Chat with us, powered by LiveChat
Picture of Clarice Grote, MS, OTR/L

Clarice Grote, MS, OTR/L

Cash-Based Occupational Therapy & Medicare

Although occupational therapy practitioners may prefer to run a 100% cash-based clinic and see Medicare beneficiaries, this is largely not possible. Why? Because occupational therapy practitioners cannot opt out of Medicare. This means that occupational therapy practitioners are required to bill Medicare for covered services. Although some services are never covered under Medicare, those services tend to be the minority. If a service for a Medicare beneficiary meets Medicare’s coverage guidelines, then OT practitioners must bill Medicare.

Clear as mud? Well, let’s dive into what it means to opt out of Medicare and for what types of services occupational therapy practitioners can bill cash.

1. Occupational Therapy Practitioners Can’t Opt Out of Medicare

As current Medicare regulation stands, occupational therapy practitioners cannot opt out of Medicare. This means that OT practitioners must submit claims to Medicare for covered services as part of the Mandatory Claims Submission law. This also applies to physical therapy and speech therapy practitioners.

The only exceptions to this rule are physicians who can “opt out” or Medicare under section 1802(b) of the Social Security Act.

2. Changing Medicare Regs to Allow OTs to Opt Out Requires an Act of Congress

Why changing the regs would be so challenging:

While the solution seems simple (change the rules and allow OT to opt out), it is quite complex. The Social Security Act (SSA) defines much of Medicare’s regulations. The SSA defines explicitly what type of professionals can opt out of Medicare in section 1802(b) of the Social Security Act.

The way occupational therapy practitioners are categorized under the Social Security Act does not allow occupational therapy practitioners to “opt out” of billing Medicare.  Therefore, to allow OTs to opt out of Medicare, it would require an act of Congress to change the OTs to the “physician” or “practitioner” category. This is not an easy task. For example, it has taken 30+ years to pass a 2-page bill allowing OTs to initiate and complete the comprehensive assessment in home health. So, one can only imagine how complicated it would be to pass legislation recategorizing therapy practitioners under the SSA.

Changing the way OTs are categorized could drastically change all aspects of practice

For further perspective, the type of regulatory change suggested would have rippling effects on the rest of the profession. It is challenging to predict what type of consequences and burdens a reclassification would bring. Although Medicare presents a challenge for practitioners who would prefer to run a cash-based program, thousands of practitioners consistently bill Medicare.

We must consider the majority of the profession who bill Medicare through their clinic, hospitals, SNFs, ALFs, LTACs, etc. We do not know what type of change recategorization would have on the profession at large, and this must be considered when discussing such a sizeable regulatory change. Additionally, we must consider that physicians have other regulatory burdens that we may not want to deal with. 

All of that being said, groups like AOTA are looking into possible solutions.

3. So, I have to submit a claim if it is covered by Medicare. What is a covered service?

A key phrase to remember when determining if a service is covered under Medicare is to ask if a service is “reasonable and necessary.” Chapter 15 of the Medicare Benefit Policy Manual clearly explains covered service criteria under Medicare Part B. Another key word is “skilled.” Coverage of OT services is not based on diagnosis but is instead based on if OT services are reasonable and necessary (translation: are they evidence-based and appropriate) and require the unique skills and training of an occupational therapy practitioner.

Occupational therapy practitioners must submit a claim if the service is covered under Medicare. Clinicians must use clinical judgment to determine if a service is covered or not for each client. The same service may be covered for some individuals and not others. If the services don’t meet all of the above criteria, you may be able to bill cash for Medicare beneficiaries. So, what doesn’t Medicare cover? Let’s discuss.

4. What Medicare Doesn’t Cover

There are a variety of services that Medicare never covers for occupational therapy providers. The list below is not comprehensive but provides a general idea.

  • Wellness Services
  • Preventative Services
  • Home modifications (the evaluation/assessment may be covered, however)
  • Most DME and equipment such as grab bars, toilet risers, etc.
  • Non-skilled services

To make matters more complicated, there are some exceptions where the provider can collect out-of-pocket payments for covered services. This is when the services are not considered “medically reasonable and necessary.” How does one decide if it is medically reasonable and necessary? By using their clinical reasoning. However, if in doubt, utilizing the Advanced Beneficiary Notice of Non-Coverage (ABN) may be appropriate. Remember, the ABN is a legal document and must be used appropriately. So read the directions carefully for this document.

