Cash-Based Physical Therapy: Medicare and Self-Pay Rules

Cash-based physical therapy means the patient pays the practice directly for care, instead of the practice billing an insurer under a network contract. In the USA the term covers several models, from dropping one or two insurance contracts to taking no insurance at all. Two federal rules shape the rest. Physical therapists (PTs) cannot opt out of Medicare, so a Medicare-covered service for a Medicare patient still goes through Medicare. And under the No Surprises Act, someone paying for their own care is entitled to a good faith estimate of what it is expected to cost.

Read it if you are a US physical therapist or clinic owner weighing up a cash-based model, or a patient deciding whether to see one. The quotes come from federal regulations, from the Centers for Medicare and Medicaid Services (CMS) and from the American Physical Therapy Association (APTA). You will find no fees, rates or income figures here, because none of those can be stated fairly for every market. The page is education only, not billing or legal advice. Check the current rules and speak to a health care attorney before you change how the practice gets paid.

What does cash-based physical therapy mean?

APTA's cash-based practice page says the term "cash practice" "can be confusing because it is often used to describe a variety of physical therapy business models." Its page on defining cash practice sets out four of them:

Collection at time of service. You stay in network with your insurers but collect copays and deductibles at the visit, along with any other fees the patient owes, instead of sending a bill later.
Limited insurance contracts. You keep the payer contracts that work for the practice and end the rest, which APTA calls "a hybrid model with some in-network contracts and some out-of-network patients."
No insurance contracts. The practice is out of network for every private insurer. Patients pay in full at the visit, or the practice bills the insurer and then bills the patient for the balance.
Noncovered services. Care most plans do not pay for, such as fitness and wellness programs, prevention work or sports performance training. The practice sets the fee and usually collects it at the time of service.

In this guide, cash-based physical therapy mostly means the third model, where the patient pays and no network contract sets the fee, with the fourth often running beside it. APTA uses the two phrases together. Its hub page says "Out-of-network, or cash-based, models can allow PTs to avoid restrictions placed on their services by third-party payers that interfere with their ability to help patients reach their goals."

There is a cost, and APTA names it. Out of network, "you will likely save administrative costs by not having to deal with insurance negotiations, billing, and collections." But "As your practice will no longer be listed in health insurance directories, you may lose some of your referrals from participating physicians whose patients prefer to remain in network." APTA says a gradual approach is more common than an immediate move for all payers, and suggests starting with "1 or 2 payer contracts that don't cover your costs."

In-network, out-of-network and self-pay care compared

The words sound alike, but the obligations differ.

	In network	Out of network	Self-pay
Contract with the patient's insurer	Yes	No	Not used for this care
Who pays the practice	The insurer, plus the patient's share	The patient, the insurer, or both, depending on the arrangement	The patient
Claim to the insurer	The practice submits it	The practice or the patient, depending on the arrangement	None
Main rule to check	Your payer contract	The patient's plan benefits	The good faith estimate rules

In network, APTA explains that PTs are "generally obligated to accept the payment provided to them by the insurer and any required out-of-pocket copay from the patient as payment in full." Selling extra services to those patients is not automatic. APTA's examples include treatment beyond the authorized visits and maintenance therapy, as well as fitness services. It says the clinic owner "should review their contract and understand and comply with the policies of each individual payer."

Out of network, APTA lists three ways to be paid. You can "Collect payment directly from patients at the time of service and provide an itemized bill for them to submit to their health insurer." You can "Collect from patients at the time of service and offer to send courtesy bills to the insurer on their behalf." Or you can "Accept assignment, bill the insurer, and bill the patient for the balance once the insurer has paid." What the patient gets back from their plan depends on the plan, so do not promise a figure. The out-of-network and superbill guide covers what goes on that itemized bill and how the estimate rules look when a patient plans to claim later.

Medicare sits outside all of this. The sections below explain why.

Can physical therapists opt out of Medicare?

No. The opt-out law lets physicians and certain other practitioners leave Medicare and sign private contracts with Medicare patients. Physical therapists are not among them. The Medicare Benefit Policy Manual settles it in chapter 15, section 40.4: "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'."

