Cash-based physical therapy and Medicare, what is allowed

A Medicare patient puts a credit card on your front desk and asks you to leave Medicare out of it. What you may do next turns on something nobody at that desk can see: whether the service you are about to furnish is one Medicare would ever pay anyone for. Two patients can hand over the same card for the same hour of your time, and one of those transactions is fine while the other is money you will be giving back.

Start where the Medicare enrollment post stopped. Physical therapists in independent practice cannot opt out of Medicare, because CMS’s Benefit Policy Manual puts them outside the opt-out law’s definition of both physician and practitioner. No private-contract lane, no exit door. The live question is what you may charge for while you are inside the program.

Can a Medicare patient just pay cash for physical therapy?

Not for a covered service. Under section 1848(g)(4) of the Social Security Act, a supplier furnishing a service for which payment is made under Part B “shall complete and submit a claim for such service on a standard claim form specified by the Secretary to the carrier on behalf of a beneficiary.” The patient’s willingness to pay you directly changes nothing about that.

CMS states the rule and its lone exception in section 40 of Benefit Policy Manual chapter 15. Providers must submit claims “for all items and services they provide for which Medicare payment may be made under Part B.” One narrow situation releases a non-opt-out supplier: “where a beneficiary or the beneficiary’s legal representative refuses, of his/her own free will, to authorize the submission of a bill to Medicare.” Even then the charge limits still apply, so a refusal does not unlock your cash rate.

Then comes the sentence that ends the most popular workaround. Agreements with beneficiaries “that purport to waive the claims filing or charge limitations requirements, or other Medicare requirements, have no legal force and effect.” The waiver your front desk hands a patient is not a legal instrument. It is a piece of paper. Nor is enforcement theoretical: chapter 1 of the Claims Processing Manual tells contractors to keep “a list of the top 50 violators, by State, of the mandatory claim submission policy.”

Going non-participating changes two numbers and nothing else. You are paid 95 percent of the fee schedule amount, and the limiting charge caps what you collect from the patient at 115 percent of that reduced figure. The claim still goes in. APTA’s guidance for cash-based practices reaches further than CMS’s manuals do, holding that these laws “apply to those enrolled in Medicare and to those who are not.” That is APTA’s reading rather than a CMS instruction, and it is what the profession’s own counsel publishes.

Which services can you actually charge cash for?

Ones that were never a Medicare benefit. That is the whole category, and it is narrower than “the patient does not want to use insurance.”

Section 220.2 of the Benefit Policy Manual draws that line inside your own scope of practice. Skilled therapy is covered when the patient needs it. But “services related to activities for the general good and welfare of patients, e.g., general exercises to promote overall fitness and flexibility and activities to provide diversion or general motivation, do not constitute therapy services for Medicare purposes.” A wellness class, a strength-and-conditioning block, a community balance program outside a plan of care: none of those are therapy services, so no claim is owed, and a Medicare beneficiary can pay you like anyone else. CMS supplies the illustration itself in an outpatient therapy ABN FAQ from 2018 that it still links from its therapy services page: a patient discharged from her PT episode who “opted to pay out-of-pocket for Tai Chi classes her PT offers as part of her Wellness Programs that are open to other community members.”

Now the case that catches people. Covered therapy that is no longer medically necessary for this patient is still the kind of service Medicare pays for. It fails the reasonable-and-necessary test, which is a coverage denial, not a benefit exclusion, and that is where the ABN belongs. So if your reason for charging cash is “Medicare would say no for this patient,” you are in ABN territory. If it is “Medicare has never paid anyone for this,” you are not. APTA’s compliance page adds a third bucket to those two, services that are a benefit but fail a technical requirement, and of the three only the reasonable-and-necessary one makes an ABN mandatory. Our payer medical-necessity guide covers how that judgment reads in the chart.

What does an ABN actually do?

It moves financial liability to the patient for a specific service you have a specific reason to expect Medicare will deny. It does not convert a covered service into a cash service, and it is not a consent form. Four details in chapter 30 of the Claims Processing Manual and the form instructions decide whether yours is worth anything.

The option box is the whole game. Option 1 gets the service and requires you to file the claim anyway, with the GA modifier on the line. Option 2 gets the service, no claim is filed, and the patient gives up appeal rights. Option 3 declines it. CMS is flat about who chooses: “Pre-selection of an option by the notifier invalidates the notice.”

