DEPARTMENT OF HEALTH & HUMAN SERVICES 	 Office of Inspector General 
Washington, D.C  20201 
JAN 262012 
TO: 	 Marilyn Tavenner 
Acting Administrator 
Centers for Medicare & Medicaid Services 
FROM:  Stuart Wright 
Deputy Inspector General 
for Evaluation and Inspections 
SUBJECT: 	 Memorandum Report:  Lack ofData Regarding Physicians Opting Out of 
Medicare,OEI-07-11-00340 
This memorandum report provides information about data limitations that we 
encountered while conducting a review of physicians who opted out of Medicare.  The 
lack of complete data prevented us from conducting a full review ofphysicians who have 
opted out of Medicare.  We plan to conduct a full evaluation when a complete data source 
of opted-out physicians is available. 
SUMMARY 
In April 2011, we began an evaluation entitled Impact ofPhysicians Opting Out of 
Medicare.  The objectives of the evaluation were to determine the extent to which and 
reasons why physicians opt out of the Medicare program, and the effects of physician 
opt-out on Medicare beneficiaries.  We specifically sought to answer: 
 	 What are the characteristics (i.e., specialty, location, practice type, gender) of 
physicians who opt out of Medicare? 
 	 Has the number of opted-out physicians increased or decreased over time? 
 	 Why do physicians choose to opt out ofthe program? 
In the course of our review, we determined that the Centers for Medicare & Medicaid 
Services (CMS), Medicare Administrative Contractors (MACs), and legacy carriers 
(i.e., Medicare claims payment contractors) do not maintain sufficient data regarding 
physicians who opt out of Medicare.  As a result, we are wlable to conduct the proposed 
evaluation at this time.  Page 2  Marilyn Tavenner 
 
Although the percentage of physicians who choose to opt out may be small (perhaps less 
than 1 percent1), monitoring the number of opted-out physicians and their specialties is 
important to ensure that Medicare beneficiaries have sufficient access to providers, 
including specialized providers.  Additionally, having appropriate data on opted-out 
physicians is essential to ensuring that such physicians are not inappropriately receiving 
Medicare payments.  Based on the limited data that we received, the number of opted-out 
physicians appears to have increased each year from 2006 to 2010.  Section 1848(f) of 
the Social Security Act (SSA) specifies a sustainable growth rate (SGR) for all physician 
services, which is intended to control the aggregate growth of Medicare expenditures for 
these services.  Unless Congress intervenes, the SGR would cause Medicare physician 
payments to decrease by 27.4 percent in 2012.2  The Texas Medical Association (TMA) 
states on its Web site, This decade-long and continued uncertainty is forcing some 
physicians to make a difficult decision to either opt out of Medicare, limit the number of 
patients they treat, or retire early.  A TMA survey [from August 2011] indicates that 
50 percent of Texas physicians are considering opting out of the Medicare program 
altogether.3 
 
BACKGROUND 
 
Prior to passage of the Balanced Budget Act of 1997 (BBA), physicians did not have a 
mechanism for opting out of the Medicare program to contract privately with Medicare 
beneficiaries.4  As amended by the BBA, section 1802 of the SSA allowed physicians to 
opt out of the Medicare program for 2-year intervals starting in 1998.   
 
Physician Provision of Services to Medicare Beneficiaries 
In general, physicians must enroll in the Medicare program to provide services to 
Medicare beneficiaries.  Once enrolled, physicians agree to abide by Medicare laws, 
regulations, and program instructions.5  Physicians who provide Medicare-covered 
services to Medicare beneficiaries must file claims on the beneficiaries behalf within 
1 year, or face civil monetary penalties.6  Participating physicians agree to accept 
assignment (i.e., the Medicare-allowed amount) for covered services; nonparticipating 
physicians are limited to 115 percent of the Medicare-allowed amount for the service.7     
 
A third option available to physicians is to opt out of the Medicare program, which 
allows them to enter into private contracts with Medicare beneficiaries.  Medicare policy 
changes that decreased physician reimbursement and increased administrative burden 
have been factors associated with physicians decisions to opt out of the Medicare 
program.8  These changes include decreases in the Medicare fee schedule, increased 
                                                 
