July Legal Intelligencer article by Lamb McErlane Health Law attorneys Vasilios J. Kalogredis, Esq. and Sonal Parekh, Esq.

Participation in Medicare generally requires enrolled physicians and practitioners to submit claims for covered services furnished to Medicare beneficiaries and to comply with Medicare reimbursement and charge limitations. However, Section 1802 of the Social Security Act permits certain eligible physicians and practitioners to elect to opt out of Medicare and instead furnish services to Medicare beneficiaries exclusively pursuant to private contracts. For many providers, opting out offers greater flexibility in establishing reimbursement arrangements and avoiding the administrative burdens associated with Medicare participation. Yet, the election also imposes significant statutory and regulatory obligations that are often misunderstood.

Recent changes to the Medicare program, including the expansion of Medicare-covered behavioral health services beginning January 1, 2024, together with updated guidance issued by the Centers for Medicare & Medicaid Services (“CMS”), have broadened the categories of practitioners who may become eligible to opt out while simultaneously increasing the importance of understanding the distinction between Medicare enrollment, Medicare participation, and Medicare opt-out status.

This article reviews the current legal framework governing Medicare opt-out, distinguishes between enrollment and opt-out status, identifies which practitioners may and may not elect to opt out, summarizes the requirements for maintaining a valid opt-out election, discusses recent CMS guidance, and highlights practical compliance considerations for attorneys representing healthcare providers.

Medicare Enrollment Versus Opting Out

One of the most common misconceptions encountered by healthcare attorneys and providers is the assumption that every practitioner who does not wish to participate in Medicare must affirmatively opt out. In reality, Medicare enrollment and Medicare opt-out are distinct concepts, and not every practitioner must make an opt-out election. Generally, practitioners fall into one of four categories.

1. First, a practitioner may enroll in Medicare and submit claims for covered services furnished to Medicare beneficiaries in accordance with Medicare’s reimbursement rules.
2. Second, an eligible practitioner may affirmatively opt out of Medicare by satisfying the applicable statutory and regulatory requirements. During the opt-out period, the practitioner agrees not to submit claims to Medicare (except in limited emergency or urgent care circumstances) and instead furnishes covered services to Medicare beneficiaries only pursuant to compliant private contracts.
3. Third, an eligible practitioner who neither enrolls in Medicare nor furnishes covered services to Medicare beneficiaries generally has no obligation to enroll or opt out. This frequently occurs in pediatric practices, providers whose patient population does not include Medicare beneficiaries, or practitioners whose practices are limited to services that are not reimbursable by Medicare. CMS expressly recognizes that practitioners who do not furnish covered services to Medicare beneficiaries generally need not enroll in Medicare or file an opt-out affidavit.
4. Finally, certain practitioners may be enrolled in Medicare but are not legally permitted to opt out. Congress has authorized opt-out status only for specified categories of physicians and practitioners. Consequently, some Medicare-recognized practitioners remain subject to Medicare participation requirements even though they may independently bill Medicare for covered services.

Because the legal consequences differ significantly among these categories, attorneys should determine at the outset whether the practitioner is (i) recognized by Medicare, (ii) eligible to enroll in Medicare, and (iii) eligible to elect opt-out status.

Which Healthcare Practitioners May Opt Out?

Section 1802 of the Social Security Act and CMS regulations permit eligible physicians and certain non-physician practitioners to opt out of Medicare. Eligible physicians include doctors of medicine, osteopathy, dentistry, podiatric medicine, and optometry. CMS also permits numerous non-physician practitioners to opt out, including nurse practitioners, physician assistants, certified registered nurse anesthetists, certified nurse-midwives, clinical nurse specialists, clinical psychologists, clinical social workers, registered dietitians and nutrition professionals, and – as of January 1, 2024 – qualified marriage and family therapists and mental health counselors.[1]

Importantly, not every behavioral health professional qualifies for Medicare enrollment or Medicare opt-out. For example, many licensed professional counselors, associate professional counselors, licensed social workers, and other state-licensed behavioral health professionals may not independently qualify for Medicare recognition merely by virtue of state licensure. Attorneys should therefore carefully analyze both federal Medicare requirements and applicable state licensure laws before advising whether a particular practitioner may enroll in Medicare or elect to opt out. Likewise, not every Medicare-recognized practitioner is eligible to opt out. Chiropractors, anesthesiology assistants, physical therapists, occupational therapists, speech-language pathologists, and audiologists remain ineligible to opt out under current federal law. These practitioners generally must either participate in Medicare or decline to furnish Medicare-covered services, depending upon their circumstances and applicable Medicare requirements.

