Cash-Based Opportunities and Regulations with Medicare Beneficiaries – Part 1

By Jarod Carter, PT, DPT, MTC

I started a cash-based physical therapy practice five years ago and was immediately in love with the lack of administrative headaches, paperwork, and rushing from one patient to the next. The patient arrives and spends an hour one-on-one with the therapist, payment is made in full at the end of each session, and the treatment note is usually finished before the patient walks out the door. If patients want to submit self-claims to their insurance, we provide a receipt with the necessary codes and they handle it themselves.

Then I received a call from a 68-year-old prospective patient. I knew that if I was not contracted with private insurances, I was not restricted from treating any of their insureds, but what about Medicare patients? Can I treat them on a completely self-pay basis without enrolling in Medicare?

This three-article series will give you a synopsis of what I have learned from extensively researching this and related questions, and how this important information applies to all practices, not just cash-based ones. In an age of declining reimbursement for our services, every practice could benefit from increasing its private-pay revenue. We will first examine the overall rules surrounding this topic and then explore the opportunities we can legally pursue with this population.

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 they lead to different answers for different types of practices.

The Three Types of Relationships You Can Have With Medicare

There are three possible relationships that a physical therapist can have with Medicare, and the answer to the question above completely depends on which one describes you and your practice.1

  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 “Nonparticipating Provider” with Medicare.
    When you enroll in Medicare, you can elect to be either a “Participating” or a “Nonparticipating Provider.” Being a Nonparticipating Provider is still a contractual relationship with CMS, but these providers have not signed an agreement to accept assignment for all Medicare-covered services. They can still 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 percent over the amount that Non-Participating Providers are paid. Non-Participating Providers are paid 95 percent of the normal physician fee schedule amount.2
  3. You have No relationship with Medicare
    You have not enrolled with Medicare in any way, neither as a Participating Provider nor as a Nonparticipating Provider. The term “non-enrolled” is also used to describe this type of provider, while both #1 and #2 above are considered “enrolled” providers.

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

  1. Being a Nonparticipating Provider is not the same thing as “opting out” of Medicare.
  2. Similarly, if your practice is like mine and does not participate with Medicare in any way (#3 above), this also is not the same thing as “opting out” of Medicare.

When you hear about health care practitioners opting out of Medicare, 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).3

Mandatory Claims Submission

Before we continue our discussion of the different relationships with Medicare 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.”4

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 Dept. of Health and Human Services) have no jurisdiction over nonenrolled healthcare providers. They say there is no legal contract between them and no legal precedent exists that proves this mandate also applies to non-enrolled practitioners. I am not making a suggestion of which side is correct. I am simply including all sides of this complicated story so you and your own attorney can make informed decisions if you are not an enrolled Medicare provider.

With that said, it would be terribly confusing for the reader if the structure and content of these articles were not based on the acceptance of one side of this issue or the other. Therefore, the remainder of these articles is written on the premise that the mandatory claims submission rule applies to all providers, even nonenrolled ones.

The Exception to Mandatory Claims Submission

The one 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.”5

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 1500-word scope of this article, so for now I will continue to explain the rules that apply when beneficiaries have not refused to authorize the submission of bills to Medicare.

Self-Payment Based on Provider Relationship with Medicare

So now that we have 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 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 percent coinsurance for the service). You must bill Medicare directly for covered services provided to beneficiaries.
  2. You are a Nonparticipating 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, since you have no relationship with Medicare, you have no way of sending in claims. Therefore, barring instances in which the beneficiary (or their legal representative), of his/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 this writing, it is simply how it is. With that said, there are still many situations in which both nonenrolled 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 next month in Part 2.


Jarod Carter, PT, DPT, MTC, is a Private Practice Section (PPS) member and is owner of Carter Physiotherapy in Austin, Texas. He is an author and consultant on the cash-based practice model and can be reached at

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