1 Buczko, William, Provider Opt-Out Under Medicare Private Contracting, Health Care Financing Review, Winter 2004-2005, 
Vol. 26, No. 2. 
2 76 Fed. Reg. 73026, 73277 (Nov. 28, 2011). 
3 TMA, Medicare Meltdown Redux Fact Sheet.  Accessed at http://www.texmed.org/ on November 16, 2011. 
4 BBA, P.L. 105-33  4507. 
5 CMS, Form 855i, Medicare Enrollment Application, p. 25, July 2011. 
6 SSA  1848(g)(4)(A) and 1848(g)(4)(B)(ii). 
7 SSA  1842(h)(1), 1848(g)(1)(A), and 1848(g)(2)(C). 
8 Buczko, William, Provider Opt-Out Under Medicare Private Contracting, Health Care Financing Review, Winter 2004-2005, 
Vol. 26, No. 2. 
OEI-07-11-00340      Lack of Data Regarding Physicians Opting Out of Medicare  Page 3  Marilyn Tavenner 
 
monitoring of claim coding, and increased fines and prosecution for fraud and abuse.9  If 
physicians wish to provide services to Medicare-eligible beneficiaries through private 
contracts and not bill Medicare, they must opt out of the Medicare program and renew 
their opt-out status every 2 years.  Physicians who have never enrolled in the Medicare 
program must still opt out if they plan to treat Medicare beneficiaries through private 
contracts.10   
 
Private Contracts.  Any physician who opts out of the Medicare program may enter into 
private contracts with Medicare beneficiaries; however, the contracts must meet the terms 
and conditions outlined in Federal regulations.11  These private contracts must state that 
the physician has chosen to opt out of the Medicare program, and that the beneficiary or 
beneficiarys legal representative accepts full responsibility for payment of the 
physicians charge for all services.  Because Medicare charge limits do not apply to 
physicians who opt out of the program, the contracts must clearly state that the 
beneficiary has the right to receive services provided by other physicians who have not 
opted out of the program and are willing to accept Medicare payments.  The beneficiary 
or the beneficiarys legal representative agrees not to submit a claim to Medicare or to 
ask the physician to submit a claim to Medicare on his or her behalf.  Physicians who opt 
out of the Medicare program must sign a new contract with each beneficiary at the 
beginning of each 2-year period for which they have chosen to opt out of the Medicare 
program.12 
 
Physician and Medicare Administrative Contractor Responsibilities 
Physicians who elect to opt out of the Medicare program must sign written affidavits 
stating that they will comply with Federal requirements for opting out.  These 
requirements provide that: 
 
  physicians may not submit claims to Medicare for any service provided during 
their 2-year opt-out period, beginning on the date the affidavit is signed;13 and 
  physicians may not receive direct or indirect Medicare payment for services 
furnished to Medicare beneficiaries with whom they have privately contracted.14   
 
CMS uses MACs to enroll providers and process Medicare claims.  No later than 10 days 
after the physician enters into the first private contract with a beneficiary, the physician 
must file a signed affidavit with all MACs that have jurisdiction over claims that the 
physician would otherwise file with Medicare.  This requirement is intended to ensure 
that a MAC can prevent improper payments to opted-out physicians.  However, an 
opted-out physician may submit claims to Medicare for emergency and urgent care 
services provided to beneficiaries who have not signed private contracts with that 
                                                 
9 Ibid. 
10 CMS, Medicare Benefit Policy Manual [Internet-Only Manual], Pub.100-02, ch. 15,  40.13.  Accessed at 
http://www.cms.hhs.gov/Manuals/IOM/list.asp on June 14, 2011. 
11 42 CFR  405.415. 
12 42 CFR  405.415(o). 
13 SSA  1802(b)(3)(B)(ii). 
14 Ibid. 
OEI-07-11-00340      Lack of Data Regarding Physicians Opting Out of Medicare  Page 4  Marilyn Tavenner 
 
physician.15  In addition, an opted-out physician may refer and order services to be 
provided by a non-opted-out physician.16 
 
MACs are required to maintain information about opted-out physicians.17  At a 
minimum, MACs must maintain:  (1) the name of the physician, (2) the physicians 
National Provider Identifier (NPI), (3) the effective date of the opt-out affidavit, and (4) 
the end date of the opt-out period.  MACs may maintain additional data elements at their 
discretion.  MACs are required to provide CMS with quarterly counts of newly opted-out 
physicians by physician specialty; however, they are not required to identify the 
physicians by name or NPI in their reports.18  To keep Medicare managed care plans 
apprised of which physicians have opted out, MACs must develop data exchange 
mechanisms with managed care plans in their service area.19  MACs may establish a Web 
site to meet this requirement.  
 
