Medicare and Cash-Pay PT Services, Part 1: The Must-Know Concepts to Avoid Legal Issues and Capitalize on Opportunities

“The sky is falling. The sky is falling!”

There are a lot of doom-and-gloom attitudes among our colleagues, but it’s not the sky that is falling; it’s the payments for our services. And they’ve been falling for a long time.

Combine tumbling payments with the enormous Baby Boomer population exiting the workforce and extracting from an already strained Medicare system, and it’s no surprise that many providers feel the future of PT private practice is bleak. 

But I’m completely optimistic about the future of my private practice! Why? Because I don’t rely on Medicare and private payers to determine what my hard work is worth, and you don’t have to, either.

The current situation has many practice owners trying to figure out how they can lessen their reliance on third-party payer reimbursement. Some find it difficult, and some find it easy, but almost none have a firm understanding of how and when they can use cash-pay services with Medicare beneficiaries. In fact, I’ve met many practice owners who thought they understood this confusing topic but actually were breaking the law.

As with many areas of Medicare, there is not a simple and single answer to the question: “Can I provide services to Medicare patients on a private-pay basis?” The short answer is, “It depends.” Now, let’s look at all the things it depends on and how those things lead to different answers for different types of practices.

3 Types of Relationships PTs Can Have With Medicare

The answer to the question above completely depends on what type of relationship you as a PT have with Medicare. There are three possible relationships

1. You are a “participating provider” with Medicare.

Participating providers have signed an agreement with Centers for Medicare and Medicaid Services (CMS) to accept assignment for all Medicare-covered services. “Accepting assignment” means that you have agreed to accept the Medicare-approved amount as full payment for services covered by Medicare. This is the most common and best-understood relationship that physical therapists have with Medicare.

2. You are a “non-participating provider” with Medicare.

When you enroll in Medicare, you can elect to be either a “participating” or a “non-participating provider.” Non-participating providers still have contractual relationships with CMS, but they have not signed an agreement to accept assignment for all Medicare-covered services. They still can choose to accept assignment for individual services. However, when they do not accept assignment, they can charge more than the Medicare-approved amount for that service. There is a limit to what they can charge called "the limiting charge." The provider can only charge up to 15% over the amount that non-participating providers are paid. Non-participating providers are paid 95% of the normal physician fee schedule amount.

3. You have no relationship with Medicare.

You have not enrolled with Medicare in any way, neither as a participating provider nor as a non-participating provider. The term “non-enrolled” also is used to describe this type of provider, while the abovementioned two are considered “enrolled” providers.

I’d like to clarify two things at this point:

1. Being a non-participating provider is not the same thing as “opting out” of Medicare.
2. Similarly, not participating with Medicare in any way (#3 above) also is not the same thing as “opting out” of Medicare. 

When you hear about healthcare practitioners opting out of Medicare, please know that this is an entirely different scenario than those described above and does not currently apply to physical therapists. At the time of this writing, physical therapists are not included in the list of practitioners who can opt out of Medicare (outlined in the Balance Budget Act of 1997 and Medicare Prescription Drug Improvement and Modernization Act of 2003. See Section 40 of Chapter 15 of the Medicare Benefit Policy Manual).

Mandatory Claims Submission

Before we continue our discussion of the different Medicare relationships and how they affect our ability to treat Medicare beneficiaries, we need to understand an important segment of The Social Security Act: 

The Social Security Act (Section 1848(g)(4)(A)) requires that claims be submitted for all Medicare patients for services rendered on or after September 1, 1990. This requirement applies to all physicians and suppliers who provide covered services to Medicare beneficiaries, and the requirement to submit Medicare claims does not mean physicians or suppliers must accept assignment.

In other words, if you provide a Medicare beneficiary with a service that is covered by Medicare, you must submit a claim to Medicare for that service. Most legal and compliance experts say that this mandate applies to all providers regardless of their relationship with Medicare.

However, some legal authorities assert that CMS and HHS (US Department of Health and Human Services) have no jurisdiction over non-enrolled healthcare providers. They say that there is no legal contract between them and that no legal precedent exists that proves this mandate also applies to non-enrolled practitioners. I am not suggesting which side is correct; I am simply including all sides of this complicated story. That way, you and your own attorney can make informed decisions if you are not an enrolled Medicare provider.

With that said, it would be quite confusing for the reader if these articles were not based on the acceptance of one side of this issue or the other. Therefore, I am writing these articles on the premise that the mandatory claims submission rule applies to all providers, even non-enrolled ones.

The Exception to Mandatory Claims Submission

The single exception to this claims submission rule comes from Section 40 of Chapter 15 of the Medicare Benefit Policy Manual

The only situation in which non-opt-out physicians or practitioners, or other suppliers, are not required to submit claims to Medicare for covered services is where a beneficiary or the beneficiary’s legal representative refuses, of his/her own free will, to authorize the submission of a bill to Medicare.

This policy may create some opportunities to see Medicare beneficiaries on a cash-pay basis, but these situations are limited based on the specific language used in the policy. This topic is outside of the scope of this article, so for the purposes of this post, I will explain the rules that apply when beneficiaries have not refused to authorize the submission of bills to Medicare.

Self-Payment Based on the Provider’s Relationship with Medicare

So now that we’ve defined the different relationships that physical therapists can have with Medicare and understand the mandatory claims submission rule for covered services, let’s address our original question (“Can I provide services to Medicare patients on a private-pay basis?”) based on each of those relationships.

1. You are a participating provider with Medicare.

If Medicare covers the service provided to the beneficiary, you cannot accept self-payment from the beneficiary (beyond the standard deductible and 20% coinsurance for the service). You must bill Medicare directly for covered services provided to beneficiaries.

2. You are a non-participating provider with Medicare.

You can accept self-payment in full from the beneficiary at the time of service, but you still must send claims to Medicare for any covered services. Medicare will then send any applicable reimbursement directly to the patient.

3. You have no relationship with Medicare.

In this situation, you cannot provide covered services to a Medicare beneficiary on a private-pay basis. Due to the mandatory claims submission rule, if you provide a covered service, you will have to send a claim for that service to Medicare. However, because you have no relationship with Medicare, you have no way of submitting claims. Therefore, barring instances in which the beneficiary (or their legal representative), of his or her own free will, requests that no claims or protected health information be sent to Medicare, you cannot provide covered services to Medicare beneficiaries if you have not enrolled with Medicare. 

In my opinion, this is totally ridiculous and unfair to both physical therapists and beneficiaries, but at the time of writing this, it is simply how it is. With that said, there are still many situations in which both non-enrolled and enrolled physical therapy practices can work with Medicare beneficiaries on a cash-pay basis.

The next step in identifying those cash-based opportunities is to define which services are covered and which are not covered as well as the scenarios in which covered services may become non-covered. We will dive into these topics tomorrow in the second part of this series on Medicare and cash-pay PT services.

About the Author

Jarod Carter PT, DPT, MTC is the owner of Carter Physiotherapy in Austin, Texas—a successful 100% cash-based private practice. He also is an author and helpful guide on the cash-based practice model. You can get the first 22 pages of his most recent book for free here: Medicare and Cash-Pay Physical Therapy Quick-Start Guide.