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AdminaStar Medicare Part B Bulletin

Private Contracts Between Beneficiaries and Physicians/Practitioners

 

REVISION - Following are the most frequently asked questions and answers concerning private contracts. This information supercedes the Q/A previously published in the January, 1998 Medicare Part B Bulletin.

Section 1802 of the Social Security Act, as amended by Section 4507 of the BBA of 1997, permits a physician or practitioner to "opt out" of Medicare and enter into private contracts with Medicare beneficiaries if specific requirements are met.

For purposes of this provision, the term "physician" is limited to doctors of medicine and doctors of osteopathy who are legally authorized to practice medicine and surgery by the State in which such function or action is performed; no other physicians may opt out. Also, for purposes of this provision, the term "practitioner" means any of the following to the extent that they are legally authorized to practice by the State and otherwise meet Medicare requirements: physician assistant, nurse practitioner, clinical nurse specialist, certified registered nurse anesthetist, certified nurse midwife, clinical psychologist, or clinical social worker.

When a physician or practitioner opts out of Medicare, no services provided by that individual are covered by Medicare and no Medicare payment can be made to that physician or practitioner directly or on a capitated basis. Additionally, no Medicare payment may be made to a beneficiary for items or services provided directly by a physician/practitioner who has "opted out" of the program. Under the statute, the physician or practitioner cannot choose to opt out of Medicare for some Medicare beneficiaries but not others; or for some services but not others.

Medicare will make payment for covered, medically necessary services that are ordered by a physician or practitioner who has opted out of Medicare if the ordering physician or practitioner has acquired a unique provider identification number (UP IN) from Medicare and provided that the services are not furnished by another physician or practitioner who has also opted out. For example, if an "opt out" physician admits a beneficiary to a hospital, Medicare will reimburse the hospital for medically necessary care.

In an emergency or urgent care situation, a physician or practitioner who opts out may treat a Medicare beneficiary with whom he or she does not have a private contract. In such a situation, the physician or practitioner may not charge the beneficiary more than what a non-participating physician would be permitted to charge and must submit a claim to Medicare on the beneficiary's behalf. Payment will be made for Medicare covered items or services furnished in emergency or urgent situations when the beneficiary has not signed a private contract with that physician/practitioner.

Effective Date of the "Opt Out" Provision.-A physician or practitioner may enter into a private contract with a beneficiary for services furnished no earlier than January 1, 1998. The physician or practitioner must submit the affidavit to all pertinent Medicare carriers within 10 days of the date the first private contract is signed by a Medicare beneficiary.

Contents of the Private Contract With the Beneficiary--Under Section 4507 of the BBA, a valid private contract must:

o Be in writing and be signed by the Medicare beneficiary or the beneficiary's legal representative in advance of the first service furnished under the agreement;

o Clearly indicate if the physician or practitioner is excluded from participation in the Medicare program under Section 1128 of the Social Security Act;

o Indicate clearly that by signing the contract the beneficiary or the beneficiary's legal representative:

 

- Agrees not to submit a claim or to request the physician or practitioner to submit a claim for payment under Medicare, even if such items and services would otherwise be covered by Medicare;

- Acknowledges that Medigap plans do not, and that other supplemental insurance plans may choose not to, make payment for items and services fiThished by the physician or practitioner under the contract;

- Agrees to be responsible for payment of such items or services;

- Acknowledges that no reimbursement will be provided by Medicare for such items and services;

- Acknowledges that the physician or practitioner is not limited in the amount that he or she may charge the beneficiary for the items and services furnished; and

- Acknowledges that the beneficiary has the right to have such items and services provided by other physicians/practitioners who have not "opted out" of the program.

To be valid, the agreement cannot be signed by the beneficiary or the beneficiary's legal representative when the Medicare beneficiary is facing an emergency or urgent health care situation.

Contents of the Affidavit.-The physician or practitioner must file an affidavit with the Medicare carrier servicing their area no later than 10 days after the first private contract is entered into. The carrier will ensure that the affidavit is valid and will keep it on file. Under Section 4507 of the BBA, a valid affidavit must:

o Provide that the physician or practitioner will not submit any claim to Medicare for any item or service provided to any Medicare beneficiary during the 2 year period beginning on the later of the date the affidavit is signed or its effective date;

o Provide that the physician or practitioner will not receive any Medicare payment for any services provided to Medicare beneficiaries either directly or on a capitated basis;

o Identify the physician or practitioner (so that the carrier can take appropriate action to ensure no payments are made to that physician or practitioner during the opt out period);

o As with participation agreements, affidavits must be filed with all carriers who have jurisdiction over claims the physician or practitioner would otherwise file with Medicare; and

o Be in writing and be signed by the physician or practitioner.