The current regulation says the same. For private contracts, 42 CFR 405.400 defines a practitioner as a physician assistant, nurse practitioner, clinical nurse specialist, certified registered nurse anesthetist, certified nurse midwife, clinical psychologist, clinical social worker, marriage and family therapist, mental health counselor, or registered dietitian or nutrition professional. Physical therapists are not on the list. APTA's compliance page puts it plainly: "Federal law does not allow physical therapists to opt-out of the Medicare program."

Staying out of Medicare enrollment does not solve this either. APTA says "Medicare laws regarding claims filing and the limiting charge apply to those enrolled in Medicare and to those who are not, meaning that PTs don't avoid penalties for noncompliance by not being enrolled in the Medicare program." Its compliance page warns that if a PT who is not enrolled "accepts payment directly from a Medicare patient for a service that is covered under Medicare, he or she could be subject to federal investigation and financial and other penalties."

That is why APTA notes that "some practices choose to be out-of-network for private insurers while continuing as Medicare providers." Everything in this section is about Original Medicare. This guide does not cover Medicare Advantage plans, so check with each plan and a billing specialist.

Medicare's claim submission rule

Section 40 of the same chapter sets the default: "Normally physicians and practitioners are required to submit claims on behalf of beneficiaries for all items and services they provide for which Medicare payment may be made under Part B." Chapter 1 of the Medicare Claims Processing Manual, section 70.8.6.1, adds: "Physicians and suppliers who fail to submit a claim or who impose a charge for completing the claim are subject to sanctions."

Section 40 of the Benefit Policy Manual names one exception. "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." Even then, the charge limits stay: "However, 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."

APTA reads that exception narrowly. Drawing on what it describes as guidance from legal counsel, APTA limits the "patient-refusal" exception: it "is available only to enrolled providers." A private agreement with the patient does not help either. The manual says: "Agreements with Medicare beneficiaries that are not authorized as described in these manual sections and that purport to waive the claims filing or charge limitations requirements, or other Medicare requirements, have no legal force and effect."

APTA works through several situations that come up in cash practices:

A patient of a PT who is not enrolled in Medicare signs up for Part B partway through care. APTA says: "The PT must either stop providing care to that patient or enroll in Medicare and submit claims for Medicare-covered services."
A patient who wants a PT who is not enrolled, after poor results with PTs who are. "The patient's lack of success with a Medicare-enrolled PT is irrelevant."
A practice enrolled as a group whose owner is not individually enrolled. APTA says "only the individually enrolled PTs within the practice can provide services to Medicare beneficiaries."
A patient who gets both covered and noncovered services. The PT "must be enrolled in the program and file claims for the covered services in the amount within the limiting charge," while the noncovered services "can be billed directly to the patient for out-of-pocket cash payment and are not subject to the limiting charge."

When can a Medicare patient pay you directly?

When the service is not covered. APTA's compliance page says "If the service is not covered under Medicare, the physical therapist can collect out-of-pocket payment from the patient." It then sorts noncovered services into three groups, each with its own notice rule:

Not a Medicare benefit under the statute at all. For these, APTA says the Advance Beneficiary Notice of Noncoverage (ABN) is advisable but not mandatory.
Not reasonable and necessary, for example further therapy for a patient whose skilled care is no longer supported. APTA says "an ABN must be issued prior to providing the additional therapy services."
A Medicare benefit that fails a coverage requirement and would get a technical denial. APTA says an ABN is not required but advisable.

CMS describes the ABN, Form CMS-R-131, as a notice given to Original Medicare patients "in situations where Medicare payment is expected to be denied," and says it is issued "in order to transfer potential financial liability to the Medicare beneficiary in certain instances." The form instructions state: "When Medicare is not likely to cover a specific item or service, health care providers and suppliers must use this ABN to let the patient know they may be financially liable before they get the items or services." They add: "The ABN may also be used to notify patients of their financial liability for items or services that Medicare never covers. When the ABN is used this way, the patient doesn't need to choose an option box or sign the notice."

