So I like to keep things simple. Like Einstein said, “Everything should be made as simple as possible, but never simpler.”  or the KISS Principle:  Keep It Simple Stupid.  Now I am NOT a lawyer, so this is my interpretation of Medicare law from what I read and who I have consulted with.  If you want true legal advice on Medicare law, I recommend consulting a healthcare lawyer who specializes in Medicare law.

But lets get started…

1. What kind of relationship do you have with Medicare?  Only 3 options here.

  • You have No relationship with Medicare
  • You are a “Participating Provider” with Medicare.
  • You are a “Non-Participating Provider” with Medicare.

I recommend to have no relationship with Medicare.  It is going bankrupt and its a broken system.  Too many limitations and guidelines.  They will continue to decline and cut reimbursement.  Some people may target this population and may choose to have a relationship and see Medicare patients, which is fine for them if they choose this.

If you have a relationship with Medicare, follow the rules below and use and ABN.

If you have no relationship with Medicare, do not use and ABN, create your own form and follow the guidelines below.

When it comes down to it, you need to do what is best for your business and your patients.  So you may want to have a relationship with Medicare.  I recommend to stay away from Medicare because of where it is going in the future and its limitations.

2. Can Physical Therapist Opt Out of Medicare?

Physical therapists, currently, cannot choose to opt out of Medicare.  Unfortunately we as physical therapists are are not included in the list of practitioners who can opt out of Medicare (outlined in the Balance Budget Act of 1997 and Medicare Prescription Drug Improvement and Modernization Act of 2003.  Opting out is different than what your relationship is with Medicare.  So you CANNOT “opt out” and collect cash payment from a Medicare patient that is considered medically necesary or a Medicare covered service.

3.  Can you see a Medicare Patient for cash for a covered service?

In a cash based physical therapy practice, you CANNOT see a Medicare beneficiary for a service that is covered under Medicare guidelines and is deemed medically necessary.

4.  Is an Physical Therapy evaluation considered medically necessary?

If you are talking to a Medicare beneficiary on the phone or with a consultation (not skilled therapy) you must clearly define the differences with an evaluation (skilled PT which is covered by Medicare) vs consultation (not skilled) and is their condition covered under Medicare guidelines, requires skilled therapy, and is considered medically necessary, then you must refer them to someone who accepts Medicare.  I try to do this on the phone and keep it simple so you are not wasting an evaluation slot and time.   Legally, if you provide a Medicare beneficiary with a service that is covered by Medicare, you must submit a claim to Medicare for that service.

5.  When can you see a Medicare patient for cash?

If you consult with a Medicare beneficiary, and their condition is NOT covered under Medicare guidelines and not medically necessary then: fully document this, use an ABN or your own form (depending on your realtionship), design an accurate plan of care, and start treating!

Some example are of Medicare noncovered services are : tennis, running, golfing, unskilled therapy such as personal training, bowling and LMT services, fitness and flexibility, and back school and packaged group programs.

6.  What does the APTA say about collecting cash payments from Medicare beneficiaries?

This is from the APTA Integrity in Practice Website HERE

Some physical therapists would prefer to collect out-of-pocket payments from Medicare beneficiaries rather than submit bills for reimbursement. However, Medicare requires providers, including physical therapists, to submit claims for covered services. The only exception is for physicians who have “opted” out of the Medicare program for 2 years in accordance with section 1802(b) of the Social Security Act. Physical therapists are not included in the group of providers who may “opt out” of the Medicare program for 2 years.

