Cash-Pay PT and Medicare: What the Rules Actually Allow

A physical therapist in the United States cannot opt out of Medicare. That undermines the usual cash-pay shortcut, “just don’t enroll and treat Medicare patients for cash,” which runs into two separate legal walls: the mandatory claim submission rule, and a regulation that blocks even a non-enrolled provider from collecting from a beneficiary for a covered service. Occupational therapists and chiropractors are in the same position: the opt-out law defines “practitioner” by a closed list of eight provider types, and none of the three is on it.

None of that means a cash-pay or hybrid PT practice is dead on arrival. What’s actually available depends on two questions, asked in order: is the patient a Medicare beneficiary, and is the specific service covered by Medicare. Answered correctly, there is a real, legal cash-pay lane for therapy that falls outside the Medicare benefit entirely, and a narrower one for services Medicare might end up denying. What is not available, outside one narrow exception, is an unlimited cash rate for medically necessary covered therapy just because a claim never gets filed.

This guide works through the statutory chain, the enrollment postures that determine what you can collect in cash, CMS’s enforcement path when a beneficiary complains, and where a bill in Congress that would change this currently stands. Current as of September 2026.

Why physical therapists can’t opt out of Medicare

Medicare’s opt-out mechanism, at SSA §1802(b)(1), lets a “physician or practitioner” enter a private contract with a beneficiary, one in which no claim is submitted and no Medicare payment is made, after filing an affidavit with the Secretary within 10 days committing not to submit any Medicare claim during the “applicable 2-year period” (§1802(b)(3)).

“Practitioner” is not generic here. §1802(b)(6) defines it by cross-reference to SSA §1842(b)(18)(C), which lists exactly eight categories: physician assistants, nurse practitioners, and clinical nurse specialists; certified registered nurse anesthetists; certified nurse-midwives; clinical social workers; clinical psychologists; registered dietitians or nutrition professionals; marriage and family therapists; and mental health counselors (the last two added effective January 1, 2024). Physical therapists are not on that list, and neither are occupational therapists or chiropractors. 42 CFR 405.400 repeats the same closed list in its own definition of “Practitioner.”

CMS states the conclusion for therapists directly in the Medicare Benefit Policy Manual, Ch. 15, §40.4 (Rev. 62; chapter Rev. 13889, issued 07-30-26), a section last revised in 2006 that still shows the pre-2024 list of practitioners but reaches the same conclusion: “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’.” Chiropractors are excluded for a related reason: “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.” The same chapter is categorical: “Only physicians and practitioners that are listed in §40.4 may opt out.”

What mandatory claim submission actually requires

Even setting opt-out aside, PTs face an independent duty: mandatory claim submission. SSA §1848(g)(4)(A) requires that, for services furnished on or after September 1, 1990, “within 1 year after the date of providing a service for which payment is made under this part on a reasonable charge or fee schedule basis, a physician, supplier, or other person … 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, and … may not impose any charge relating to completing and submitting such a form.” Note the reach: “a physician, supplier, or other person,” not only opt-out-eligible practitioners, with no fee allowed for filing.

CMS restates the duty operationally in the Medicare Claims Processing Manual, Ch. 1, §70.8.3 (Rev. 12909, effective 11-26-24; chapter Rev. 13826, issued 06-11-26), and pairs it with a charge limit in the Medicare Benefit Policy Manual, Ch. 15, §40: physicians and practitioners “are not allowed to charge beneficiaries in excess of the limits on charges that apply to the item or service being furnished,” with one exception, “this subsection does not apply to noncovered charges.” The filing window: claims must go in “no later than the period ending 1 calendar year after the date of service” (SSA §1842(b)(3)(B)).

Penalties are specific. §1848(g)(4)(B)(ii) subjects anyone who fails to submit a required claim, or who charges for filing one, to a borrowed sanction: the penalty is applied “in the same manner as” the one at §1842(p)(3), a provision written for missing diagnosis codes. That sanction is a civil money penalty of “an amount not to exceed $2,000” for a knowing and willful violation, escalating on repeated, willful violations after notice to exclusion “from participation in the programs under this chapter for a period not to exceed 5 years” (§1842(j)(2)(A)). That $2,000 figure is the statutory base; HHS adjusts CMPs for inflation annually under 45 CFR 102.3 (2025 adjustments), though this violation has no distinct adjusted line. Enforcement runs through CMS, not the beneficiary: CMS “is responsible for assessing sanctions and monetary penalties for noncompliance” (Claims Processing Manual, Ch. 1, §70.8.6.1).

Three enrollment postures, and what each lets you collect in cash

A PT in private practice is a Medicare Part B “supplier” once enrolled, per 42 CFR 410.60(c): state licensure, and practicing as a solo practice, partnership, group practice, or as an employee of one. Enrollment status, not opt-out status, is what actually governs how much a PT practice may collect from a Medicare beneficiary in cash.

Participating. A participating PT accepts assignment on every claim and is paid the fee schedule amount in full (split 80/20 with the beneficiary’s coinsurance after the deductible), and cannot charge more than that amount for covered services.