The Relationship Between This Provision and Medicare Participation Agreements.--Participating physicians and practitioners may opt out by filing an affidavit that meets the above-described criteria and which is received by the carrier at least 30 days before the first day of the next calendar quarter showing an effective date of the first day in that quarter (i.e. 1/1, 4/1, 7/1, 10/1). Their participation agreement will terminate at that time. They may not provide services under private contracts with beneficiaries earlier than the effective date of the affidavit. Non-participating physicians and practitioners may opt out at any time.

Relationship to Non-Covered Services.-Since Medicare rules and regulations do not apply to items or services not covered by Medicare, a private contract is not needed to furnish such items or services to Medicare beneficiaries. A private contract is needed only for items or services that would be covered by Medicare and where Medicare might make payment if a claim were submitted. Examples of services not covered by Medicare include cosmetic surgery and routine physical exams.

Similarly, where a beneficiary, who is enrolled in a Medicare risk-based managed care plan, goes out of plan to acquire a service and the plan does not cover it, the enrollee is liable for the full charge for the service and the physician or practitioner does not need to sign a private contract to collect payment for the noncovered service.

Emergency and Urgent Care Situations.--Payment may be made for services furnished by an "opt out" physician/practitioner who has not signed a private contract with a Medicare beneficiary for emergency and urgent care items and services furnished to, or ordered or prescribed for such beneficiary on or after the date the physician "opted out". In this circumstance, the physician or practitioner must submit a completed Medicare claim on behalf of the beneficiary and document on an attachment that the services furnished to the Medicare beneficiary were emergency or urgent and the beneficiary does not have a private agreement with him or her. If the physician or practitioner does not submit the appropriate documentation, the claim will be denied and the beneficiary may appeal.

Payment will be denied for emergency or urgent care items and services to both an "opt out" physician/practitioner and the beneficiary if these parties have entered into a private contract.

Denial of Payment to Employers of "Opt Out" Physicians and Practitioners.--If an "opt out" physician or practitioner is employed in a hospital setting and submits bills for which payment is prohibited, the Part B carrier surveillance process usually detects and investigates the situation. However, in some instances an "opt out" physician/practitioner may have a salary arrangement with a hospital or clinic or work in group practice and may not directly submit bills for payment. If this situation is detected, the hospital/clinic/group practice will be contacted and informed that the amount of their payment will be reduced by the amount of Federal money involved in paying the "opt out" physician/practitioner.

Denial of Payment to Beneficiaries and Others.--If a beneficiary submits a claim that includes items or services furnished by an "opt out" physician or practitioner on dates on or after the effective date of opt out by such physician or practitioner, such items or services will be denied.

Payment for Medically Necessary Services Ordered or Prescribed By An Opt Out Physician or Practitioner.-If claims are submitted for any items or services ordered or prescribed by an "opt out" physician or practitioner under Section 4507 of the BBA of 1997, payment may be made for medically necessary services of the furnishing entity, provided the furnishing entity is not also a physician or practitioner that has opted out of the Medicare program.

Mandatory Claims Submission.-Social Security Act Section 1 848(g)(4), Physician Submission of Claims, regarding mandatory claims submission does not apply once a physician or practitioner signs and submits an affidavit to the Medicare carrier opting out of the Medicare Program, for the duration of his/her "opt out" period unless he/she violates the affidavit.

Violation of Agreement Not to File Claims.-If an "opt out" physician/practitioner violates his or her agreement to not file claims to Medicare (except for claims for emergency or urgent care services furnished to a beneficiary with whom the physician or practitioner has not entered into a private contract) he/she must thereafter submit claims for all services to Medicare beneficiaries (for which no Medicare payment may be made) and must abide by the limiting charge rules and regulations (which the carrier must again enforce) for the duration of the "opt out" period. In other words, the physician/practitioner's act of submitting a claim to the program, other than a claim for emergency/urgent care as discussed above, is in violation of the physician's or practitioner's agreement (per the affidavit) not to file such claims and makes the contract with the Medicare beneficiary null and void. The physician/practitioner will be notified of this status and of the new rules that apply (e.g., mandatory submission of claims, limiting charge, etc.). Furthermore, the act of claims submission by the beneficiary for an item or service provided by a physician/practitioner who has "opted out" is not a violation by the physician/practitioner and may not be used to nullify the contract with the beneficiary.