Routine issuance destroys the notice. CMS defines the routine use it prohibits as giving written notice “where there is no specific, identifiable reason to believe Medicare will not pay.” Blanket notices for all claims and signatures collected on blank forms are banned separately. A stack of ABNs signed at intake protects nothing, and in a review it argues against you.

A valid notice does free your price. The patient “may be held liable,” and “the charge may be the healthcare provider or supplier’s usual and customary fee for that item or service and is not limited to the Medicare fee schedule.” Your rate, not the fee schedule’s. Deliver a defective notice, or none when one was required, and you are the one precluded from collecting, owing prompt refunds on anything already taken.

Dual-eligible patients run a different procedure. CMS instructs notifiers to have patients with Medicaid or Qualified Medicare Beneficiary coverage check Option 1, with part of it struck through, because you cannot bill them while the claim is pending. Running your standard cash-pay script on a QMB patient is the version that ends in a refund.

For services Medicare never covers, none of this applies. CMS: “An ABN is not needed for services that Medicare would never cover.” A voluntary notice is a courtesy, which is why the manual says the beneficiary “should not be asked to choose an option box or sign the notice.” The Tai Chi class needs no form at all.

Is maintenance therapy automatically non-covered?

No, and getting this one backwards is expensive, because it turns covered care into cash you had no right to collect.

The improvement standard is a myth CMS has publicly disavowed. Its Jimmo settlement page says the 2013 agreement “may reflect a change in practice for those providers, adjudicators, and contractors who may have erroneously believed that the Medicare program covers nursing and therapy services under these benefits only when a beneficiary is expected to improve.” Coverage, the page says, “does not turn on the presence or absence of a beneficiary’s potential for improvement, but rather on the beneficiary’s need for skilled care.”

Section 220.2 D carries the manual revisions that followed. Designing a maintenance program is covered when it takes a therapist’s judgment, as is instructing the patient or caregiver in it and reassessing it, and delivering it is covered when an individualized assessment shows a therapist’s skills are needed to do it safely. CMS’s own PT example is a patient with multiple sclerosis and increased spasticity whose wheelchair transfers and lower-extremity stretches need a therapist’s instruction, covered right up until she or a caregiver can do them safely. So the question for a maintenance patient is not whether she is improving. It is whether this needs you.

Does the therapy threshold turn services into cash pay?

No, and CMS answered this one in writing. From the same therapy ABN FAQ: “Medicare covers therapy services above the KX modifier thresholds for which the therapist or therapy provider attests are medically reasonable and necessary.” Same answer at the $3,000 targeted medical review threshold. The patient owes the usual coinsurance and deductible, and that is all.

For 2026 the KX threshold is $2,480 for PT and SLP combined. Crossing it means you attest and your documentation carries the attestation; coverage has not moved. CMS puts the distinction on the claim line, noting that KX and GA “cannot be added to the same claim line of service because they convey opposing payer policy.” One says this is medically necessary. The other says you warned the patient it is not.

What about a superbill?

Different situation. Medicare has its own beneficiary-submitted claim, the Form CMS-1490S, which the Claims Processing Manual says beneficiaries use “only if the service provider refuses to do so.” Superbills for an out-of-network commercial patient are a separate arrangement, governed by that patient’s plan and your contract with that payer.

Getting this right before the visit exists

Nearly all of this risk is settled at booking, by whether anyone knew what the patient’s coverage would say. That is why real-time eligibility is included in both Orion plans instead of sold as an upgrade, and why Orion’s billing carries CPT rates and custom cash-pay rates on one fee schedule: a wellness program and a therapy episode get priced in one system instead of two. Pro is the plan for cash-based practices and clinics that bill with their own team; Pro Plus adds claim submission, ERA posting, scrubbing and denials. Either way the bill counts billing providers, $189 to $249 each per month. Whichever plan you sit on, a signed notice has to live in the chart against the visit it covers: CMS generally expects it kept five years from the completion of care, and it is worth nothing in a review if nobody can find it.

None of this makes cash pay a bad model. Plenty of good practices run on it, and CMS has left them a real lane. It makes cash pay a model with one federal wall through the middle of it, standing somewhere other than where the marketing puts it. Pull last month’s Medicare-beneficiary self-pay charges and sort them into two piles, never a benefit and covered but denied. Anything in a third pile is what you take to your MAC and your attorney this week.