed by Subsection 40 of the Medicare Benefits Policy Manual and Code of Federal Regulations 42 405.400. The AMA has created a sample Medicare Private Contract (click here).  

 The Opted-Out physician may refer or certify Medicare beneficiaries for Medicare-covered items or services for which the physician is not paid directly or indirectly, such as lab services or hospitalization.  An Opted-Out physician must have a National Provider Identifier (NPI) in order to refer, certify, or receive reimbursement for emergency services provided.  (When you refer a patient for Medicare-covered medically necessary services, you must provide an NPI for that claim.)

Consequences of Failing to Opt Out

Unfortunately, unless properly opted out, a physician who provides covered services to Medicare beneficiaries is considered a non-participating provider even if he or she has never submitted an enrollment application. 

Properly opting out has several legal requirements.  These include submitting an appropriate affidavit to the local Medicare carrier(s), as well as signing an appropriate private contract (as discussed above) with each Medicare patient. 

 To Opt Out of Medicare, follow the guidelines provided by the Medicare Part B contractor that is responsible for your State.  As noted, some states require you to accept assignment to maintain your medical license.   Be sure that your contractual arrangements with hospitals and other entities do not require you to participate. (And some providers, such as chiropractors, may not opt out).

For California, the contractor responsible is Palmetto GBA, LLC.  Click here for the instructions from Palmetto GBA, LLC.  These instructions specify that the opt-out request should be sent to Palmetto GBA, LLC at the following address: J1 MAC – Palmetto GBA, Provider Enrollment, P.O. Box 1508, Augusta, GA 30903-1508; and that the provider should submit a valid affidavit form (click here for the form).  

 Once you receive confirmation from the carrier that you are opted out, inform patients regarding your new Medicare status.  For example: “Physician has opted out of Medicare and provides services to Medicare patients under a private agreement. Medicare will not be billed for services, and patient is responsible for the entire fee charged by physician.”

Opt Out vs. ABN

Be sure not to confuse opting out of Medicare, with requirements relating to giving Medicare beneficiaries an Advanced Beneficiary Notice (ABN) for non-covered services.

Physicians providing complementary and alternative medical therapies or integrative medicine may be required to present an ABN to their patients for some of these medical services.

**

Michael H. Cohen is a thought leader in health care law, pioneering legal strategies and solutions for business law clients in traditional and emerging healthcare. wellness, and lifestyle markets.  As a corporate and regulatory attorney who has also handled litigation matters, Michael H. Cohen represents conscious business leaders in a transformational era.

Clients seek Michael H. Cohen’s legal expertise on business structure and entity formation (corporations, partnerships, LLCs); health care licensing matters; employment contracts and independent contractor agreements; dispute resolution; e-commerce; intellectual property issues; informed consent and malpractice liability issues; HIPAA and confidentiality and privacy issues; Stark, self-referral, anti-kickback, patient brokering, and fee-splitting questions; dietary supplement labeling; medical device and FDA matters; insurance reimbursement and Medicare issues; website disclaimers; concierge medicine legal advice; telemedicine; and other business law and health care regulatory compliance arenas.  Whether advising start-ups or established companies, he brings his entrepreneurial spirit and caring insight to cutting-edge legal and regulatory challenges.

Attorney Michael H. Cohen is admitted to practice in California, Massachusetts New York, and Washington, D.C.  Contact attorneys at our Beverly Hills, California law firm today.