Chapter 30 of the Medicare Claims Processing Manual fills in the rest. Section 50.2 lists care that is "not reasonable and necessary" among the cases that require an ABN. Section 50.2.1 says ABNs are not required for care that is statutorily excluded, which it describes as "care that is never covered," and that CMS strongly encourages issuing one for that care anyway. Section 40.2.2 limits how often notices are used: "Notifiers should only give written notices to beneficiaries when there is some genuine doubt that Medicare will make payment." The same section says "Giving written notices for all claims or items or services (i.e., 'blanket written notices') is not an acceptable practice." APTA agrees: "You should not ask every patient to sign an ABN form."

The hard part is clinical, not clerical. Whether a visit is skilled care that is reasonable and necessary comes down to the individual patient. Section 220.2 of chapter 15 says "Medicare coverage does not turn on the presence or absence of a beneficiary's potential for improvement from the therapy, but rather on the beneficiary's need for skilled care." So a plateau alone does not make skilled maintenance care noncovered. The KX modifier guide explains that standard, and when an ABN and the GA modifier apply after a patient has met their goals.

Calling a session "wellness" on your price list does not settle the question either. Section 40 says an agreement with a beneficiary "to exclude services from Medicare coverage" is ineffective, so check the service itself against Medicare's coverage rules.

Other public programs have their own limits. APTA notes that "The ability of Medicaid-enrolled providers to accept direct payment for noncovered services may vary by state." For workers' compensation, it says "all but a few states ban the practice of balance billing." For TRICARE, it says the policies "are complex and vary by region (East and West)," so check them before offering out-of-network care to military families. APTA also points out that federal law bars Medicare providers from billing people in the Qualified Medicare Beneficiary program for Medicare Part A and Part B cost-sharing "under any circumstances," so do not collect Medicare deductibles, coinsurance or copays from them at the visit.

Good faith estimates for uninsured and self-pay patients

The No Surprises Act rules on estimates took effect on January 1, 2022. APTA told PTs at the time that they may apply to them. CMS explains the rule for patients this way: "Usually, if you aren't using health insurance to pay for your care, your health care provider must give you a good faith estimate of expected charges if you request one or schedule services at least 3 business days in advance."

Who counts as self-pay

The regulation, 45 CFR 149.610, defines an "uninsured (or self-pay) individual" in two parts. The first covers someone who does not have benefits for the item or service under a group health plan, individual or group health insurance, a Federal health care program, or a Federal Employees Health Benefits plan. The second part is someone who does have benefits under a group health plan, health insurance or a Federal Employees Health Benefits plan "but who does not seek to have a claim for such item or service submitted to such plan or coverage."

Read those two parts closely if you see Medicare or Medicaid patients for cash services. Federal health care programs appear in the first part but not in the second. Ask your attorney how the rule applies to your own mix of patients. The regulation also has you ask whether the patient has coverage and, if they have a group health plan, health insurance or a Federal Employees Health Benefits plan, whether they want a claim submitted to it.

Deadlines for the estimate

CMS gives patients this timetable:

Scheduled 0 to 2 business days ahead: "you aren't entitled to get a good faith estimate."
Scheduled 3 to 9 business days ahead: "you'll get the estimate within 1 business day."
Scheduled 10 or more business days ahead: "you'll get the estimate within 3 business days."
Asked for without booking: the regulation allows up to 3 business days from the request.

The estimate itself must be written down. The regulation says it "must be provided in written form either on paper or electronically, pursuant to the uninsured (or self-pay) individual's requested method of delivery."

What goes in it

Paragraph (c)(1) of the regulation lists the contents. They include the patient's name and date of birth, a description of the main service, and an itemized list of the expected items and services showing the diagnosis and service codes and the expected charges. It also lists each provider's name, National Provider Identifier, Tax Identification Number and location, and it carries a set of disclaimers: that it is only an estimate and actual charges may differ, that it is not a contract, and that the patient can start the dispute process if billed charges are substantially higher. Check the full list in the regulation before you build a template.