Therefore, a physical therapist may not collect out-of-pocket payment from a Medicare beneficiary for a Medicare-covered service. It is possible for a physical therapist to receive cash payment from a Medicare beneficiary for a service that is not covered by Medicare. For example, Medicare does not pay for wellness and prevention services, and the physical therapist could collect out-of-pocket payment from the Medicare beneficiary for those services. If the services would not be covered by Medicare because they are not considered “medically reasonable and necessary,” the provider must have the patient sign an Advanced Beneficiary Notice (ABN) prior to providing the therapy services to the patient in order to collect out of pocket payment

Here is an example of my ABN for you to edit and use if needed:

Example ABN


Download information and a CMS form HERE

7.  What does the Law state, the Mandatory Claims Submission rule and The Exemption…

Therapists are NOT required to accept Medicare patients, but it they do accept/treat Medicare patients they MUST enroll in the Medicare program, and are required to submit a claim on behalf of the beneficiary. This is the law.

in my opinion – if you are a 100% cash-only practice you should:

1) Understand Medicare policy in order to determine what is medical necessity, and Medicare coverage requirements.  Write your business policy based on this medical necessity

2) Understand HIPAA, and comply with HIPAA if you are a Covered Entity (CE);

3) Or get legal advice if plan to treat Medicare patients and if you are not enrolled in the Medicare program.  (this is just my interpretation of the law and I am not a lawyer.  So consult a lawyer who specializes in Medicare law = See Gwen Simmons link Also look at section 40 and  you will see the federal claims submission rule below.

Here is a link to the Medicare Manual.

But what if you have no relationship with Medicare?  What if you have no relationship with Medicare you are unable to submit a claim?

but there may be an exemption…

Here are 2 great blog post that can help answer this for us

Click Here

click here

There are 2 areas that are often misinterpreted:

1) don’t overlook the exception rule to the required claim submission  “if by their own free will” a Medicare covered person does not want Medicare billed and covering care, then it’s not required .  Medicare provider patient specific right to refuse to authorize submission of claim IF THE PROVIDER IS ENROLLED in Medicare.  If you are not enrolled in Medicare (par or non-par) some say it is not applicable, and can’t be use to bypass the Mandatory Claims Submission Rule.

2) The HIPAA Patient Right that is specific to restriction of PHI – for a provider to not disclose PHI to the health plan. That right is preempted by the Mandatory Claims Submission requirement.  There is an exception to the mandatory claim submission provision, but it isn’t a result of HIPAA’s (HITECH’s) Patient Rights as many individuals believe. It is a Medicare provider specific Patient Right which allows the beneficiary/legal representative to (of his/her free will) refuse to authorize the submission of a claim to Medicare if the provider is enrolled in the Program. The HIPAA Patient Right specific to restriction of Protected Health Information (PHI) is the option to request that a Covered Entity/healthcare provider not disclose (PHI) to a health plan. That right is preempted by the Mandatory Claims Submission requirement as noted in § 164.502(a)(2)(ii), § 164.510(a) or § 164.512, which stipulates: ‘If a provider is required by State or other law (Mandatory Claims Submission) to submit a claim to a health plan for a covered service provided to the individual, and there is no exception or procedure for individuals wishing to pay out of pocket for the service, then the disclosure is required by law and is an exception to an individual’s right to request a restriction to the health plan pursuant to 154.522(a)(1)(vi)(A) of the Rule

Simple enough! (Ha Ha Yea right!)

Again, I like to keep things simple to understand and there is no need to make this a complex topic.  So the main point is that currently, a Medicare beneficiary cannot pay cash for Medicare covered services, that are medically necessary, and are covered under Medicare guidelines.  Medicare is a broken system and why would you want to open a business in a broken system that is already going to fail.  Your cash based practice should not be based on Medicare or any insurance company.  Why set yourself up for failure when you are just starting.

Your main goal here when dealing with a Medicare patient is; is treatment considered medically necessary or not under Medicare guidelines.  Unfortunately, you may have to refer some patients to other providers if it is deemed medically necessary, which is fine.  I would rather be safe than sorry.  The full description of the laws are stated below.  If your Medicare patient does not meet guidelines, is deemed not medically necessary, then your are OK and us an ABN.  This is the only current way someone can see a Medicare patient in a cash based setting.  Below are links to the policies and laws that clearly state what is medically necessary, what is considered skilled therapy, and what are Medicare guidelines.