Accordingly, counsel should evaluate opt-out eligibility on a practitioner-specific basis under current federal law and CMS guidance.

Legal Framework Governing Medicare Opt-Out

The Medicare opt-out framework is established by a combination of statutory authority, federal regulations, and CMS interpretive guidance. The primary statutory authority is Section 1802 of the Social Security Act, with implementing regulations codified in 42 C.F.R. Part 405, Subpart D. CMS further interprets these provisions through Chapter 15, Section 40 of the Medicare Benefit Policy Manual (“MBPM”), together with related guidance contained in the Medicare Program Integrity Manual (“MPIM”) and CMS’s current Medicare enrollment guidance available through the Provider Enrollment, Chain and Ownership System (“PECOS”). Although the CMS manuals do not themselves carry the force of law, they remain highly persuasive administrative guidance and are routinely relied upon by Medicare Administrative Contractors (“MACs”) when administering the Medicare program.

Because CMS periodically updates its manuals and enrollment guidance, attorneys should verify that any advice regarding Medicare opt-out reflects the most current CMS publications rather than relying solely upon older manual provisions or historical guidance. For example, Chapter 15, Section 40 of the MBPM has not yet been updated to reflect the expansion of opt-out eligibility to marriage and family therapists and mental health counselors.

Requirements to Opt-Out

An eligible physician or practitioner seeking to opt out of Medicare must satisfy two independent requirements: (i) the provider must timely execute and file a valid opt-out affidavit with the appropriate Medicare Administrative Contractor (“MAC”) and (ii) the provider must enter into a compliant written private contract with each Medicare beneficiary receiving covered services during the opt-out period. Failure to satisfy either requirement may invalidate the attempted opt-out and subject the provider to Medicare’s participation and reimbursement requirements.

1. Opt-Out Affidavit.

The opt-out affidavit serves as the practitioner’s formal election to withdraw from Medicare participation and instead furnish covered services to Medicare beneficiaries exclusively pursuant to private contracts. The affidavit must be filed with each MAC having jurisdiction over the geographic areas in which the physician or practitioner furnishes services.

Although CMS provides model language, the regulations prescribe the substantive content that must be included in every affidavit. Among other things, the affidavit must identify the physician or practitioner, acknowledge the provider’s agreement to opt out of Medicare for the applicable opt-out period, confirm that covered services furnished to Medicare beneficiaries will be provided only pursuant to compliant private contracts (except as otherwise permitted for emergency or urgent care), and acknowledge that neither the provider nor the beneficiary may receive Medicare payment for covered services furnished pursuant to such contracts. Attorneys advising providers should ensure the provider’s enrollment records are consistent with and appropriately reflect the provider’s opt-out status.

1. Private Contracts.

Filing an opt-out affidavit alone does not authorize a physician or practitioner to privately contract with Medicare beneficiaries. Rather, the provider must also execute a compliant written private contract with each Medicare beneficiary receiving covered services during the opt-out period. The private contract documents the parties’ mutual agreement that the services will be furnished outside the Medicare program and that neither party will seek Medicare reimbursement for the covered services furnished pursuant to the agreement.

Among other required provisions, the contract must clearly provide that: (i) the Medicare beneficiary agrees not to submit a claim to Medicare (or request that the physician or practitioner submit a claim) for covered services furnished pursuant to the contract; (ii) the beneficiary accepts full financial responsibility for payment of the services; (iii) the beneficiary understands that Medicare payment will not be available for services furnished under the agreement; (iv) the beneficiary acknowledges that Medigap policies and other supplemental insurance generally will not reimburse amounts otherwise excluded from Medicare coverage because of the private contract; and (v) the beneficiary understands that he or she remains free to obtain Medicare-covered services from physicians or practitioners who have not opted out of Medicare.

The private contract must be executed before any covered services are furnished. A physician or practitioner may not present a private contract to a beneficiary who is already in need of emergency or urgent medical care. Likewise, a provider cannot retroactively cure the absence of a compliant private contract by obtaining the beneficiary’s signature after services have been rendered. Attorneys should encourage providers to maintain these agreements in the patient’s permanent record together with documentation establishing the date of execution.

1. Automatic Renewal of the Opt-Out Affidavit and Private Contracts.

Under current law, opt-out affidavits filed on or after June 16, 2015 automatically renew every two years unless the physician or practitioner affirmatively notifies the appropriate MAC(s) in writing of the intent to terminate the opt-out election no later than thirty days before the next renewal date. Accordingly, practitioners who remain satisfied with their opt-out status ordinarily need not submit successive affidavits every two years. Instead, the opt-out election continues uninterrupted unless properly terminated.