Of course, there are plenty of situations where a clinician would not need to bill Medicare if the services are not medically necessary, a skilled service is not being provided, or the service would never be covered under Medicare. AOTA has released a specific guideline for home modifications this past year. Many practitioners run profitable clinics that bill Medicare in addition to private payers. Part of the challenge with running any company is considering the “case-mix,” meaning how many patients of each payer source you need to remain profitable.

The Advanced Beneficiary Notice (ABN) is a necessity, not an option

If a service is not medically reasonable or necessary but would be typically covered by Medicare, the provider would need to have a patient sign an Advanced Beneficiary Notice (ABN) before providing any services. AOTA provided a comprehensive guide on the ABN that should facilitate this decision-making process.

Therapists are required to issue the ABN to original (fee-for-service) Medicare beneficiaries before providing a service the therapy practitioner suspects is not covered under Medicare. The purpose of the ABN is to prevent surprise bills if Medicare rejects a claim and to reduce the risk of Medicare beneficiaries being taken advantage of by bad actors.  

Fast Facts

  • The ABN cannot be used to charge patients cash for covered services
  • You cannot have patients sign a blanket ABN
  • You cannot provide influence to the patient as to what option they should select
  • You cannot retroactively sign an ABN

5. So, Who Can Opt Out of Medicare and Bill Cash for Covered Services?

Medicare provides a list of providers who are eligible to opt out of Medicare. This list primarily consists of physicians, clinical social workers, and nurse anesthetists. Providers who are not eligible to opt out of Medicare include physical therapists, speech-language pathologists, occupational therapists, and chiropractors.

This is the Medicare guidance on who can opt out of Medicare:

40.4 – Definition of Physician/Practitioner (Rev. 62, Issued: 12-22-06, Effective: 11-13-06, Implementation: 04-02-07) For purposes of this provision, the term “physician” is limited to doctors of medicine; doctors of osteopathy; doctors of dental surgery or of dental medicine; doctors of podiatric medicine; and doctors of optometry who are legally authorized to practice dentistry, podiatry, optometry, medicine, or surgery by the State in which such function or action is performed; no other physicians may opt-out.

Also, for purposes of this provision, the term “practitioner” means any of the following to the extent that they are legally authorized to practice by the State and otherwise meet Medicare requirements:
• Physician assistant;
• Nurse practitioner;
• Clinical nurse specialist;
• Certified registered nurse anesthetist;
• Certified nurse midwife;
• Clinical psychologist;
• Clinical social worker;
• Registered dietitian; or
• Nutrition Professional

The opt-out law does not define “physician” to include chiropractors; therefore, they may not opt-out of Medicare and provide services under private contract. Physical therapists in independent practice and occupational therapists in independent practice cannot opt-out because they are not within the opt-out law’s definition of either a “physician” or “practitioner”

Medicare Exists to Protect Patients

In conclusion, although there are challenges with billing Medicare, there are challenges in running any business. Some business models work better with certain payer sources than others. At the end of the day, Medicare exists to protect its beneficiaries, and Congress will consider this of great importance. As with all other payment and regulatory changes in the past few years, we must self-reflect on how we practice and the type and quality of therapy we provide. 

More Resources:

If you’re a private practice clinician or running a home mods company, I developed a list of all my favorite resources for you. These are resources I have vetted and trust. So instead of yelling at Google and losing a resource you previously found, just save yourself some time and stress and get my curated resource list.

Clarice standing in a light room smiling wearing black pants and a light green puff sleeve shirt

hi there,

I’m  Clarice

Occupational therapist & medicare specialist helping practitioners understand policy, engage in advocacy, and own their value!

Stay in the Know with Amplify OT

By entering your info, you’ll become an Amplify OT Insider (Unsub anytime in a click.) You also agree to our Terms of Use and Privacy Policy.

Trade "not-knowing" for informed-and-confident!

Demystifying policy and reimbursement for occupational therapy practitioners working in adult rehabilitation.  ⬇️

Scroll to Top
Image of front page of Podcast playlist showing Amplify OT Podcast logo and "Your custom playlist is here!"
Get your FREE Reimbursement Guide!

Stop wasting your time searching endlessly for resources – get our free reimbursement guide and podcast playlist totally free! 👇

By entering your info, you’ll become an Amplify OT Insider – with FREE access to exclusive insights,, and policy updates, delivered to your inbox. (Unsub anytime in a click.) You also agree to our Terms of Use and Privacy Policy.

Tech display of the Amplify OT Membership showing our course page, groups, and activity feed.

Oh no! ☹️
Sign ups aren't currently open right now - Get on the waitlist by entering your info below.
We'll let you know when doors open again so you get access ASAP!

We use cookies to ensure you receive the best experience on our site. If you continue to use this site, we assume you agree with our terms.