Plans of care and recurring visits

A plan of care sets how often and for how long you will see the patient, and the regulation allows for that. One estimate is enough for recurring services as long as it gives "the expected scope of the recurring primary items or services (such as timeframes, frequency, and total number of recurring items or services)." The scope "must not exceed 12 months." If the scope changes, for example because you add visits or a new service, the regulation requires a new estimate "no later than 1 business day before the items or services are scheduled to be furnished." The estimate is easier to write when your plan of care already states the expected frequency and duration.

Telling patients, and keeping copies

You also have to tell people that estimates exist. That notice has to be "prominently displayed (and easily searchable from a public search engine) on the convening provider's or convening facility's website, in the office, and on-site where scheduling or questions about the cost of items or services occur." It must also be "Orally provided when scheduling an item or service or when questions about the cost of items or services occur." And the regulation says you "shall consider any discussion or inquiry regarding the potential costs of items or services under consideration as a request for a good faith estimate," so a price question on the phone can start the 3 business day clock. You must provide a copy of any estimate issued in the last 6 years if the patient asks for it.

When a bill is well above the estimate

The patient-provider dispute resolution process in 45 CFR 149.620 applies when a provider's total billed charges are "at least $400 more than the total amount of expected charges listed on the good faith estimate for the provider or facility." The comparison is made provider by provider, not across the whole estimate. The patient must start the process within 120 calendar days of receiving the first bill with those charges. Realistic estimates, reissued whenever the plan changes, are the simplest protection.

State rules to check

Federal rules are only part of it. Before you change your model, read these at state level:

Direct access. Cash patients may book without a referral, and some states attach day limits, visit limits, experience requirements or written notices. The direct access guide covers what applies if you practice in Texas, Florida or New York, and the questions to ask of your own practice act. Some of those notices tell the patient that insurance may not cover care without a referral, which matters when a patient plans to claim later.
Medicaid. APTA says rules on direct payment for noncovered services "may vary by state," and that both enrolled and non-enrolled PTs should check state regulations before accepting payment from Medicaid beneficiaries.
Workers' compensation. Check your state's balance billing rules before you take any payment from an injured worker.
Your board's rules on fees and advertising. What you publish about prices and results has to meet them. The physical therapy marketing guide covers US advertising and testimonial rules.
Your existing payer contracts. APTA suggests you "Review all existing payer contracts to see if any prohibit you from collecting for non-covered services," and read the termination terms before you give notice. If the practice itself is new, the licensing, entity and enrollment steps are in how to start a physical therapy private practice.

Communicating value and prices to patients

The points in this section are suggested practice, not legal requirements. Where a point comes from APTA's out-of-network guidance, it says so.

Start from the patient's choice. APTA warns: "Keep in mind that if a patient can receive the same value or same service from an in-network provider with no out-of-pocket cost, he or she will likely choose to stay in-network." A cash-based practice has to be worth the difference to that patient, and the reasons APTA lists are ordinary ones: a recommendation from someone they trust, a convenient location and hours, and expertise or a level of service they cannot find elsewhere.

In practice:

Keep one fee schedule. APTA says "it is recommended that you bill based upon a single fee schedule for all of the services that you provide." If you offer discounts, APTA advises you "establish a policy for discounts and apply them consistently." Working out the numbers behind that schedule is covered in how to price physical therapy sessions and packages.
Make prices easy to find. APTA suggests you "Consider posting (or making available) a list of the services that you offer and your fee schedule." You already have to publicize the right to a good faith estimate, so put the two together.
Put money rules in writing. APTA recommends a "written financial policy for all patients and clients to read and sign." Your cancellation and no-show policy belongs in the same paperwork.
Talk about cost with the plan, not after it. APTA says the PT "should mention the out-of-network status of the practice and make certain that the patient is able to afford the visits necessary to reach the goals." If they cannot, APTA notes that the plan can often be changed "through increased emphasis on home program or other adjustments," and sometimes the right answer is helping the patient find an in-network practice.
Show progress in numbers the patient cares about. Measure at the start and at set points, and share the change. The outcome measures guide and the Patient-Specific Functional Scale are good places to start.
Be honest about insurance. If a patient asks whether their plan will pay you back, offer to help them find out, but do not promise an amount. Their plan decides that.
Keep promises about results out of your pitch. Explain the plan, how many visits you expect and what each one is for. That says more than any guarantee.

