Medicare Private Contracting Requirements

In accordance with 42 C.F.R. § 424.55, when accepting assignment, physicians are required to submit claims on behalf of Medicare beneficiaries for all items and services for which payment may be made under Medicare (i.e., covered items/services).  When accepting assignment, they agree to accept, as full charges, the amount approved by the carrier as the basis for determining the Medicare Part B payment (the reasonable charge or the lesser of the fee schedule amount and the actual charge). They are further prohibited from directly charging beneficiaries (or any other source) if Medicare pays 100% of the approved charges for the services. If it pays less than 100% of the approved amount, they may only collect the difference between the Medicare approved amount and the Medicare Part B payment, any applicable deductible amount, and any applicable coinsurance amount.  Pursuant to 42 C.F.R. § 424.82 and 42 C.F.R. § 424.535, a physician’s failure to comply with these requirements can result in revocation of his right to receive assigned benefits (i.e., to receive Medicare payment), and in termination of Medicare enrollment and billing privileges.  Also, if a physician repeatedly (and knowingly) charges Medicare beneficiaries directly for more than the applicable charge limits, he may be subject to civil monetary penalties and exclusion from the Medicare program. Carriers that suspect such activities will make a report to the U.S. Office of Inspector General (OIG) for investigation.

42 C.F.R. Part 405, Subpart D, sets forth the regulatory private contracting requirements.  In essence, a physician may enter into private contracts with Medicare beneficiaries to provide otherwise covered items and services, and will not be subject to the Medicare limiting charge requirements, as long as the following regulatory criteria are met:

1. Opt-Out:  The physician must opt-out of Medicare for a two (2)-year period.  The 2-year opt-out period begins on the date that the required affidavit, discussed below, is signed, provided the affidavit is filed within ten (10) days after the physician signs his first private contract with a beneficiary. Otherwise, the opt-out period begins as of the date that a required affidavit is filed (the “effective start date” of opt-out). Any private contracts entered into prior to the effective start date are not enforceable with respect to services already furnished (to the extent that their terms violate Medicare requirements; for example, limiting charge requirements), and all billings pursuant to the services already provided are deemed subject to all standard Medicare requirements. Please note that for an opt-out period to start as of the next calendar quarter of the year, the affidavits must be filed with carriers at least thirty (30) days before the beginning of the selected calendar quarter.  The opt-out can be renewed for subsequent 2-year periods by again filing an affidavit with carriers within thirty (30) days after the current opt-out period expires.
2. Nullification of Opt-Out and Private Contracts:  If the physician does not properly opt-out from Medicare (i.e., the required affidavits are not submitted and the private contracts do not comply with the regulatory requirements), both the opt-out and the private contracts are deemed null and void (i.e., the physician may be required to refund improper payments made).  The opt-out may be deemed null and void for the entire 2-year opt-out period or become null and void at any time during the opt-out period (and for the remainder) if the physician fails to maintain compliance with the regulatory requirements. If opt-out is properly obtained and he subsequently fails to maintain compliance, he may also be prohibited from receiving Medicare payments (directly or indirectly) for the remainder of the 2-year period. If the physician is deemed by Medicare at any time to have not properly opted out, he must submit claims to Medicare for all covered items and services, including those furnished under the nullified contracts, and will have to refund excess payments to beneficiaries (except for deductibles and coinsurance amounts). Only if the physician failed to properly opt-out at the onset may he make another attempt to opt-out at any time. If he fails to maintain his opt-out (by complying with the regulations), he must wait until the 2-year period expires before trying again. 
3. Affidavit:  To comply with the regulatory requirements, the physician must submit an affidavit to each Medicare carrier with which he would otherwise file claims.  The affidavit affirms that (i) the physician will, pursuant to the opt-out, only provide services to Medicare beneficiaries through private contracts that comply with the regulatory requirements; (ii) he will not bill Medicare or permit any entity (including a group practice) to bill Medicare on his behalf; (iii) he may not receive any direct or indirect Medicare payment (including under a Medicare Advantage plan) in his capacity an employee, partner or otherwise of any entity (including a group practice); (iv) he is not entitled to Medicare payments; (v) he will be fully bound by the terms of the private contract and the affidavit; and (vi) he acknowledges that his Part B participation agreement automatically terminates on the effective date of the affidavit.
4. Termination of Out-Out: If the physician files affidavits with carriers and decides instead to terminate the opt-out, he may do so no later than ninety (90) days after the effective start date of the opt-out period (provided he has not previously opted out and provided he appropriately notifies beneficiaries and refunds excess payments already made pursuant to the opt-out).

Further, to meet the regulatory requirements, a Private Contract must:

1. Be in writing and in sufficiently large, readable print;
2. State whether the physician is excluded from Medicare;
3. State that the beneficiary (or his legal representative):
   1. accepts full responsibility for payment of charges;
   1. understands that Medicare charge limits do not apply;
   1. agrees not to submit a claim to Medicare (or ask the physician to);
   1. understands that Medicare payment will not be made even if it would have otherwise been covered;
   1. enters into the contract with the knowledge that he has the right to obtain Medicare-covered items and services from physicians who have not opted-out, and that the beneficiary is not compelled to enter into private contracts that apply to other covered services provided by third parties who have not opted-out; and
   1. understands that Medigap plans do not, and that other supplemental plans may elect not to, make payments for items and services not paid for by Medicare.
4. State the start and end dates of the opt-out period (known or expected);
5. Be signed by the beneficiary (or his legal representative) and the physician;
6. Not be entered into during a time when the beneficiary requires emergency care services or urgent care services (i.e., requires services to be furnished within twelve (12) hours in order to avoid the likely onset of an emergency medical condition);
7. Be provided to the beneficiary (or his legal representative) before services are furnished (a photocopy is permissible);
8. Be retained (original signatures of both parties required) by the physician for the duration of the opt-out period;
9. Be made available to CMS upon request; and
10. Be entered into for each opt-out period.

Note that a physician who has opted out may still order, certify the need for, or refer a beneficiary for Medicare-covered items and services, provided he is not paid, directly or indirectly, for the furnishing of such services. Special billing rules apply to urgent care situations and emergency services.