 

Questions and Answers on Private Contracts

 

1. What is a "private contract" and what does it mean to a Medicare beneficiary who signs it?

As provided in Section 4507 of the Balanced Budget Act of 1997, a "private contract" is a contract between a Medicare beneficiary and a physician or other practitioner who has "opted out" of Medicare for two years for all covered items and services he or she furnishes to Medicare beneficiaries. In a private contract, the Medicare beneficiary agrees to give up Medicare payment for services furnished by the physician or practitioner and to pay the physician or practitioner without regard to any limits that would otherwise apply to what the physician or practitioner could charge.

2. What has to be in a private contract and when must it be signed?

The private contract must be signed by both parties before services can be furnished under its terms and must state plainly and unambiguously that by signing the private contract, the beneficiary or the beneficiary's legal representative:

- Gives up all Medicare coverage of, and payment for, services furnished by the "opt out" physician or practitioner;

- Agrees not to bill Medicare or ask the physician or practitioner to bill Medicare for items or services furnished by that physician or practitioner;

- Is liable for all charges of the physician or practitioner, without any limits that would otherwise be imposed by Medicare;

- Acknowledges that Medigap will not pay towards the services and that other supplemental insurers may not pay either; and

- Acknowledges that he or she has the right to receive items or services from physicians and practitioners for whom Medicare coverage and payment would be available.

The contract must also indicate whether the physician or practitioner has been excluded from Medicare.

Also, a contract is not valid if it is entered into by a beneficiary or by the beneficiary's legal representative when the Medicare beneficiary is facing an emergency or urgent health situation.

3.Who can "opt out" of Medicare under this provision?

Certain physicians and practitioners can "opt out" of Medicare. For purposes of this provision, physicians include doctors of medicine and of osteopathy. Practitioners permitted to opt out are physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists, certified nurse midwives, clinical social workers, and clinical psychologists.

The "opt out" law does not define "physician" to include optometrists, chiropractors, podiatrists, dentists, and doctors of oral surgery; therefore, they may not opt out of Medicare and provide services under private contract. Also, physical therapists in independent practice and occupational therapists in independent practice cannot opt out because they are not within the "opt out" law's definition of either a " physician" or "practitioner .

4. Can physicians or practitioners who are suppliers of durable medical equipment (DMEPOS), independent diagnostic testing facilities, clinical laboratories, etc., opt out of Medicare for only these services?

No. if a physician or practitioner chooses to opt out of Medicare, it means that he or she opts out for all covered items and services he or she furnishes. Physicians and practitioners cannot have private contracts that apply to some covered services they furnish but not to others. For example, if a physician or practitioner provides laboratory tests or durable medical equipment incident to his or her professional services and chooses to opt out of Medicare, then he or she has opted out of Medicare for payment of lab services and DMEPOS as well as for professional services. if a physician who has opted out refers a beneficiary for medically necessary services, such as laboratory, DMEPOS or inpatient hospitalization, those services would be covered. (See #18.) In addition, because suppliers of DMEPOS, independent diagnostic testing facilities, clinical laboratories, etc., cannot opt out, the physician or practitioner owner of such suppliers cannot opt out as such a supplier.

5. How can participating physicians and practitioners opt out of Medicare?

Participating physicians and practitioners may opt out if they file an affidavit that meets the criteria and which is received by the carrier at least 30 days before the first day of the next calendar quarter showing an effective date of the first day in that quarter (i.e. 1/1, 4/1, 7/1,10/1). They may not provide services under private contracts with beneficiaries earlier than the effective date of the affidavit.

Non-participating physicians and practitioners may opt out at any time.

6. what happens if a physician or practitioner who opts out is a member of a group practice or

otherwise reassigns his or her Medicare benefits to an organization?

Where a physician or practitioner opts out and is a member of a group practice or otherwise reassigns his or her rights to Medicare payment to an organization, tile organization may no longer bill Medicare or be paid by Medicare for tile services that physician or practitioner furnishes to Medicare beneficiaries. However, if the physician or practitioner continues to grant the organization with the right to bill and be paid for the services he or she furnishes to patients, the organization may bill and be paid by the beneficiary for tile services that are provided under tile private contract.

The decision of a physician or practitioner to opt out of Medicare does not affect tile ability of the group practice or organization to bill Medicare for the services of physicians and practitioners who have not opted out of Medicare.