The home program between paid visits

When a patient pays for every visit, the home exercise program (HEP) carries more of the plan. APTA's guidance points to "increased emphasis on home program" as one way to adjust a plan the patient cannot afford in full, which makes the HEP part of what the patient is paying for. It should match what you wrote in the plan, with the dose and the reason for each exercise. For exercise choice and dosing, see writing a home exercise program.

PocketPhysio was made for this part of care. You put the program together from the library, give each exercise its dose and write a cue for it in your own words; every exercise already has its video and a spoken voice guide. Patients get it as a link, an SMS message or an email, or find it waiting in their Pocket Physio Care app, and WhatsApp also works. At the next paid visit you can see the previous program and build on it. Prices are in the app.

For keeping patients coming back once they have paid for a plan, see the patient retention guide.

Questions for patients before booking a cash-based PT

A cash-based physical therapist can be a good choice. Ask a few things first:

Is the practice in network with my plan? If not, how will I be billed, and will I get paperwork I can send to my insurer myself?
If I have Medicare, is this PT enrolled in Medicare? A PT cannot opt out of Medicare, so covered services are billed to Medicare. For a service Medicare may not pay for, you may be asked to sign an ABN before you receive it.
If I am paying for myself, can I have a good faith estimate? You can ask for one at any time, and you should get one automatically if you book at least 3 business days ahead.
How many visits does the PT expect, over what period, and what will I do at home in between?
Can I book without a doctor's referral in my state? The direct access guide explains the rules.

Keep your estimate. If a provider bills you at least $400 more in total than that provider's part of the estimate, you can dispute it within 120 calendar days of receiving the first bill with those charges. And some symptoms need a doctor before physical therapy, a few of them urgently. The red flags guide explains which ones. A PT who asks you to see a doctor first is doing their job.

Common mistakes when moving to a cash-based model

Leaving Medicare enrollment and taking cash from Medicare patients for covered services. PTs cannot opt out, and APTA says not being enrolled does not avoid the penalties.
Having a Medicare patient sign an agreement to skip claims. CMS says such agreements "have no legal force and effect."
Handing every Medicare patient an ABN. CMS calls blanket notices "not an acceptable practice."
Treating "wellness" as a label that makes covered care private. What matters is whether the service is covered.
Forgetting the good faith estimate for a self-pay patient booked 3 or more business days ahead, or not reissuing it when the plan changes.
Selling extra services to in-network patients without reading the payer contract.
Taking payment from an injured worker, or a Medicaid patient, before checking state rules.
Setting a price without a plan the patient can afford to finish.

Cash-based physical therapy in brief

Cash-based physical therapy means the patient pays you directly, whether you have dropped some insurance contracts or all of them. PTs cannot opt out of Medicare, so Medicare-covered services for Medicare patients still need a claim, and CMS says private agreements to skip that "have no legal force and effect." A Medicare patient can pay you directly for noncovered services, with an ABN where Medicare may deny payment.

Self-pay patients booked 3 or more business days ahead get a written good faith estimate, and a plan of care can be covered by one estimate for up to 12 months. Read your payer contracts and your state's direct access rules before you switch, along with its Medicaid and workers' compensation rules. Then set one fee schedule and publish it. Talk about cost when you agree the plan, not after.

