3 Things You Probably Didn’t Know About Medicare & Cash-Based Physical Therapy

Jarod Carter ebook Medicare Cash Based Physical Therapy
This is # 3 of a 3 part series on Medicare. Check out Part 1: Medicare: My Story & Part 2: Medicare Enrollment – PAR or NON-PAR?


Jarod Carter ebook medicare cash based physical therapy

Dr. Jarod Carter

I still remember the day a little over five years ago when my excitement turned into apprehension and fear. I had recently started my cash-based private practice and things were going very well. Every call from a prospective new patient was so exciting until I got my first call from a prospective patient who was a Medicare beneficiary. Gulp!

I was so busy with everything else surrounding the startup of a new practice, that I had not yet educated myself on Medicare regulations and private payment. I referred out the first few Medicare patients who called my office until I got a firm handle on when I could and could not accept them as cash-pay patients.

Since I, like Aaron, am in the business of teaching our colleagues about the cash-based business model, I have had to learn the rules surrounding this topic as they apply to any type of PT practice… Not just cash-based ones.

In five years of fielding questions on all aspects of the cash-based business model, I can confidently say that none is more misunderstood and confusing than Medicare. Since the primary rules and regulations are already available for free at my website, today I want to focus in on some lesser-known aspects of this topic.

Fun Fact: HIPAA Stole the Social Security Act’s Thunder

A couple years ago, there was a big stir in the Cash-PT world (as well as other governing bodies and associations) when a blog post stated that the 2013 HIPAA Omnibus Final Rule created a “loophole” that could allow physical therapists to provide covered services to Medicare beneficiaries on a cash-pay basis.

This idea excited some practitioners and also ruffled the feathers of those who felt the law was being misused. The story was spread around on social media and the whole thing was quite amusing to watch.

“Amusing”? Well, I guess I was just amused that this potential “loophole” was being credited to new HIPAA laws when it had been a part of the Social Security Act for many years.

Let’s look at 2013 HIPAA Omnibus Rule language to see what I’m talking about (I’ve used bold font for dramatic effect). The segment we are analyzing is the second half of page 5628 of the Federal Register, Vol. 78, No. 17 (pg. 64 of this link). Specific to our Medicare topic, the HIPAA rules state:

“With respect to Medicare, it is our understanding that when a physician or supplier furnishes a service that is covered by Medicare, then it is subject to the mandatory claim submission provisions of section 1848(g)(4) of the Social Security Act (the Act), which requires that if a physician or supplier charges or attempts to charge a beneficiary any remuneration for a service that is covered by Medicare, then the physician or supplier must submit a claim to Medicare. However, there is an exception to this rule 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. In such cases, a Medicare provider is not required to submit a claim to Medicare for the covered service and may accept an out of pocket payment for the service from the beneficiary. The limits on what the provider may collect from the beneficiary continue to apply to charges for the covered service, notwithstanding the absence of a claim to Medicare. See the Medicare Benefit Policy Manual, Internet only Manual pub. 100–2, ch.15, sect. 40, available at http://www.cms.gov/manuals/Downloads/bp102c15.pdf. Thus, if a Medicare beneficiary requests a restriction on the disclosure of protected health information to Medicare for a covered service and pays out of pocket for the service (i.e., refuses to authorize the submission of a bill to Medicare for the service), the provider must restrict the disclosure of protected health information regarding the service to Medicare in accordance with § 164.522(a)(1)(vi).”

I’m not going to discuss if one can or should use these provisions in the law in order to provide covered services on a private-pay basis. I’m just giving a fun fact for your next PT networking event, and showing that this “exciting new loophole” actually comes from a practically geriatric part of the Medicare Benefit Policy Manual (More specifically, section 40 of chapter 15 of the Medicare Benefit Policy Manual – starting at pg. 22 of this link).

Potential Mistakes with the Therapy Cap

Through the years, many of the questions I receive about Medicare and private-pay services have had something to do with the Therapy Cap. The most common of these goes something along the lines of, “Once a Medicare patient has hit the Therapy Cap, can I start taking cash payment for continued services?”

So let’s set the record straight on this one…

At the time of this writing, if you are a Participating or Non-Participating provider treating a beneficiary who has met the Therapy Cap, but you believe the PT services are still medically necessary, you cannot begin taking self-payment from the beneficiary once that beneficiary hits the initial cap. You must submit the claims with a KX modifier (if the total annual billing is between $1900 and $3700) and make sure your documentation supports the medical necessity. At $3700, there is a manual medical review process. You can only begin taking self-payment if you get to a point at which you believe (or CMS decides) that the services are not medically necessary.

If you’ll be continuing services on a cash-pay basis, you’ll need to provide the patient with an Advance Beneficiary Notice (ABN). See the following document for info on the use of ABNs for these patients: http://cms.hhs.gov/Medicare/Billing/TherapyServices/Downloads/ABN-Noncoverage-FAQ.pdf

Please note, the above statement is specific to providers who are enrolled with Medicare (Participating or Non-Participating), and can therefore provide beneficiaries with normally covered services and can take them through the exceptions process.