Helpful Links to Medicare 

  1. Here is link to the CMS policy. Click HERE. Outpatient rehab services starts on page 82.
  2. Here is an LCD link (Click HERE) for contractor information for outpatient therapy services.  This reviews what is skilled vs unskilled, what is medically necessary, etc
  3. Here is the Medicare Beneficiary Policy Chapter 15. CLICK HERE.  Section 40 reviews not using Medicare coverage
  4.  Gwen Simmons is a PT and Lawyer and a great resource for us to consult with regarding physical therapy and Medicare.  Click here


Here is the long version:

1.What defines medically necessary under Medicare law?


Medical Necessity
Section 1862(a)(1)(A) of the SSA states: “No Medicare payment shall be made for expenses incurred for items or services which . . . are not reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member.”

Services which do not meet the requirements for covered therapy services in Medicare manuals are not payable as therapy services. Services related to activities for the general good and welfare of patients, such as general exercises to promote overall fitness and flexibility, and activities to provide diversion or general motivation, do not constitute (covered) therapy services for Medicare purposes. Services related to recreational activities such as golf, tennis, running, etc., are also not covered as therapy services.

To be considered reasonable and necessary, the services must meet Medicare guidelines. The guidelines for coverage of outpatient therapies have basic requirements in common.

  • There must be an expectation that the patient’s condition will improve significantly in a reasonable (and generally predictable) period of time.
  • If an individual’s expected rehabilitation potential would be insignificant in relation to the extent and duration of therapy services required to achieve such potential, therapy would not be covered because is not considered rehabilitative or reasonable and necessary.
  • When there is limited potential for restoration of function, establishment of a safe and effective maintenance program must require the unique skills of a therapist.
  • A therapy plan of care is developed either by the physician/NPP, or by the physical therapist who will provide the physical therapy services, or the occupational therapist who will provide the occupational therapy services, (only a physician may develop the plan of care in a CORF). The plan must be certified by a physician/NPP.
  • All services provided are to be specific and effective treatments for the patient’s condition according to accepted standards of medical practice; and the amount, frequency, and duration of the services must be reasonable.
  • The services that are provided must meet the description of skilled therapy below.

2. What defines skilled therapy under Medicare Law?
Skilled Therapy
Services that do not require the professional skills of a therapist to perform or supervise are not medically necessary. The skills of a therapist may also be furnished by an appropriately trained and experienced physician or NPP, or by an assistant (PTA, OTA) appropriately supervised by a therapist. Therefore, if a patient’s therapy can proceed safely and effectively through a home exercise program, self management program, restorative nursing program or caregiver assisted program, payment cannot be made for therapy services. Consider the following points when determining if a service is skilled.