References

American Physical Therapy Association. Cash-Based Practice. No date shown. Accessed September 28, 2026. https://www.apta.org/your-practice/payment/cash-practice
American Physical Therapy Association. Defining Cash Practice. No date shown. Accessed September 28, 2026. https://www.apta.org/your-practice/payment/cash-practice/cash-practice-defining
American Physical Therapy Association. Cash Practice Compliance Issues. No date shown. Accessed September 28, 2026. https://www.apta.org/your-practice/payment/cash-practice/cash-practice-compliance-issues
American Physical Therapy Association. Cash-Based Payment and Medicare Services: No Exceptions to the Rules. No date shown. Accessed September 28, 2026. https://www.apta.org/your-practice/payment/cash-practice/cash-based-practice-medicare
American Physical Therapy Association. Cash Practice: Considerations for Going Out of Network. No date shown. Accessed September 28, 2026. https://www.apta.org/your-practice/payment/cash-practice/cash-practice-out-of-network
American Physical Therapy Association. APTA Advisory Provides Guidance on New Estimate Requirement. December 21, 2021. Accessed September 28, 2026. https://www.apta.org/news/2021/12/21/estimates-practice-advisory
Centers for Medicare and Medicaid Services. Medicare Benefit Policy Manual (Publication 100-02), Chapter 15: Covered Medical and Other Health Services. Section 40, Effect of Beneficiary Agreements Not to Use Medicare Coverage (Revision 160, issued October 26, 2012, effective January 28, 2013); section 40.1, Private Contracts Between Beneficiaries and Physicians/Practitioners (Revision 222, effective August 15, 2016); section 40.4, Definition of Physician/Practitioner (Revision 62, effective November 13, 2006); section 220.2, Reasonable and Necessary Outpatient Rehabilitation Therapy Services (Revision 255, issued January 25, 2019, effective January 1, 2019). Accessed September 28, 2026. https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/downloads/bp102c15.pdf
Code of Federal Regulations. 42 CFR 405.400, Definitions (Part 405, Subpart D, Private Contracts), as amended at 88 FR 79523, November 16, 2023. Electronic Code of Federal Regulations. Accessed September 28, 2026. https://www.ecfr.gov/current/title-42/section-405.400
Centers for Medicare and Medicaid Services. Medicare Claims Processing Manual (Publication 100-04), Chapter 1: General Billing Requirements. Section 70.8.6.1, Monitoring Claims Submission Violations (Revision 12909, issued October 24, 2024, effective November 26, 2024). Accessed September 28, 2026. https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/downloads/clm104c01.pdf
Centers for Medicare and Medicaid Services. Medicare Claims Processing Manual (Publication 100-04), Chapter 30: Financial Liability Protections. Section 40.2.2, Written Notice Special Considerations (Revision 4197, effective April 15, 2019); section 50.2, ABN Uses, and section 50.2.1, Optional ABN Uses (Revision 10862, effective October 14, 2021). Accessed September 28, 2026. https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/downloads/clm104c30.pdf
Centers for Medicare and Medicaid Services. FFS ABN. Page last modified July 17, 2026. Accessed September 28, 2026. https://www.cms.gov/medicare/forms-notices/beneficiary-notices-initiative/ffs-abn
Centers for Medicare and Medicaid Services. Advance Beneficiary Notice of Non-coverage (ABN) Form Instructions, OMB Approval Number 0938-0566. No date shown. Accessed September 28, 2026. https://www.cms.gov/medicare/medicare-general-information/bni/downloads/abn-form-instructions.pdf
Centers for Medicare and Medicaid Services. What is a good faith health insurance estimate? Page last modified August 25, 2026. Accessed September 28, 2026. https://www.cms.gov/medical-bill-rights/help/guides/good-faith-estimate
Code of Federal Regulations. 45 CFR 149.610, Requirements for provision of good faith estimates of expected charges for uninsured (or self-pay) individuals, paragraphs (a)(2), (b)(1)(i), (b)(1)(ii), (b)(1)(iii), (b)(1)(iv), (b)(1)(vi), (b)(1)(vii), (b)(1)(x), (c)(1), (e)(1) and (f)(1). Electronic Code of Federal Regulations. Accessed September 28, 2026. https://www.ecfr.gov/current/title-45/section-149.610
Code of Federal Regulations. 45 CFR 149.620, Requirements for the patient-provider dispute resolution process, paragraphs (a)(2), (b)(1) and (c)(1). Electronic Code of Federal Regulations. Accessed September 28, 2026. https://www.ecfr.gov/current/title-45/section-149.620

Written and checked by the PocketPhysio editorial team. Last updated 2026-09-28.

Cash-based physical therapy: what it means, Medicare limits and good faith estimates