Did you know that 39% of psychiatrists have opted out of Medicare in 2024, followed by 21.5% of family medicine physicians and 13% of internal medicine physicians?
These stats are alarming, but not unexpected, given the huge price cuts introduced by federal programs for physicians. But if not Medicare, then who? Who should you choose as your payers? Before making a decision, you must understand the different provider statuses within the federal program:
- Participating (PAR) providers are the ones who sign an annual agreement to accept the Medicare-approved amount as payment in full for all covered services.
- Non-participating (non-PAR) providers are also enrolled in Medicare, but they choose not to sign the participation agreement.
- Medicare opt-out providers are practitioners who have formally opted out of the Medicare program for a two-year period.
If you are unsure whether to stay a PAR, become a non-PAR, or completely opt out of the program, this guide is for you.
So, continue reading!
Medicare Participating (Par) Providers
Do you want to be a Medicare PAR provider? If yes, then you must sign a formal agreement to accept assignment on all covered services for all Medicare patients.
How does it work? This agreement is legally binding and dictates how Medicare will reimburse the provider and how the patient will be billed.
Characteristics of Medicare PAR Providers
The following are some of the key characteristics of Medicare in-network providers:
- Participating providers must accept the Medicare-approved amount as full payment for covered services.
- Medicare pays the provider directly for 80% of the approved amount. Contrarily, the patient is responsible for the remaining 20% coinsurance and any unmet deductible.
- Medicare PAR healthcare practitioners must submit claims directly to Medicare on behalf of the patient.
- Providers can choose to join or leave the PAR program during the Medicare Open Enrollment period at the end of each year.
How Do Medicare Benefits Benefit the PAR Providers?
Listed below are some of the benefits participating physicians receive:
- Medicare pays participating physicians 5% more than non-participating providers for the same services.
- When you become an in-network provider, you get a spot in the Medicare Participating Provider Directory. This serves as a marketing tool to attract beneficiaries.
- All payments are directly deposited into the provider’s account by Medicare. As a result, the provider’s revenue cycle is streamlined.
- Since Medicare processes the claim and pays the provider directly, there is less administrative burden for patient collections for the primary 80%.
Medicare PAR Provider Reimbursement Mechanics: A Quick Breakdown
The financial split follows a clear, predictable formula determined entirely by the Medicare-approved amount.
Here’s a quick summary table for better understanding:
| Billing Component | How Is It Handled/Calculated? |
|---|---|
| Payer Allowed Amount | 100% of the standard Medicare Physician Fee Schedule (MPFS). |
| Medicare Share (80%) | Medicare deposits this amount directly into the provider’s bank account via EFT from the Medicare Administrative Contractor (MAC). |
| Patient Share (20%) | The coinsurance balance is billed to the patient or automatically forwarded to the secondary insurance carrier. |
| Contractual Write-Off | It is the exact difference between the provider’s billed amount and the Medicare-allowed amount. The PAR provider must write off this amount entirely. |
| Balance Billing | Strictly prohibited. |
Medicare Non-Participating (Non-Par) Providers
Non-PAR providers are clinicians who are enrolled in the Medicare program but choose not to sign the annual participation agreement. This means that if you are a non-PAR physician, you have the flexibility to decide whether or not to accept an assignment.
But what does taking an assignment mean? It means that you accept Medicare’s approved amount for care services as full payment on a case-by-case basis, rather than being locked into it for every patient.
Characteristics of Medicare Non-PAR Providers
The following are some of the key characteristics of non-PAR physicians enrolled with Medicare:
- Non-PAR providers can choose to accept assignment for some claims and decline it for others for the exact same patient or different patients.
- Medicare allowed amount for a non-PAR physician is automatically reduced to 95% of the standard PAR physician fee schedule.
- Even though you have not signed the annual participating agreement, you are still legally required to submit claims to Medicare on behalf of the beneficiaries. That is, you cannot force the patient to file the primary paperwork.
- When a non-participating provider declines assignment on a claim, Medicare sends the 80% reimbursement check directly to the patient instead of depositing it into the provider’s account. The practice must then collect the full balance directly from the patient.
Understanding the Limiting Charge Rule
What happens when a non-PAR provider declines assignment on a medical claim? He becomes eligible to charge the patient more than the Medicare-allowed amount. This is called balance billing.
However, federal law protects beneficiaries by capping how much extra a non-participating clinician can charge.
| Limiting Charge = Non-PAR Allowed Amount x 115% |
Here’s how it works!
Assume that the standard Medicare fee schedule for a service is $100. This means:
- The non-PAR allowed rate drops 5% to $95. And Medicare pays only 80% of this, which is $76.
- The maximum a non-PAR provider can legally bill the patient is 115% of that $95, which is $109.25.