  • Rehabilitative therapy occurs when the skills of a therapist (as defined by the scope of practice for therapists in each state) are necessary to safely and effectively furnish a recognized therapy service, whose goal is improvement of an impairment or functional limitation.
  • The services shall be of such a level of complexity and sophistication or the condition of the patient shall be such that the services required can only be safely and effectively performed by a qualified clinician, or therapists supervising assistants. Services that do not require the skills of a therapist are not considered reasonable or necessary therapy services, even if they are performed or supervised by a therapist, physician or NPP.
  • While a beneficiary’s particular medical condition is a valid factor in deciding if skilled therapy services are needed, a beneficiary’s diagnosis or prognosis should never be the sole factor in deciding that a service is or is not skilled. The key issue is whether the skills of a qualified therapist are needed to treat the illness or injury, or whether the service(s) can be carried out by non-skilled personnel.
  • Therapy is not required to effect improvement or restoration of function where a patient suffers a transient and easily reversible loss or reduction in function which could reasonably be expected to improve spontaneously as the patient gradually resumes normal activities (CMS Publication 100-02, Medicare Benefit Policy Manual, chapter 15, section 220.2(C)). Patients must require the unique skills of a therapist to realize improved function in order for therapy to be covered. For example, therapy may not be covered for a fully functional patient who developed temporary weakness from a brief period of bed rest following abdominal surgery. It is reasonably expected that as discomfort reduces and the patient gradually resumes daily activities, function will return without skilled therapy intervention.
  • If at any point in the treatment of an illness or injury it is determined that the treatment is not rehabilitative, or becomes repetitive and does not require the unique skills of a therapist, the services are non-covered.
  • There may be circumstances where the patient, with or without the assistance of an aide or other caregiver, does activities planned by a clinician. Although these activities may be supportive to the patient’s treatment, if they can be done by the patient, aides or other caregivers without the active participation of qualified professional/auxiliary personnel, they are considered unskilled.
  • If a patient’s limited ability to comprehend instructions, follow directions, or remember skills that are necessary to achieve an increase in function, is so severe as to make functional improvement very unlikely, rehabilitative therapy is not required, and therefore, is not covered. However, limited services in these circumstances may be covered with supportive documentation, if the skills of a therapist are required to establish and teach a caregiver a safety or maintenance program.
    • This does not apply to the limited situations where rehabilitative therapy is reasonable and achieving meaningful goals is appropriate, even when a patient does not have the ability to comprehend instructions, follow directions or remember skills. Examples include sitting and standing balance activities that help a patient recover the ability to sit upright in a seat or wheel-chair, or safely transfer from the wheelchair to a toilet.
    • This also does not apply to those patients who have the potential to recover abilities to remember or follow directions, and treatment may be aimed at rehabilitating these abilities, such as following a traumatic brain injury.
  • The use of therapy equipment such as therapeutic pools or gym machines alone does not necessarily make the treatment skilled.
  • Medicare does not cover packaged or predetermined therapy services or programs, such as Back Schools or pre-operative joint classes with preset educational activities and exercises for all participants involved. Services must be individualized, medically necessary and require the unique skills of a therapist. (Packaged or predetermined therapy services do not apply to post-surgical protocols that provide ranges and guidance.)
  • Services which do not meet the requirements for covered therapy services under Medicare are not payable using codes and descriptions for therapy services. Also, services not provided under a therapy plan of care, or provided by staff that are not qualified or appropriately supervised are not covered, payable therapy services

3. Does Medicare cover a maintenance program for a Medicare beneficiary?

Maintenance Therapy
The specialized skill, knowledge and judgment of a therapist may be required, and services are covered, to design or establish the maintenance program, assure patient safety, train the patient, family members, caregiver, and/or unskilled personnel and make infrequent but periodic reevaluations of the program. The services of a qualified professional are not necessary to carry out a maintenance program, and are not covered under ordinary circumstances. The patient may perform such a program independently or with the assistance of unskilled personnel, caregivers or family members. For circumstances in which the patient’s safety is at risk, services shall be covered when the skilled maintenance program is carried out by the qualified professional/auxiliary personnel (e.g., where there is an unhealed, unstable fracture) with documented justification.

Maintenance programs can take several forms.

Individual Activities Concurrent with Rehabilitative Treatment
An individualized plan of exercise and activity for patients and their caregiver(s) may be developed by clinicians to maintain and enhance a patient’s progress during the course of skilled therapy, as well as after discharge from therapy services. Such programs are an integral part of therapy from the start of care and should be updated and modified as the patient progresses. Therapist skills are required to develop and revise the program, and train the patient and/or caregiver to follow it. As the patient or caregiver masters an activity or exercise, transition to a maintenance program for completion of the activity or exercise is expected. Prior to discharge, the maintenance program may be revised based on the patient’s attained functional status so that the patient does not regress or lose important functional skills, or to gain further improvement. Maintenance programs are not covered if established after the rehabilitative therapy has been completed (i.e., after the long term goals for the rehabilitative therapy have been achieved).

