Physician calculating finances

The Biggest Financial Mistake Physicians Make

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Japa Volchok, DO

I was a medical student on my first clinical rotation, and the surgeon I was with asked me if I was married.  I said, “I am,” and he said, “Don’t get divorced; it will be the worst financial decision you ever make.” Divorce has significant financial implications, but it is not the worst financial decision a physician can make. The worst may be to opt-out of Medicare.  A mistake that is too often made by plastic surgeons, concierge medicine physicians, and many others.

To understand “opt-out,” it is essential to understand a few things about Medicare.  Medicare has two main parts; Part A that pays for facility-based charges for care and part B that pays for professional services or medical services including durable medical equipment. A “beneficiary” or person enrolled in Medicare, in most cases, is enrolled in part A at no cost.  Enrollment in part B requires paying a monthly premium (in 2019, it is a minimum of $135.50/month). Medicare Part C, also known as Medicare Advantage, replaces both A and B, has a monthly premium, and is provided by private insurance organizations (for example Humana, Aetna, United, Blue Cross,).  When a beneficiary receives a service that is a covered Medicare benefit, the payment is“assigned” to the provider.  Assigning payment to the provider is known as “assignment of benefits.”  The payment is directed to the provider, either automatically for physicians participating in Medicare or on a claim by claim basis for nonparticipating physicians.

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On the physician side of things, doctors have the option of participation or nonparticipation, and the choice of opting out entirely.  Every physician with a national provider identifier (NPI) and a valid medical license at a minimum can become an ordering and referring provider for Medicare patients. Medicare allows these doctors to order and refer, but it doesn’t pay the ordering doctor.  Physicians can also participate in Medicare part B and Medicare Advantage. 

So why then would a doctor choose not to be a participating provider in the Medicare program?  There are several reasons a physician might not enroll and participate in Medicare.  Another government agency might employ the physician. The population she sees is not of Medicare age.   The service the doctor provides is some experimental or alternative treatment that is never a covered benefit through Medicare. The most common thing is that the physician is a plastic surgeon and only provides cosmetic care, or the doctor is an internist with a concierge practice that accepts cash only. What then does Medicare have to do with a cosmetic practice or a cash-only practice? Medicare has numerous regulations that stipulate what a is a covered benefit (what things are paid for) and how much the government will pay, and who be paid.  Because participating in Medicare is a choice and comes with specific agreed-upon requirements, some physicians chose not to participate or to opt-out entirely.  These are two distinct choices a physician can make.  The option of opt-out can be the worst financial decision that a doctor makes.

Nonparticipation occurs when a physician provides care for Medicare patients but is not billing Medicare and does not accept the assignment of benefits. The physician will instead seek payment from the patient and the patient, in turn, will seek reimbursement from Medicare. Alternatively, the patient may sign an assignment of benefits on a claim by claim basis, and the doctor can then bill and be paid by Medicare. Medicare pays 5% less than the regularly allowed amount when paying for services from nonparticipating providers.  Wait. What. That is right, a 5% pay cut if you don’t participate; however, there is a catch with a silver lining. The provider can still bill the Medicare beneficiary for more than Medicare allows and the patient is required to pay this additional amount.  There is a limit though, known as the limiting charge, and this is set at115% of the regularly allowed Medicare amount. If you are a physician, say in a concierge practice, with patients that don’t mind paying a premium, you can get paid 15% more than your participating colleagues. There is more upfront work and collections effort required though.

Opt-out. A physician who opts out of Medicare is saying, “I do not accept Medicare payment rates, and you understand that you must pay me directly. Whatever I charge, you will pay me, and you will not ask Medicare to pay for any of my services”. There is an exception for emergency or urgent care.  Several other requirements must be met and in Medicare’s language, “neither the physician/practitioner nor the beneficiary submits the bill to Medicare for services rendered. Instead, the beneficiary pays the physician/practitioner out-of-pocket, and neither party is reimbursed by Medicare. A private contract is signed between the physician/practitioner and the beneficiary that states, that neither one can receive payment from Medicare for the services that were performed (Medicare).” It might seem like a good idea at first to some physicians, but it is not, don’t opt-out. When a physician opts out, he files an affidavit with Medicare and Medicare then places the physician into an opt-out status for two years and on a list of opt-out physicians.  If you forget the two years are coming to an end and take no action, the opt-out renews for another two years. 

There are a couple of things you can do if you made the mistake of opting out.  If you opted out and it has been less than 90 days from the first time you ever signed an affidavit you can contact Medicare and cancel the opt-out. If you opted out and are past the 90 days and now want to participate, you must wait.  Contact Medicare at least 30 days before the opt-out period ends.   Failure to do this and your opt-out will renew for another two years automatically.  You will have no way to reverse this and to participate.   Opt-out is not just from Medicare Part B; it is also from Medicare Advantage.  It may seem like a good idea to opt-out, but the decision persists for two years and can quickly become four years.  You will have few options for employment and will face significant financial loss and hardship. I did get divorced years later, and the financial cost hurt but the opt-out mistake I have seen others make is much worse by comparison.

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