The treatment of private contracts warrants separate consideration. Neither the Social Security Act nor the implementing regulations expressly require physicians and practitioners to execute entirely new private contracts each time an opt-out affidavit automatically renews. Rather, the regulations require that covered services furnished during the opt-out period be provided pursuant to a compliant private contract. Accordingly, attorneys drafting private contracts should consider expressly providing that the agreement remains effective throughout the practitioner’s initial opt-out period and any subsequent automatic renewal periods unless earlier terminated by either party, superseded by a new agreement, or rendered ineffective by operation of law. Properly drafted renewal provisions may eliminate unnecessary administrative burdens while preserving compliance with CMS requirements. Nevertheless, providers should periodically review existing private contracts to ensure continued compliance with current federal law and CMS guidance, particularly following significant statutory or regulatory changes.

1. Emergency and Urgent Care Exception.

The Medicare opt-out rules recognize that physicians and practitioners may unexpectedly furnish emergency or urgent medical services to Medicare beneficiaries who have not previously executed private contracts. Opt-out providers are not required to use private contracts in emergency or urgent care situations. If an opt-out provider furnishes emergency or urgent care items or services to a Medicare beneficiary that has not signed a private contract, the provider must submit the claim to Medicare on behalf of the beneficiary relative to such services and may collect no more than the Medicare limiting charge.[2] However, if the beneficiary had previously entered into a private contract (before the onset of the emergency or urgent medical condition), then the emergency or urgent care services are to be furnished pursuant to the terms of the private contract.[3] Thus, the timing of contract execution is critical. Attorneys preparing practice policies should ensure that providers understand the distinction and implement procedures for identifying existing private contracts before emergency billing decisions are made.

Maintaining Opt-Out Status

Once a provider has successfully opted-out, the provider must continuously maintain compliance throughout the opt-out period to preserve the validity of their election. A single violation of the applicable statutory or regulatory requirements may jeopardize the provider’s opt-out status and invalidate private contracts executed with Medicare beneficiaries.

Key obligations include: (i) furnishing all Medicare-covered services exclusively under valid private contracts (except emergencies/urgent care); (ii) prohibiting claim submission to Medicare, directly or indirectly; (iii) retaining copies of all private contracts for audit purposes; and (iv) ensuring internal compliance systems prevent accidental billing of Medicare. The last obligation extends beyond the practitioner personally. Therefore, billing companies, credentialing vendors, practice administrators, electronic health record (“EHR”) systems, clearinghouses, and other third-party vendors should be educated regarding the provider’s opt-out status and instructed not to submit Medicare claims inadvertently. In many instances, erroneous claim submissions arise not from the provider’s actions, but from automated billing processes or staff unfamiliar with Medicare opt-out requirements.

Attorneys advising healthcare providers should also address Medicare compliance during practice acquisitions, mergers, employment transitions, and ownership changes. A purchaser acquiring a medical or behavioral health practice should verify whether any physicians or practitioners have opted out of Medicare, review existing private contracts, confirm the status of opt-out affidavits, and evaluate billing procedures to ensure continuity of compliance following the transaction. Likewise, when an opt-out practitioner joins an existing practice, onboarding procedures should include education regarding Medicare billing restrictions and appropriate modifications to practice management systems.

Consequences of Noncompliance

The Medicare opt-out provisions are unforgiving. Failure to satisfy either the initial opt-out requirements or the ongoing maintenance obligations may result in significant consequences for both the provider and affected Medicare beneficiaries.

A provider who fails to properly opt out (e.g., by not filing affidavits correctly or using non-compliant private contracts) will have his or her attempted opt-out nullified. All private contracts entered into during the defective opt-out period are void, and the provider reverts to Medicare participation, subject to statutory charge limitations. A provider who fails to maintain opt-out (e.g., by knowingly submitting claims, failing to use valid contracts, or not complying with emergency care billing rules) similarly faces severe consequences.

Fortunately, if a Medicare beneficiary subject to a valid private contract with an opt-out provider nonetheless submits a claim to Medicare, the submission does not automatically constitute a violation by the provider and does not invalidate the private contract. When CMS or the applicable MAC identifies a Medicare claim submitted on behalf of an opt-out physician or practitioner, the provider is generally afforded an opportunity to explain the circumstances surrounding the claim submission. Current CMS guidance permits the physician or practitioner to demonstrate that the claim resulted from clerical error, administrative oversight, automated billing processes, or other inadvertent circumstances and, where appropriate, to undertake good-faith corrective action, including refunding any improper Medicare payment received.

