Medicare Participation

The Center for Medicare & Medicaid Services (CMS) is a federal agency within the Department of Health and Human Services which manages and oversees the Medicare program for beneficiaries. Physicians are required to comply with numerous laws and regulations related to various aspects of their practice within the Medicare program. Below are key areas that address many of the regulatory areas for practitioners and their staff.

Medicare Participation

Each year physicians have the opportunity to review and/or modify their contractual relationship within the Medicare program. It is important for health care providers to understand their options within the program to ensure proper reimbursement.

There are three Medicare contractual options available for physicians:

  • Participating (often referred to as "PAR") - providers can sign a participating agreement and accept Medicare’s allowable charges as payment in full for all their Medicare patients.
  • Non-participating (referred to as "non-PAR") - providers may elect to be a non-PAR physician, which permits them to make assignment decisions on a case-by-case basis and allows the option to bill patients more than Medicare allows for unassigned claims.
  • Private contracting – as a private contracting physician, the provider agrees to bill his/her patients directly and forego any payments from Medicare.

Physicians have the ability to change their status from PAR to non-PAR or vice versa annually. Once made, the decision is generally binding until the next annual contracting cycle except where the physician's practice situation has changed significantly, such as relocation to a different geographic area or a different group practice. To become a private contractor, physicians must give Medicare 30 days notice before the first day of the quarter when the contract will take effect.

Providers considering a change in their Medicare status must first determine that they are not bound by any contractual arrangements with hospitals, health plans, or other entities that require them to be a PAR physician. In addition, it is imperative to understand and verify any state laws that have been enacted prohibiting physicians from balance billing their patients.

Participating (PAR)

Participating in the Medicare program means the health care professional agrees to accept assignment for all services provided to Medicare beneficiaries. By accepting assignment, it states that the provider agrees to accept the amount approved by Medicare as the total payment for covered services. The deductible and/or coinsurance are applied to covered services and the beneficiary is responsible for these amounts.

When a provider enrolls as a new provider to become a Participating, Medicare allows 90 days from the date of your Provider Identification Number (PIN) notification to change your participation status. If a par agreement is received within 90 days of enrollment, the PAR effective date will be the postmark date on the envelope.

If the decision is made to enroll as a Medicare participating provider after the 90-day grace period, the individual provider must wait and complete a form during open enrollment and is obligated to remain a participant until the following annual enrollment period.

Advantages of Participating in Medicare:

  • Your Medicare fee schedule amount is 5% higher than that of a non-participating provider.
  • Collections from patients are much easier because Medicare reimburses 80% of the allowed charges to the provider and the practice will have to collect the remaining 20% from the beneficiary.
  • Medicare will automatically forward Medigap claims to the proper insurer for payment when they receive the completed claim form. This “one stop” billing eliminates the need to submit a separate bill to the supplementary insurer or beneficiary after receiving Medicare’s payment.
  • Participation also improves the relationship with the beneficiary as it helps reduce any out-of-pocket expenses that will be the responsibility of the beneficiary.

Non-Participating (NON-PAR)

If a provider makes the decision to not be a participating provider in the Medicare program, they will have to choose either to accept or not accept assignment on Medicare claims on a claim-by-claim basis. If you choose not to accept assignment, you may not charge the beneficiary more than what Medicare has capped as the limit for unassigned claims for services covered by Medicare.

The limiting charge applies to non-participating providers in the Medicare Part B program when they do not accept assignment and is usually 115% of the physician fee schedule amount. Keep in mind, Medicare beneficiaries are not responsible for billed amounts in excess of the limiting charge for a covered service. (Effective January 1, 1994, the limiting charge applies to all services and supplies billed under the Physician Fee Schedule (including drugs and biologics) regardless of the provider rendering the services.)

If you choose not to participate in the Medicare program and do not accept assignment on claims, the maximum amount to charge is 115% of the approved fee schedule amount for non-participating providers. This amounts to only 9.25% more than the fee schedule amount for participating providers.

Par Versus Non-Par

The primary difference between being a “Par” or Non-par” provider lies in how fees will be collected. Participating providers must accept assignment; while non-participating providers may collect up-front from the patient. Essentially, if you are a participating provider, your patient will only pay any deductible and/or co-insurance at time of service and then Medicare reimburses the allowed fee after the claim is billed. Non-participating providers may collect their allowed fees in full from the patient and the beneficiary will be partially reimbursed by Medicare. For non-covered services, regardless of status, payment may be collected up-front from the patient.

Changing Your Status

Typically, providers are given the last six weeks per calendar year (November 15 - December 31) to change their participation status. Once a decision is made, it is binding throughout the following calendar year and cannot be changed unless there is a significant change in the practice, such as relocation to a different geographic area or transformation into a group practice.

If you are currently a non-participating provider and wish to become participating, you will have to contact your carrier for a participation agreement. If you are currently a participating provider and wish to become non-participating, you will need to submit a letter (on office letterhead) to your local carrier or administrative contractor stating your intent. This letter must include an original signature of the authorized representative or individual provider.