METHODOLOGY 
 
We sought to obtain data on opted-out physicians both from CMS and from individual 
MACs and legacy carriers (i.e., Medicare claims payment contractors that remain in 
jurisdictions not yet awarded to MACs).  A CMS official provided us with a list of 
approximately 7,900 opted-out providers (e.g., physicians and nonphysician 
practitioners), which included opted-out providers from 1998 to March 2011.  This 
official indicated that the data were updated by using the lists of opted-out providers 
posted on MAC and legacy carrier websites.  These data did not indicate the end dates of 
the opt-out periods.  In some cases, affidavit effective dates were as early as 1998; 
however, there was no information to indicate whether the opt-out extended past the 
initial 2-year opt-out period.  The CMS official stated that the MACs and legacy carriers 
would have the best available data on opted-out physicians. 
 
In July 2011, we requested information from each MAC and legacy carrier regarding 
opted-out physicians for the period January 2009 through June 2011.  Our request 
specifically called for the following data elements:  (1) demographic (i.e., name, address, 
and NPI) and specialty information for each opted-out physician, (2) effective date of 
opt-out, and (3) if applicable, date of the physicians return to Medicare 
(i.e., reinstatement date).  We note that these data elements are a combination of (1) data 
elements that CMS requires MACs and legacy carriers to maintain for opted-out 
physicians, and (2) data elements accessible in their internal enrollment databases or the 
Provider Enrollment Chain Ownership System (PECOS).  We requested this information 
from all 10 MACs and 6 legacy carriers that pay Part B Medicare claims.  After at least 
three requests via telephone and email, as of September 2011 we had received data from 
                                                 
15 CMS, Medicare Benefit Policy Manual [Internet-Only Manual], Pub.100-02, ch. 15,  40.28.  Accessed at 
http://www.cms.hhs.gov/Manuals/IOM/list.asp on June 14, 2011. 
16 CMS, Medicare Benefit Policy Manual [Internet-Only Manual], Pub.100-02, ch. 15,  40.32.  Accessed at 
http://www.cms.hhs.gov/Manuals/IOM/list.asp on June 14, 2011. 
17 CMS, Medicare Benefit Policy Manual [Internet Only Manual], Pub.100-02, ch. 15,  40.20.  Accessed at 
http://www.cms.hhs.gov/Manuals/IOM/list.asp on June 14, 2011. 
18 CMS, Medicare Benefit Policy Manual [Internet Only Manual], Pub.100-02, ch. 15,  40.40.  Accessed at 
http://www.cms.hhs.gov/Manuals/IOM/list.asp on June 14, 2011. 
19 CMS, Medicare Benefit Policy Manual [Internet Only Manual], Pub.100-02, ch. 15,  40.21.  Accessed at 
http://www.cms.hhs.gov/Manuals/IOM/list.asp on June 14, 2011. 
OEI-07-11-00340      Lack of Data Regarding Physicians Opting Out of Medicare  Page 5  Marilyn Tavenner 
 
seven MACs and four legacy carriers.  However, the data provided were often 
incomplete.  Only one MAC and one legacy carrier provided all data elements that CMS 
requires. 
 
Table 1 shows the number of MACs and legacy carriers that provided each data element 
in response to our request.  Detailed information can be found in the Appendix. 
 
Table 1:  Number of MACs and Legacy Carriers That Provided Data Elements 
 
Number of 
MACs/Legacy 
Data Element 
Carriers 
(n=11) 
Physician Name  11 
NPI  5 
Specialty  10 
Address  7 
Opt-Out Effective Date  11 
Opt-Out Expiration Date  6 
Reinstatement Date  3 
 
Standards 
This study was conducted in accordance with the Quality Standards for Inspection and 
Evaluation issued by the Council of the Inspectors General on Integrity and Efficiency. 
 
RESULTS 
 
We were unable to answer the issue questions in our proposed study on opted-out 
physicians because no centralized data exist and the data that we received from MACs 
and legacy carriers were insufficient or not provided at all.  Specifically, we cannot 
determine the characteristics of physicians who opt out of Medicare, the trend in the 
number of opted-out physicians, or why physicians choose to opt out of Medicare. 
 
