DEPARTMENT OF HEALTH & HUMAN SERVICES 	 Office of Inspector General 

Washington, D.C 20201 

JAN· 26·2012 

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. 
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OEI-07-11-00340 Lack of Data Regarding Physicians Opting Out of Medicare 

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.
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OEI-07-11-00340 Lack of Data Regarding Physicians Opting Out of Medicare 

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 

beneficiary’s legal representative accepts full responsibility for payment of the 

physician’s 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 beneficiary’s 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

• physicians may not receive direct or indirect Medicare payment for services 

furnished to Medicare beneficiaries with whom they have privately contracted.

and

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.
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OEI-07-11-00340 Lack of Data Regarding Physicians Opting Out of Medicare 

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 physician’s 

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 physician’s 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.
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OEI-07-11-00340 Lack of Data Regarding Physicians Opting Out of Medicare 

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

Data Element

Number of 

MACs/Legacy 

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 

guidance—issued in November 2011 and effective April 1, 2012—requires MACs and 

legacy carriers to capture opt-out affidavit information from affidavits received on or 

after January 1, 2009. 
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OEI-07-11-00340 Lack of Data Regarding Physicians Opting Out of Medicare 

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 CMS’s 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. 
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OEI-07-11-00340 Lack of Data Regarding Physicians Opting Out of Medicare 

APPENDIX

Data Elements Provided by Medicare Administrative Contractors and Legacy Carriers to 

the Office of Inspector General

Contractor 

Jurisdiction/

Name

Data Elements Provided

Physician 

Name

National 

Provider 

Identifier

Specialty Address Opt-Out 

Effective 

Date

Opt-Out 

Expiration 

Date

Reinstatement 

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 

Government Services No Data Received

14 – National 

Heritage Insurance 

Corporation

    

15 – Cigna      

Legacy Carriers

Cahaba – Mississippi    

Cigna – Idaho      

National Government 

Services – Indiana No Data Received

Noridian – Alaska, 

Oregon, Washington No Data Received

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.