If you are like me or Aaron and are not an enrolled provider with Medicare, you can only provide covered services to beneficiaries in cases where they invoke their legal right to refuse the submission of claims to Medicare (in which case, the Therapy Cap is not really part of the equation.)

Cash PT Medicare eBook 3D Hardbound Image jarod carter physical therapy

Careful with Your Pricing!

The pricing of your services for Medicare patients can be a very tricky thing depending on your provider relationship with Medicare, and there can be severe penalties and fines for overcharging Medicare beneficiaries.

For this reason, I have an entire chapter devoted to “Pricing” in my book on the Medicare and Cash-PT Topic.

Some practice owners who enroll in Medicare decide to become “Non-Participating Providers” because they can still provide covered services to beneficiaries, but can collect payment in full from the beneficiary at the time of service and can collect 9.25% more than Participating Providers (note: they still must submit claims to Medicare for the covered services). This 9.25% increase above the normal Medicare Physician Fee Schedule is called the “limiting charge.”

I won’t get into the mathematical details of where the 9.25% comes from, but I want to point out a little-known fact about how the limiting charge for Non-Participating Providers can be lowered. Limiting charges on services can be lowered if your practice is not in compliance with recent (2015) mandates to adopt electronic health records (EHR) and the Physician Quality Reporting System (PQRS). See this CMS webpage for details on how the limiting charges may change based on these factors.

This is extremely important information because if you are not in compliance with both EHR and PQRS but you continue to charge the usual “limiting charge” to your patients, you are overcharging them and could be subject to the penalties and fines mentioned above.

Educate Yourself on Medicare

As you can see, there are quite a lot of confusing legal regulations on taking private-payment from Medicare beneficiaries … Regardless of the type of service or the type of physical therapy practice. And the above information doesn’t even scratch the surface!

To get the entire story and remove the confusion and fear you may have surrounding this topic, click this link to watch the Medicare and Cash Pay Training I did with Aaron and also be sure you check out my ebook, Medicare and Cash-Pay Physical Therapy- A Guide to the Rules and Regulations on Taking Private Payment from Medicare Beneficiaries.

Jarod Carter ebook medicare cash pay based physical therapy


Author Bio:
Jarod Carter PT, DPT, MTC graduated from the University of St. Augustine PT school in 2005. He worked in both insurance-based and private-pay practices before opening Carter Physiotherapy in Spring 2010, a 100% cash-based clinic where patients receive an hour of one-on-one care in every treatment session. In September 2011, he released his first book My Cash-Based Practice and has since been blogging, podcasting, and speaking on all aspects of the out-of-network practice model via www.DrJarodCarter.com. In October 2015, he released his 2nd book: Medicare and Cash-Pay Physical Therapy – A Guide to the Rules and Regulations on Taking Private Payment from Medicare Beneficiaries. It can be found at www.CashPTMedicare.com


About The Author

Jarod Carter

Jarod Carter PT, DPT, MTC is the owner of Carter Physiotherapy a 100% cash-based clinic where patients receive an hour of one-on-one care in every treatment session. Jarod is the author of 2 books on the subject of cash-based physical therapy and since 2011 has been blogging, podcasting, consulting and speaking on all aspects of the out-of-network practice model.


  • Bryce

    Reply Reply December 14, 2015

    As a cash based or out of network provider, is there a way you can maximize your client’s reimbursement from their insurance for a one hour session by billing for multiple sessions in the same hour?

    In other words, if insurance is used to paying out for a 30 minute session, could you hand your client for, say, two $30 or $50 receipts? Would their reimbursement for a single one hour $60-$100 session be more or less than for two back to back sessions of $30-50?

    • Aaron LeBauer

      Reply Reply December 17, 2015

      Hey Bryce, Thanks for your comment and question.
      It reads like you are asking if you can charge the patient twice for 1 treatment. I would not advise anyone to double bill their patients. Two receipts for the same service would not increase the insurance reimbursement, but I think would only raise a red flag.

      What I would advise you to do is to decide on a fee for your 30, 45, 60 or 90 minute treatment. Then decide how many units you will bill the patient. Then charge the patient per unit. For instance if I want to earn $100/hour and see 1 patient every hour, I can bill 3 or 4 units. I choose to bill 3 units in my 1 hour slot because patients get approximately a 45 minute treatment. So in this instance I would charge the patients $33.33 per unit. Typically I bill patients 2 units of manual therapy and 1 unit of therapeutic exercise or the other way around.

      For many insurance companies this price will still be higher than their allowed amount and they will adjust what the patient owes accordingly. The beauty of this model is that we can ascend above this game and charge what we are worth. These days, most people get better before their insurance kicks in anyway.

      I hope this clarifies your questions.

  • Scott Grantham

    Reply Reply March 7, 2018

    I would like to know who to get Medicare to pay me for services provided.
    I have filled out all the paper work but I have not received payment for my services. I had to shut my clinic because Medicare never paid me for my services. I thought you might give me some info on hope to get them to pay me.

    Thank you

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