Department of Health and Human Services - Health Care Financing Administration

Jane M. Orient, M.D.
Executive Director
Association of American Physicians and Surgeon, Inc.
1601 North Tucson Boulevard, Suite 9
Tucson, Arizona 85716-3450

Dear Dr. Orient:

Thank you for your letter on behalf of the Association of American Physicians and Surgeons, Inc. about section 4507 of the Balanced Budget Act (BBA) of 1997. The Health Care Financing Administration (HCFA) released the attached Program Memorandum to all Medicare carriers for use in the annual "Dear Doctor" letter that transmits the 1998 physician fee schedule for Medicare services. One of the issues addressed in it is section 4507 of the BBA. Physicians should have received the "Dear Doctor" letter by the time you receive this response. Please note that we have extended to February 2, 1998, the participation enrollment/disenrollment period for this year. In addition, HCFA has developed the attached questions and answers which should be sent to all physicians and practitioners via a Medicare bulletin before January 9, 1998. These answer many of the questions we have received so far.

With respect to your specific questions:

  1. Does HHS interpret this new Section as applying to any service that are not covered by Medicare?"

    Private contracts are not needed for a physician or practitioner to be able to charge a beneficiary for a noncovered service. The provision of and collection of payment for a noncovered service does not compel a physician or practitioner to "opt out" of Medicare.

  2. Has HHS changed its policy toward private contracting by Medicare beneficiaries, as expressly adopted by the United States District Court in Stewart vs. Sullivan, 816 F. Supp. 281 (D.N.J. 1992), by virtue of this new Section (or otherwise)?"

    In Stewart vs. Sullivan, the District Court found that the issue was not ripe for judgement and dismissed the case without making a decision on the merits of the case


  3. Does HHS interpret this new Section as applying to any private contracts entered into prior to its effective date?"

    This new section of the law provides an exception to the mandatory claims submission and limiting charge provisions of the law only with respect to private contracts entered into on or after January 1, 1998.

  4. Does HHS impose any reporting requirements, prior to or after the effective date of this Section (please address both time periods), for services provided in which the patient and physician expressly waive any reimbursements under Medicare or other governmental programs?

  5. Does HHS interpret this section as applying a penalty to any physician who does not file an affidavit and yet provides a potentially covered services to a Medicare-eligible person and if so, what is the penalty?"

    Section 4507 of the BBA provides an exception to the mandatory claims submission and limiting charge rules of the law. The rules in effect before the effective date of the BBA continue to apply unless the physician or practitioner elects to take this exception.


    Physicians and practitioners are required by section 1 848(g)(4) of the Social Security Act to file a claim on behalf of a Medicare beneficiary who is enrolled in Part B for covered services the physician or practitioner furnishes to the enrolled beneficiary and, if the physician does not take assignment on the claim, the physician may charge no more than the Medicare limiting charge for the service (a practitioner must take assignment on the claim). The law provides civil money penalties for failure to file the claim or for charges in excess of the limiting charge, or in the case of a practitioner, for failure to take assignment on the claim. HCFA has said that where a beneficiary refuses to authorize the physician or practitioner to submit a claim to Medicare, HCFA will not impose the penalties that the law provides since the beneficiary has effectively disabled the physician or practitioner from complying with the law. However, if the beneficiary or his or her legal representative requests that the physician or practitioner file the claim with Medicare, the physician or practitioner must do so or risk the statutory penalties for failure to file the claim. Moreover, even where no claim is filed, the physician may charge no more than the Medicare limiting charge for covered services furnished to the beneficiary. For services before January 1, 1998, HCFA does not recognize private contracts as binding a beneficiary to an agreement to give up the claims submission and limiting charge rights for which there is no statutory exception.

    Where the physician violates the mandatory claims submission or limiting charge rules, the law imposes civil monetary penalties of $ 10,000 per violation plus three times the amount of the charge made for the service. It also permits the Secretary to exclude the physician or practitioner for continuing violations.


    Section 4507 of the BBA provides that, for services furnished on or after January 1, 1998, where a physician or practitioner signs a private contract with a beneficiary that meets the statute's requirements, the physician or practitioner must file with HCFA an affidavit in which the physician or practitioner promises to provide services to Medicare beneficiaries only through private contracts for two years. Upon filing the affidavit with the Medicare carrier, the physician is no longer required to comply with the claims submission or limiting charge rules for the duration of the 2-year period as long as he or she continues to provide services through private contracts. Where the physician or practitioner does not file the affidavit with the carrier or, after filing one, violates it and fails to provide services under private agreements as specified in the law, the claims submission and limiting charge rules (and the penalties described above for failure to comply with them) will again apply to that physician (although no Medicare payment can be made for his or her services for the duration of the 2-year period).

  6. Will HHS issue any regulations clarifying application of this new Section and, if so, when can Medicare beneficiaries and physicians expect promulgation of these regulations?"

    We intend to issue a notice of proposed rulemaking in Spring of 1998 that will propose regulations to implement this section and will request public comment. We expect the final rule to be issued in Fall of 1998, effective for January 1, 1999. However, we intend to implement this provision based on the legislation and operating instructions we have attached to this letter and others that will be issued soon.

  7. With respect to physicians who file an affidavit pursuant to this Section, may they seek reimbursement from the government for services rendered outside the scope of this section due to an emergency situation?"

The special exception governing provision of emergency/urgent care to a beneficiary with whom the physician has not signed a private contract is addressed in the attached Program Memorandum and in question 17.


Bruce Merlin Fried Director Center for Health Plans and Providers