CMS Pub. 100-04, ch. 12, § 20.4.1

B3-15032

For services/supplies rendered prior to January 1, 1994, the amounts allowed to

nonparticipating physicians, under the fee schedule may not exceed 95 percent of the

participating fee schedule amount. Payments to other entities under the fee schedule

(physiological and independent laboratories, physical and occupational therapists, portable x-ray suppliers, etc.) are not subject to this differential unless the entities are billing for a

physician’s professional service. When a nonparticipating nonphysician is billing for a

physician’s professional service, Medicare’s allowance could not exceed 95 percent of the fee

schedule amount.

For services/supplies rendered on or after January 1, 1994, payments to any nonparticipant may

not exceed 95 percent of the fee schedule amount or other payment basis for the service/supply.

This five percent reduction applies not only to nonparticipating physicians, physician

assistants, nurse midwives, and clinical nurse specialists but also to entities such as

nonparticipating portable x-ray suppliers, independently practicing physical and occupational

therapists, audiologists, and other diagnostic facilities. Furthermore, these nonparticipating

entities including physicians, are subject to the five percent reduction not only when they bill

for services paid for under the physician fee schedule, but also when they bill for services that

are legally billable under the physician fee schedule, but which are based upon alternative

payment methodologies. As of January 1, 9994 and beyond, the services/supplies included in

this latter category are drugs and biologicals provided incident to physicians services. The

payment basis for these drugs and biologicals is the lower of the average wholesale price

(AWP) or the estimated acquisition cost (EAC). Therefore, the Medicare payment allowance

for “incident to” drugs and biologicals billed by and a nonparticipant cannot exceed 95 percent

of whichever is lower than the AWP or the EAC.