- Patient’s out-of-pocket charge increases to: $33.25 ($109.25 total limiting charge minus the $76.00 Medicare reimbursement check).
Impact on Financial Performance & Administrative Workflow
Listed below are some of the distinct administrative hurdles and financial advantages that operating as a non-PAR provider introduces for your practice:
- Since Medicare sends payments directly to the patient when the assignment is unaccepted, the front-desk and billing teams must chase patients for collections. This directly adds up to the practice’s outstanding accounts receivable.
- Patients are often confused when they receive checks from Medicare and subsequent bills from the clinician. As a result, you must train your staff to provide upfront financial counseling to patients. It is essential to explain to them why they will be paying more out of pocket.
- Utilizing the limiting charge can help offset rising operational costs that standard Medicare fee schedules fail to cover. This is specifically beneficial for high-volume specialties or practices with a wealthy demographic mix.
Medicare Non-PAR Provider Reimbursement Mechanics: A Quick Breakdown
The table below offers an at-a-glance view of how the non-PAR financial ledger splits differently from a standard PAR claim:
| Billing Component | How Is It Handled/Calculated? |
|---|---|
| Medicare Allowed Amount | It is reduced to 95% of the standard PAR fee schedule. |
| Maximum Patient Responsibility | Up to 115% of the non-PAR allowed amount, i.e., the limiting charge. |
| Medicare Payout (80%) | Sent directly to the patient. |
| Provider Collection Method | Many providers choose to collect 100% of the limiting charge directly from the patient, upfront. |
Medicare Opt-Out Providers
Now that you know the difference between PAR and non-PAR providers, it is time to understand the opt-out healthcare practitioner.
You become a Medicare opt-out provider when you decide to break all ties with the federal program.
How does it work? This status gives healthcare practitioners the ultimate pricing autonomy. However, it completely removes Medicare from the financial equation for both the practice and the patient.
Characteristics of Medicare Opt-Out Providers
Discussed below are some of the key characteristics of opt-out physicians:
- You cannot selectively opt out. That is, opting out applies to all Medicare beneficiaries nationwide across all service locations. This means you become ineligible to bill both Original Medicare (Part B) and Medicare Advantage (Part C) networks.
- Medicare will not pay for any services rendered by an opt-out provider. That is, all care is completely self-pay.
- The formal opt-out status lasts for a strict two-year period. Besides, it automatically renews every two years unless the provider submits a written cancellation request to their MAC at least 30 days before the cycle expires.
Below is a list of physicians and practitioners who are eligible to opt out:
- Certified nurse midwives
- Certified registered nurse anesthetists (CRNAs)
- Clinical nurse specialists
- Clinical psychologists
- Clinical social workers
- Doctors of dental surgery or dental medicine (DDS/DMD)
- Doctors of medicine or osteopathy (DO)
- Nurse practitioners (NP)
- Optometrists
- Physician assistants (PAs)
- Podiatrist
- Registered dietitians or nutrition professionals
Mandatory Private Contracts Requirement with Medicare Beneficiaries
Note that if you are a Medicare opt-out provider, you must secure a signed, written private contract with the Medicare beneficiary before rendering any non-emergency medical service.
What happens when a practice collects cash from a Medicare beneficiary without this contract on file? It is a direct violation of federal law.
Therefore, ensure that the private contract is written in clear, large print and explicitly states the following consumer protections:
- The patient agrees to pay the provider directly, out of pocket, for all items and services.
- The patient acknowledges that neither they nor the provider can submit a claim to Medicare for reimbursement.
- The patient understands that standard Medigap (supplemental) plans and secondary payers will also not reimburse for these care services.
- The patient recognizes that they have a right to seek care from a Medicare PAR or non-PAR provider if they want the federal program to cover care expenses.
Understanding the Emergency Care Exception
Medicare has a few exceptions for opt-out providers in emergency situations (where urgent care is required). That is, in these situations, an opt-out physician can legally bill Medicare and bypass the private contract rule when rendering care to a patient.
In an emergency or urgent care situation, the provider treats the patient, bills Medicare, and appends modifier GJ. Medicare will then pay the standard non-participating rate directly to the practice for that single encounter.
For context, modifier GJ indicates that you are a Medicare opt-out provider who provided emergency or urgent care service to the beneficiary.
Streamline Medical Billing with MediBillMD
To summarize, if you want predictable revenue, network participation, and access to a patient demographic with low out-of-pocket costs, choose to become a participating provider.
If you desire greater control over fees and services and cater to specific Medicare beneficiaries, become a non-participating provider.
However, if you are tired of dealing with rigorous payer rules, scrutiny, payment cuts, and want the freedom to choose your own rate, opt out of the Medicare program.
Finally, if you want to streamline your practice’s billing workflow and ensure steady cash flow, consider medical billing services from professionals at MediBillMD.