No Centralized Data on Opted-Out Physicians Exist 
We sought to obtain data on opted-out physicians from CMS; however, CMS currently 
maintains no such data.  A CMS official stated that the MACs and legacy carriers would 
have the most complete data.  We note that entering data into PECOS could be one 
method to compile centralized data on opted-out physicians.  However, a CMS official 
stated that some, but not all MACs and legacy carriers have been entering opt-out data 
into PECOS from information contained on physician affidavits received since 
January 1, 2010.  In September 2011, CMS issued guidance to MACs and legacy carriers, 
effective immediately, about entering opt-out affidavit information into PECOS.  Further 
guidanceissued in November 2011 and effective April 1, 2012requires MACs and 
legacy carriers to capture opt-out affidavit information from affidavits received on or 
after January 1, 2009. 
OEI-07-11-00340      Lack of Data Regarding Physicians Opting Out of Medicare  Page 6  Marilyn Tavenner 
 
Not All MACs and Legacy Carriers Reported Data to OIG 
Despite at least three requests via telephone and email, we did not receive data from 3 of 
10 MACs and 2 of 6 legacy carriers.  Without data from all MACs and legacy carriers, 
we cannot create a complete universe of opted-out physicians.  Without a complete list, 
we cannot sample opted-out physicians for the purposes of conducting interviews with 
them.   
 
MACs and Legacy Carriers Failed to Maintain Required Elements 
The MACs and legacy carriers are not maintaining all required data elements for 
opted-out physicians.  For example, not all MACs and legacy carriers are tracking the 
expiration dates of affidavits.  In cases in which these dates are tracked, it is unclear 
whether the information is used to ensure that those physicians who were once enrolled in 
Medicare are automatically reenrolled in Medicare or are excluded from filing claims 
until they actively reenroll in Medicare.  The September 2011 guidance addresses the 
steps that MACs and legacy carriers should take if the opt-out period expires without the 
physician renewing the opt-out status or enrolling in Medicare.     
 
CONCLUSION 
 
The quality of the data and lack of procedures for MACs handling of opted-out 
physicians impedes CMSs oversight of this aspect of the Medicare program.  Monitoring 
the number of opted-out physicians and their specialties is important to ensure that 
Medicare beneficiaries have sufficient access to providers.  Based on the limited data that 
we received, the number of opted-out physicians appears to have increased each year 
from 2006 to 2010.  More physicians may opt out in the near future, given the potential 
for legislated decreases in Medicare reimbursement for physician services.  
 
Although we acknowledge that CMS guidance addresses the procedures that MACs and 
legacy carriers must have in place for processing opt-out affidavits, we believe that 
further direction is necessary to account for data on physicians who filed affidavits 
between 1998 and 2008.  This information is essential for CMS oversight of opted-out 
physicians, which would be aided by the ability to assess trends in the numbers and 
locations of opted-out physicians.  We plan to conduct a full evaluation when a complete 
data source of opted-out physicians is available.   
 
This report is being issued directly in final form because it contains no recommendations.  
If you have comments or questions about this report, please provide them within 60 days.  
Please refer to report number OEI-07-11-00340 in all correspondence. 
OEI-07-11-00340      Lack of Data Regarding Physicians Opting Out of Medicare  Page 7  Marilyn Tavenner 
 
APPENDIX 
 
Data Elements Provided by Medicare Administrative Contractors and Legacy Carriers to 
the Office of Inspector General 
Data Elements Provided 
Contractor 
Jurisdiction/  National  Specialty  Address  Opt-Out  Opt-Out 
Physician  Reinstatement 
Name  Provider  Effective  Expiration 
Name  Date 
Identifier  Date  Date 
Medicare Administrative Contractors 
1 and 11  Palmetto               
3  Noridian  No Data Received 
4  Trailblazer               
5  Wisconsin 
             
Physicians Service 
9  First Coast 
             
Service Options 
10  Cahaba               
12  Highmark  No Data Received 
13  National 
No Data Received 
Government Services 
14  National 
Heritage Insurance               
Corporation 
15  Cigna               
Legacy Carriers 
Cahaba  Mississippi               
Cigna  Idaho                
National Government 
No Data Received 
Services  Indiana 
Noridian  Alaska, 
No Data Received 
Oregon, Washington  
Pinnacle  Arkansas, 
             
Louisiana 
Wisconsin 
Physicians Service  
             
Illinois, Michigan, 
Minnesota, Wisconsin 
   Total  11  5  10  7  11  6  3 
Source:  Office of Inspector General analysis of data provided by Medicare administrative contractors and legacy carriers, 2011. 
 
OEI-07-11-00340      Lack of Data Regarding Physicians Opting Out of Medicare