Evaluation and Maintenance Program without Rehabilitation Therapy
When there is no expectation of significant functional improvement, therapy may be covered for the establishment of a safe and effective maintenance program to maintain or prevent decline in function. Maintenance program development and periodic monitoring are covered if the specialized knowledge and judgment of a therapist is required to design or establish the plan, assure patient safety, train the patient, family members and/or unskilled personnel, and make infrequent but periodic reevaluations of the plan. For example, the skills of a physical therapist (PT) may be covered to develop a maintenance program for a patient with multiple sclerosis for services intended to prevent or minimize deterioration in gait ability caused by the medical condition, when the patient’s current condition does not yet justify the need for rehabilitative physical therapy treatment. Evaluation, development of the program and training the family/caregivers would require the skills of a therapist. The services of a qualified professional are not necessary to carry out the maintenance program under ordinary circumstances. The patient may perform such a program independently or with the assistance of unskilled personnel or family members.

When patients with chronic progressive conditions experience a deterioration of function, rehabilitative therapy may be appropriate and reasonable to assist the patient in restoring lost function. Other times, the intent of therapy is not necessarily rehabilitative, but to develop a maintenance program to delay or minimize functional deterioration. Instructing patients and/or caregivers in a maintenance program required to delay or minimize functional deterioration in patients suffering from a chronic disease is not expected to require more than 2-4 visits. Supporting documentation is required to justify more than 4 visits. In addition, therapy may be intermittently necessary to determine the need for assistive equipment and/or establish/revise a program to maximize function.

Non-covered indications for maintenance programs include the following services.

  • Non-individualized services
  • Services considered to be routine or non-skilled (e.g., supportive nursing services)
  • Maintenance programs for patients without a complex condition that requires development of such a program by a skilled therapist
  • Exercises or activities that could have been transitioned to an independent or caregiver assisted program (e.g., consistently repetitive exercises/activities)
  • Non-cooperation by patient or caregiver(s)
  • Continuation of treatment solely for the purpose of staff training and education, or development of a formal maintenance program after rehabilitative therapy has been completed.

4.When should I use an ABN for therapy services and what does the Medicare Law say about it?

Therapists are required to issue the ABN to original (fee-for–service) Medicare beneficiaries
prior to providing therapy that is not medically reasonable and necessary regardless of a
therapy cap.  That is when services will not be covered under Medicare guidelines. Because they are not part of their benefit, not skilled, not meeting conditions of participation for restorative care plan which would normally be covered.  The ABN must be issued prior to providing the services that won’t be covered by Medicare because they are no longer medically necessary and fall under Medicare guidelines.

Therapy Caps and Advance Beneficiary Notice of Noncoverage (ABN), Form CMS-R-131,
FAQs April 2013

Prior to the ATRA, original (fee-for-service) Medicare claims for therapy services at or
above therapy caps that did not qualify for a coverage exception were denied as a benefit
category denial, and the beneficiary was financially liable for the non-covered services. CMS
encouraged suppliers and providers to issue a voluntary Advance Beneficiary Notice of
Noncoverage (ABN), Form CMS-R-131, as a courtesy, to alert beneficiaries to potential
financial liability. However, issuance of an ABN wasn’t required for the beneficiary to be held
financially liable.

Section 603 (c) of the ATRA amended §1833(g)(5) of the Social Security Act (the Act) to
provide limitation of liability (LOL) protections (See §1879 of the Act) to beneficiaries receiving
outpatient therapy services on or after January 1, 2013, when services are denied and the services
provided are in excess of therapy cap amounts and don’t qualify for a therapy cap exception.
Now, the provider/supplier must issue a valid, mandatory ABN to the beneficiary before
providing services above the cap when the therapy coverage exceptions process isn’t
applicable. The ABN informs the beneficiary why Medicare may not or won’t pay for a specific
item or service and allows the beneficiary to choose whether or not to get the item or service and
accept financial responsibility. ABN issuance allows the provider to charge the beneficiary if
Medicare doesn’t pay. If the ABN isn’t issued when it is required and Medicare doesn’t pay the
claim, the provider/supplier will be liable for the charges.


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