7. Can organizations that furnish physician or practitioner services opt out?

No. Corporations, partnerships, or other organizations that bill and are paid by Medicare for the services of physicians or practitioners who are employees, partners or have other arrangements that meet the Medicare reassignment-of-payment rules cannot opt out since they are neither physicians nor practitioners. Of course, if every physician and practitioner within a corporation, partnership or other organization opted out, then such corporation, partnership, or other organization would have in effect, opted out.

8. Can a physician or practitioner have "private contracts" with some beneficiaries but not others?

No. The physician or practitioner who chooses to opt out of Medicare may provide covered care to Medicare beneficiaries only through private agreements.

To have a "private contract" with a beneficiary, the physician or practitioner has to opt out of Medicare and file an affidavit with all Medicare carriers to which he or she would submit claims, advising that he or she has opted out of Medicare. The affidavit must be filed within 10 days of entering into the first "private contract" with a Medicare beneficiary. Once the physician or practitioner has opted out, such physician or practitioner must enter into a private contract with each Medicare beneficiary to whom he or she furnishes covered services (even where Medicare payment would be on a capitated basis or where Medicare would pay an organization for the physician's or practitioner's services to the Medicare beneficiary), with the exception of a Medicare beneficiary needing emergency or urgent care.

Physicians who provide services to Medicare beneficiaries enrolled in the new Medical Savings Account YSA) demonstration created by the BBA of 1997 are not required to enter into a private contract with those beneficiaries and to opt out of Medicare under Section 4507.

9. What has to be in the "opt out" affidavit?

To be valid, the affidavit must:

- Provide that the physician or practitioner will not submit any claim to Medicare for any item br service provided to any Medicare beneficiary during the 2 year period beginning on the date the affidavit is signed;

- Provide that the physician or practitioner will not receive any Medicare payment for any items or services provided to Medicare beneficiaries;

- Identify the physician or practitioner sufficiently that the carrier can ensure that no payment is made to the physician or practitioner during the opt out period. If the physician has already enrolled in Medicare, this would include the physician or practitioner's Medicare uniform provider identification number (UPIN), if one has been assigned. If the physician has not enrolled in Medicare, this would include the information necessary to be assigned a UPIN;

- Be filed with all carriers who have jurisdiction over claims the physician or practitioner would otherwise file with Medicare and be filed no later than 10 days after the first private contract to which the affidavit applies is entered into; and

- Be in writing and be signed by the physician or practitioner.

10. Where and when must the "opt out" affidavit be filed?

An "opt out" affidavit must be filed with each carrier that has jurisdiction over the claims that the physician or practitioner would otherwise file with Medicare and must be filed within 10 days after the first private contract to which the affidavit applies is entered into.

11. How often can a physician or practitioner "opt out" or return to Medicare?

Pursuant to the statute, once a physician or practitioner files an affidavit notifying the Medicare carrier that he or she has opted out of Medicare, he or she is out of Medicare for 2 years from the date the affidavit is signed. After those 2 years are over, a physician or practitioner could elect to return to Medicare or to "opt out" again.

12. Can a physician or practitioner "opt out" for some carrier jurisdictions but not others?

No. The opt out applies to all items or services the physician or practitioner furnishes to Medicare beneficiaries, regardless of the location where such items or services are furnished.

13. What is the effective date of the "opt out" provision?

A physician or practitioner may enter into a private contract with a beneficiary for services furnished on or after January 1, 1998.

14. Does the statute preclude physicians from treating Medicare beneficiaries if they treat private pay patients?

No. Medicare does not preclude physicians from treating Medicare beneficiaries if they treat private pay patients, whether such private pay patients are persons not eligible for Medicare under age 65 or are individuals who are entitled to Medicare benefits but have chosen not to enroll in Part B.

15. Do Medicare rules apply for services not covered by Medicare?

If a service is one of a type that Medicare categorically excludes from coverage, Medicare

rules, including opt-out rules, do not apply to the furnishing of the noncovered service. For example Medicare does not cover healing aids; therefore, there are no limits on charges for hearing aids, and beneficiaries pay completely out of their own pocket if they want hearing aids.

If a service is one that is not covered because, under Medicare rules, the service is never found to be (medically necessary to treat illness or injury, no claim need be submitted, but the physician or practitioner who has not opted out may charge the beneficiary for the noncovered service only if he or she gives the beneficiary an advance beneficiary notice of noncoverage.