If CMS determines that the provider failed to maintain compliance and the violation is not satisfactorily resolved, the consequences may be substantial. Private contracts may become ineffective, the provider’s opt-out status may be revoked for the remainder of the applicable opt-out period, and the provider may again become subject to Medicare’s participation and reimbursement requirements. Because providers generally may not simply file a new opt-out affidavit during the remainder of the existing opt-out period, compliance failures can have lasting operational and financial implications. Accordingly, healthcare attorneys should encourage clients to view Medicare opt-out as an ongoing compliance program rather than a one-time filing requirement.

Practical Implications for Attorneys

Attorneys representing physicians, behavioral health professionals, advanced practice providers, and other healthcare practitioners should incorporate Medicare opt-out analysis into both regulatory counseling and transactional matters.

From a regulatory perspective, counsel should first determine whether the provider is recognized by Medicare, eligible to enroll, and eligible to elect opt-out status. Although these inquiries often overlap, they should be analyzed separately. Failure to appreciate these distinctions may result in erroneous advice regarding Medicare participation obligations.

Once eligibility has been confirmed, attorneys should review or prepare compliant opt-out affidavits and private contracts tailored to the provider’s practice rather than relying upon generic forms. Particular attention should be given to practices employing multiple provider types, as some providers may be eligible to opt out while others practicing within the same entity may not.

Attorneys should also advise clients regarding implementation. Written policies addressing patient intake, execution and retention of private contracts, emergency and urgent care procedures, billing workflows, EHR configuration, vendor oversight, and periodic compliance reviews may substantially reduce the likelihood of inadvertent violations. Staff training is equally important, particularly for front-office personnel responsible for patient registration and billing personnel responsible for claim submission.

Transactional attorneys should likewise consider Medicare opt-out issues during practice acquisitions, mergers, reorganizations, employment agreements, professional service arrangements, and due diligence investigations. Existing opt-out affidavits, private contracts, Medicare enrollment records, and billing practices should be reviewed as part of the transaction to identify potential compliance risks before closing.

Finally, behavioral health practices deserve particular attention. Because practitioner eligibility varies depending upon federal Medicare recognition—not merely state licensure—attorneys should carefully evaluate each provider’s professional credentials before advising whether Medicare enrollment, Medicare participation, or Medicare opt-out is appropriate.

Conclusion

Opting out of Medicare affords eligible physicians and other practitioners increased autonomy in establishing reimbursement arrangements and contracting directly with Medicare beneficiaries. That flexibility, however, is accompanied by a comprehensive statutory and regulatory framework that requires continuous compliance. Physicians and practitioners must not only properly effectuate the initial opt-out election through compliant affidavits and private contracts but must also maintain rigorous internal procedures to preserve their opt-out status throughout successive opt-out periods.

For healthcare attorneys, understanding the distinction between Medicare enrollment, Medicare participation, and Medicare opt-out has become increasingly important as CMS continues to expand Medicare-recognized practitioner categories and update enrollment guidance. Proper legal counsel extends beyond preparing opt-out documentation; it requires advising clients regarding eligibility, operational compliance, practice transactions, billing procedures, and ongoing risk management.

By proactively addressing these issues and implementing comprehensive compliance measures, attorneys can assist physicians and other healthcare practitioners in realizing the benefits of Medicare opt-out while minimizing the substantial regulatory and financial risks associated with noncompliance.

If you have any questions or if we may be of further assistance regarding Medicare opt-out compliance or other health law matters,  contact Bill Kalogredis, Esq. or Sonal Parekh, Esq.

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Vasilios J. (Bill) Kalogredis, Esq. has been advising physicians, dentists, veterinarians, and other health care professionals and their businesses as to contractual, regulatory and transactional matters for over 50 years. He is Chairman of Lamb McErlane PC’s Health Law Department. Bill can be reached by email at bkalogredis@lambmcerlane.com or by phone at 610-701-4402.

Sonal Parekh, Esq., is an associate at Lamb McErlane PC who focuses on healthcare transactional matters and a broad range of healthcare regulatory-related issues on behalf of healthcare systems, physicians, dentists, and behavioral health providers, other healthcare providers, and is a pharmacist by education and training. Sonal can be reached by email at sparekh@lambmcerlane.com or by phone at 610-701-4416.

*This article is for educational purposes only and is not intended to be legal advice. Should you require legal advice on this topic, any health care matter, or have any questions or concerns, please contact Vasilios J. (Bill) Kalogredis, Esq. or Sonal Parekh, Esq.

[1] https://www.cms.gov/medicare/enrollment-renewal/providers-suppliers/chain-ownership-system-pecos/manage-your-enrollment#eligibility.

[2] See 42 C.F.R. § 405.440(b).

[3] See 42 C.F.R. § 405.440(c).