Non-participating. The posture most cash-friendly hybrid practices want. A non-participating supplier isn’t required to accept assignment (Claims Processing Manual, Ch. 1, §70.8.6.1), and the statute sets a defined, higher ceiling rather than an open market rate: the fee schedule amount is “95 percent of such amount otherwise applied” (SSA §1848(a)(3)), and the limiting charge is “115 percent of the recognized payment amount … for nonparticipating physicians or for nonparticipating suppliers or other persons” (§1848(g)(2)(C)), a hard ceiling: “No person may bill or collect an actual charge for the service in excess of the limiting charge” (§1848(g)(1)(A)). It applies to PTs by name: Claims Processing Manual, Ch. 1, §30.3.12.3 says it governs “Outpatient physical therapy services furnished by an independently practicing physical therapist.”

Run the numbers on a $100 participating fee schedule amount:

That 95 percent × 115 percent stack, 109.25 percent of the participating rate, is the actual cash-pay math for non-participating PTs. Collect more, and the excess must be refunded; repeated willful violations, or a failure to correct or refund, can trigger sanctions, up to $19,940 under the 2025 inflation-adjusted maximum penalty for §1848(g)(1)(B), per 45 CFR 102.3.

Not enrolled. This is the posture the “just don’t enroll” advice assumes is a clean exit, and it isn’t. 42 CFR 424.505 is not limited to claims filed with Medicare: “To receive payment for covered Medicare items or services from either Medicare (in the case of an assigned claim) or a Medicare beneficiary (in the case of an unassigned claim), a provider or supplier must be enrolled in the Medicare program.” A non-enrolled PT has no assigned charge limit, but that isn’t a loophole: 424.505 independently bars collecting anything from a beneficiary for a covered service without enrollment. The only place a non-enrolled PT can legally collect cash from a Medicare beneficiary is for a service that isn’t covered by Medicare at all, the question below.

Question 1: is the patient a Medicare beneficiary?

Before anything else, confirm status, including both traditional Medicare and Medicare Advantage (an MA enrollee is still a beneficiary; more on MA below). Ask directly, verify through an eligibility check, and get a signed intake attestation distinguishing true self-pay patients from Medicare beneficiaries seeking a service that may or may not be covered. Get this wrong, and every downstream decision rests on a false premise.

Question 2: is the service covered by Medicare?

Once the patient is confirmed as a beneficiary, coverage splits into three buckets, each with a different cash-pay answer.

Bucket 1: categorically excluded, or outside the Part B therapy benefit. Manual Ch. 15, §40.19 states the principle: “Because Medicare’s rules do not apply to items or services that are categorically not covered by Medicare, a private contract is not needed to furnish such items or services to Medicare beneficiaries, and Medicare’s claims filing rules and limits on charges do not apply to such items or services.” CMS’s example is hearing aids; for a PT practice, think wellness or fitness programming that was never part of the Part B therapy benefit, not a plan-of-care service that simply didn’t work out. §40.24 confirms no ABN is needed here either: “An ABN is not needed where the item or service is categorically excluded from Medicare coverage or outside the scope of the benefit.” This is the clean cash lane: no claim, no charge limit, no ABN.

Bucket 2: within the benefit generally, but not reasonable and necessary in this case. Coverage for Part B therapy turns on medical necessity: SSA §1862(a)(1)(A) bars payment for services “not reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member,” and Manual Ch. 15, §220.2 frames the test around whether a service “require[s] the skills of a therapist to safely and effectively furnish a recognized therapy service whose goal is improvement of an impairment or functional limitation.” One caution: a plateau alone doesn’t settle the question, since the same section allows skilled maintenance care to remain covered under a maintenance program.

§40.19 is explicit that a non-opt-out provider still owes Medicare a claim before collecting anything: “If the physician or practitioner or other supplier has given a proper Advance Beneficiary Notice (ABN), he or she may collect from the beneficiary the full charge if Medicare does deny the claim.” An ABN is not a private contract: per §40.24, it is used “when the physician/practitioner believes that Medicare will not make payment,” and once a valid ABN is on file and a submitted claim is denied, the denial “relieves the non-opt-out physician/practitioner, or other supplier, of the limitations on charges that would apply if the services were covered.” The GA/GX/GY/GZ modifier mechanics and their interaction with the annual CY 2026 KX threshold are covered in our ABN and modifiers guide and KX threshold guide.

Bucket 3: covered. If the service is medically necessary and squarely within the benefit, the full mandatory-claim-submission and charge-limit rules above apply without exception. There is no cash-pay option here beyond the narrow exception below.

The ‘beneficiary refuses’ exception, and why it’s narrower than it sounds

There is exactly one situation where a non-opt-out PT is excused from filing a claim for a covered service. Per Manual Ch. 15, §40: “The only situation in which non-opt-out physicians or practitioners, or other suppliers, are not required to submit claims to Medicare for covered services is 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.” But: “the limits on what the physician, practitioner, or other supplier may collect from the beneficiary continue to apply to charges for the covered service, notwithstanding the absence of a claim to Medicare.” The charge limit doesn’t disappear because the claim does: participating PTs stay capped at the fee schedule amount, non-participating PTs at the limiting charge (109.25 percent). A non-enrolled PT has no assigned charge limit but is still blocked by 424.505 from collecting for a covered service at all, so this exception offers a non-enrolled practice nothing.

