AAOS Bulletin - October, 2006

Considering dropping out of Medicare?

You have just six weeks to change your participation status

By Marty Krawczyk

If you do not plan to change your Medicare provider participation status in 2007—even in light of the proposed 5 percent reduction in payments beginning in January—you can skip reading this article. If you are thinking about making a change in your provider participation status, you will need to do so between November 15 and December 31, 2006.


Legislative efforts are underway to prevent the proposed cuts in Medicare physician payments and to increase physician reimbursements in 2007. Although the debates will continue in the coming months, the Centers for Medicare and Medicaid Services (CMS) plans to release the 2007 Final Rule on the Medicare Physician Payment Schedule sometime next month. Physicians will receive a CD-ROM from their Medicare carriers that details the changes and contains the 2007 Medicare Participating Physician/Supplier Agreement. The CMS Web site Medicare Learning Network will also contain details of the 2007 program. If specific payment rates are not included on your CD, you will need to contact your individual carriers.

You should understand and consider your options for 2007 carefully because the contract will be binding for the entire calendar year (except in the event of specific circumstances such as relocating your practice, joining a new group or becoming a private contractor).


Option 1: Agree to be a participating (PAR) Medicare physician. This will guarantee you:

  • 100 percent of the Medicare fee schedule reimbursement (5 percent more than non-PAR physicians) with 80 percent of that reimbursement coming from the carrier and 20 percent paid by the patient or supplemental insurance
  • quicker processing of claims and the availability of toll-free access
  • direct payment from Medicare
  • publication of your name in a directory of PAR physicians available to senior groups and others

In addition, you can accept as patients only those Medicare beneficiaries you choose.

Option 2: Decide to remain or become a non-PAR physician who accepts Medicare assignment. Under this option you can expect to receive:

  • 95 percent of the Medicare approved fee schedule (5 percent less than a PAR physician), with 80 percent of that approved fee reimbursed from the carrier and the remaining
  • 20 percent paid by the patient or supplemental insurance
  • direct payments from Medicare

Option 3: Decide to remain or become a non-PAR physician who does not accept Medicare assignment. In this case, you will be required to:

  • limit your charges at 9.25 percent above the Medicare approved fee schedule for PAR physicians
  • submit claims to Medicare with no direct reimbursement from Medicare
  • bill the patient, who is responsible for the entire amount, and who will receive the reimbursement directly from Medicare based on the claim you submit (80 percent of the amount submitted will be paid to the patient by the carrier and

20 percent—plus any copayments—will be paid out-of-pocket by the patient or by supplemental insurance)

“Opting-out” of Medicare
If you decide to “opt-out” of Medicare completely, you can choose private contracting, whereby you and the Medicare patient contract for services. Before considering this option, however, carefully review your state’s laws regarding balance billing. You should also review any contracts you have with entities—including hospitals and health care plans—that may require Medicare PAR status. As a private contractor you will need to:

  • sign and file an affidavit agreeing to forego submitting claims or receiving any payment from Medicare for any beneficiary, either directly or indirectly, or on a capitated basis, for two (2) years
  • notify the Medicare carrier at least 30 days before the first day of the quarter the contract takes effect

In addition, before you can treat a patient or provide any service, the Medicare beneficiary must sign a contract, prepared by you, in which the beneficiary agrees to:

  • give up all Medicare payment for services you provide
  • not bill Medicare or ask you to bill Medicare
  • accept liability for all your charges, without any Medicare balance billing limits
  • understand that Medigap, or any supplemental insurance, will not pay toward the services
  • acknowledge that he or she has the right to receive services from a physician who does accept Medicare payments, but chooses not to

This contract cannot be signed when the patient/beneficiary is in an emergency or urgent heath situation.

If you change your mind, you can “opt-in” to Medicare within 90 days after the effective date of the first “opt-out” affidavit by notifying the carrier of the revocation. In this case, you would return to your pre-“opt-out” status.

Before making a decision about which Medicare option is most appropriate for your practice in 2007, you and your practice manager or administrator should review the total revenues received from Medicare, patient copayments, bad debts and collection costs. If Medicare payments make up a substantial portion of your practice revenue, you may need to develop alternative revenue-generating plans before deciding to opt out of the program.

Marty Krawczyk is coordinator of the practice management group. She can be reached at (847) 384-4337 or krawczyk@aaos.org

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