If a service is one which Medicare has determined is medically necessary where certain clinical criteria are met, but is not medically necessary where these criteria are not met, a claim must be submitted since it is possible that the carrier may determine that the service is covered in the individual beneficiary's case, even where the physician or practitioner who has not opted out believes that it will not be covered and has given an advance beneficiary notice to that effect. In this case, if Medicare denies the claim on the basis that the service was not medically necessary, the physician or practitioner who has given the advance beneficiary notice may bill the beneficiary.

Where a physician or practitioner has opted out of Medicare and agreed to provide covered services only through private contracts with beneficiaries that meet the criteria specified in the law, the physician or practitioner who has opted out is prohibited from submitting claims for covered services.

16. Is a private contract needed for services not covered by Medicare?

No. Since Medicare rules do not apply for services not covered by Medicare, a private contract is not needed. A private contact is needed only for services that are covered by Medicare and where Medicare might make payment if a claim were submitted.

A physician or practitioner may furnish a service that Medicare covers under some circumstances but which the physician anticipates would not be deemed "reasonable and necessary" by Medicare in the particular case (e.g., multiple nursing home visits, some concurrent care services, two mammograms within a twelve month period, etc.). If the physician or practitioner gives the beneficiary an "Advance Beneficiary Notice" that the service may not be covered by Medicare and that the beneficiary will have to pay for the service if it is denied by Medicare, a private contract is not necessary to permit the physician or practitioner to bill the beneficiary if the claim is denied.

17. What rules apply to urgent or emergency treatment?

The law precludes a physician or practitioner from having a beneficiary enter into a private contract when the beneficiary is facing an urgent or emergency health care situation.

Where a physician or a practitioner who has opted out of Medicare treats a beneficiary with whom he does not have a private contract in an emergency or urgent situation, the physician or practitioner may not charge the beneficiary more than the Medicare limiting charge for the service and must submit the claim to Medicare on behalf of the beneficiary for the emergency or urgent care. Medicare payment may be made to the beneficiary for the Medicare covered services furnished to the beneficiary.

18. Will Medicare make payment for services that are ordered by a physician or practitioner who has opted out of Medicare?

Yes, provided the "opt out" physician or practitioner ordering the service has acquired a uniform provider identification number (UPIN) and the services are not furnished by a physician or practitioner who has also opted out.

19. Clinical psychologists and clinical social workers are currently not recognized by and enrolled by Medicare unless they meet certain criteria specified by HCFA, some of which are voluntary. Are the requirements for opting out of Medicare different for these practitioners?

No. A clinical psychologist or clinical social worker must meet the affidavit and private contracting rules to opt out of Medicare.

20. What is the relationship between an Advanced Beneficiary Notice and a private contract?

There is no relationship between these instruments. A physician or practitioner may furnish a service that Medicare covers under some circumstances but which the physician anticipates would not be deemed "reasonable and necessary" under Medicare program standards in the particular case. If the beneficiary receives an "Advance Beneficiary Notice" that the service may not be covered by Medicare and that the beneficiary will have to pay for the service if it is denied by Medicare, and payment for the service is denied as a "medical necessity denial." a private contract is not necessary to bill the beneficiary if the claim is denied.

21. Are there any situations where a physician or practitioner who has not opted out of Medicare does not have to submit a claim or a covered service provided to a Medicare beneficiary?

Yes. A physician who has not opted out of Medicare must submit a claim to Medicare for services that may be covered by Medicare unless the beneficiary, for reasons of his or her own, declines to authorize the physician or practitioner to submit a claim or to furnish confidential medical information to Medicare that is needed to submit a proper claim. Examples would be where the beneficiary does not want information about mental illness or HIV/AIDS to be disclosed to anyone. Moreover, if the beneficiary or their legal representative later decides to authorize the submission of a claim for the service and asks the physician or practitioner to submit the claim, the physician or practitioner must do so.

The Health Care Financing Administration does not seek to limit or interfere in the right of a beneficiary to obtain medical care from the physician or practitioner of his or her choice. However, once a physician or practitioner who has not opted out of Medicare has furnished a covered item or service to a beneficiary who is enrolled in Part B of Medicare, the law requires that the physician or practitioner submit a claim to Medicare for the covered services.

22. How do the private contracting rules work when Medicare is the secondary payer?

When Medicare is the secondary payer, and the physician has opted out of Medicare, the physician has agreed to treat Medicare beneficiaries only through private contract. The physician or practitioner must therefore have a private contract with the Medicare beneficiary, notwithstanding that Medicare is the secondary payer. Under this circumstance, no Medicare secondary payments will be made for items and services furnished by the physician or practitioner under the private contract.