The manual sets no documentation standard for a valid refusal, a reason for caution, not comfort: the refusal should be unsolicited, in the beneficiary’s own words (not a practice-drafted form), kept on file, and understood to never authorize charging above the applicable limit. This is the narrowest, least-defined exception in the framework, and agreements that purport to waive claims-filing requirements have “no legal force and effect,” so get compliance counsel involved before building a process around it.

Decision table: enrollment posture by service type

Enrollment status changes the price ceiling on covered and questionable-coverage services; it never opens a path to cash for medically necessary covered care outside the beneficiary-refusal exception.

What to document

Four things belong in the chart or billing file, matched to the buckets above:

• A beneficiary status attestation, from intake, before anything gets priced.
• A properly completed ABN for bucket 2 services, with the beneficiary’s own claim-submission choice honored: “Providers and suppliers must follow the beneficiary’s directive for claim submission as indicated on the ABN” (Manual Ch. 15, §40).
• A beneficiary refusal in the beneficiary’s own words, kept on file, if relying on the narrow exception above, never a boilerplate waiver.
• A certified plan of care for bucket 3 services, since coverage is conditioned on a certified plan of care; see our documentation requirements guide for the broader standard.

This is the record that determines which bucket a service actually falls into if a MAC, or a beneficiary complaint, ever asks.

Do Medicare Advantage patients change the answer?

Not fundamentally, but one extra rule applies. 42 CFR 422.214(a)(1) requires a provider without a contract for an MA coordinated care, MSA, or private fee-for-service plan to “accept, as payment in full, the amounts that the provider could collect if the beneficiary were enrolled in original Medicare,” and subsection (a)(2) extends every relevant statutory provision, penalties included, to that payment. In plain terms: a non-contracted PT treating an MA enrollee is capped at the same amount as for a traditional Medicare beneficiary, participating fee schedule or non-participating limiting charge, whichever posture applies. Plan-specific network and authorization rules are a separate topic; the charge ceiling is not.

Where the physical therapist opt-out bill stands

Legislation would change all of this. The Medicare Patient Choice Act, H.R. 4204 (119th Congress), sponsored by Reps. Lloyd Smucker (R-Pa.) and Don Davis (D-N.C.) and endorsed by APTA, would add physical therapists to the list of providers eligible to opt out of Medicare; APTA reports it would also extend eligibility to occupational therapists, speech-language pathologists, audiologists, and chiropractors. Per GovTrack, the bill was introduced June 26, 2025, has six cosponsors (three Republicans, three Democrats), and remains at the “Introduced” stage, with no committee or floor action, as of September 2026.

Quick answers

Can a physical therapist opt out of Medicare?

No. The opt-out law’s definition of “practitioner” is a closed list of eight provider types, and PTs, OTs, and chiropractors aren’t among them (SSA §1842(b)(18)(C); Manual Ch. 15, §40.4). H.R. 4204 would change this, but remains at the introduced stage as of September 2026.

Can a PT practice just not enroll in Medicare and treat patients for cash?

Not for covered services. 42 CFR 424.505 requires enrollment to collect from a beneficiary for a covered service, whether or not a claim is ever filed. Non-enrollment only works for services categorically outside the Medicare therapy benefit to begin with.

How much can a non-participating PT charge a Medicare beneficiary?

Up to the limiting charge: 115 percent of the non-participating fee schedule amount, which is itself 95 percent of the participating rate, for an effective ceiling of 109.25 percent of the participating amount (SSA §1848(a)(3) and (g)(2)(C)). Collecting more requires a timely refund of the excess.

Do I need an ABN to bill cash for a service Medicare might not cover?

It depends which bucket the service falls into. Services categorically outside the Medicare benefit need no ABN. Services generally covered but questionable in this case do need an ABN plus a submitted claim before cash can be collected after a denial (Manual Ch. 15, §40.19 and §40.24).

What happens if a beneficiary complains that a practice refused to bill Medicare?

The beneficiary can file Form CMS-1490S with the MAC, which pays the beneficiary’s claim directly and tells them the provider was required by law to submit a claim and to enroll in Medicare (Claims Processing Manual, Ch. 1, §70.8.3 and §70.8.6.1). CMS, not the beneficiary, then assesses any sanctions.

The line between what a practice can bill Medicare and what it can bill in cash comes down to how a service is coded and tracked, not a judgment call at checkout. PrismEHR lets organizations define their own billing rules, including minute and unit restrictions by code and payer, enforced at the point of documentation and reinforced again at claim creation, and tracks each beneficiary’s accrued therapy expenses against the KX threshold as claims are documented. For a hybrid practice running insurance-billed therapy alongside cash-pay wellness programming, that keeps covered visits on the claim path with the right payer rules applied, and non-covered services off it. See how it fits physical therapy practices and wellness clinics, and pair this guide with our breakdown of ABN use and the GA/GX/GY/GZ modifiers for bucket 2 services.