Moving the HME Industry Forward

Billing/Reimbursement

Re-Start of the 36-Month Oxygen Rental Term

June 19, 2017

AMARILLO, TX – There are a number of scenarios in which a DME supplier can re-start the 36 month oxygen rental term.

After the Five Year Reasonable Useful Lifetime (“RUL”) Period Has Expired
At any time after the end of the five year RUL period, the Medicare beneficiary may elect to receive a new oxygen concentrator, thus beginning a new 36 month rental period. The five year period begins on the initial date of service and runs for five years from that date. It is not based on the actual age of the equipment. The five year period does not re-start if there has been a change in oxygen modality, change-out of equipment, or change in supplier.

When the RUL of a beneficiary’s portable oxygen equipment differs from the RUL of the beneficiary’s stationary oxygen equipment, the RUL of the stationary oxygen equipment will govern for both types of oxygen equipment, stationary and portable. If the RUL end date of the portable oxygen equipment is before the RUL end date of the stationary oxygen equipment, the RUL end date of the portable oxygen equipment is extended to coincide with the RUL end date of the stationary oxygen equipment. If the RUL end date of the portable oxygen equipment is after the RUL end date of the stationary oxygen equipment, the end date of the RUL of the portable oxygen equipment is shortened to coincide with the RUL end date of the stationary oxygen equipment.

When the end date of the RUL of the stationary oxygen equipment occurs, the beneficiary may elect to obtain replacement of both the stationary and the portable oxygen equipment. If the beneficiary elects to obtain replacement of the stationary and the portable oxygen equipment, both types of oxygen equipment must be replaced at the same time, and a new 36 month rental period and new RUL is started for both the replacement stationary oxygen equipment and the replacement portable oxygen equipment.

A beneficiary who resides in a competitive bidding area (“CBA”) may obtain replacement of both the stationary and portable oxygen systems only from a competitive bidding contract supplier having a competitive bidding contract for the CBA in which the beneficiary permanently resides.

If the beneficiary elects not to receive new equipment after the end of the five year RUL period, and if the supplier retains title to the equipment, all elements of the payment policy for months 37-60 remain in effect. There is not separate payment for accessories or repairs. If the beneficiary was using gaseous or liquid oxygen equipment during the 36th rental month, payment can continue to be made for oxygen contents. If the beneficiary elects not to receive new equipment after the end of the RUL period and if the supplier transfers title of the equipment to the beneficiary, accessories, maintenance, and repairs are statutorily non-covered by Medicare. Contents are separately payable for beneficiary-owned gaseous or liquid systems.

Abandonment of Oxygen Patients
In late August 2013, CMS published the following announcement regarding “abandonment” of oxygen patients: Effective immediately, CMS will allow for the replacement of oxygen equipment in cases where a supplier exits the Medicare oxygen business and is no longer able to continue furnishing oxygen and oxygen equipment. In these instances, the oxygen equipment will be considered lost and a new 36-month rental period and reasonable useful lifetime will begin for the new supplier furnishing replacement oxygen equipment on the date that the replacement equipment is furnished to the beneficiary. Suppliers exiting the Medicare oxygen business with patients that they were unable to transfer to new suppliers should be aware that they are in violation of the statutory and regulatory requirements for furnishing oxygen equipment both before and after the payment cap. As such, oxygen suppliers that do not fulfill their oxygen obligations and voluntarily exit the Medicare oxygen business are not in compliance with the [supplier standards].

A Joint DME MAC article was originally posted on December 19, 2013 and revised on June 19, 2014, entitled “Supplier Exit From Oxygen Equipment Business.” The article states, in part: In the event the DME supplier voluntarily exits the Medicare oxygen business and is no longer able to continue furnishing oxygen and oxygen equipment, then the replacement oxygen and oxygen equipment will be deemed to be “lost” under the Medicare regulations. The article states that CMS intends to protect oxygen patients in the event their supplier walks away from the business, leaving the patients “abandoned” with nowhere to go for equipment, contents or repairs. According to the article, allowing the 36 month rental period to restart by classifying the equipment as “lost” is an incentive for new suppliers to assume responsibility for the abandoned patients. The article goes on to say that a patient may elect to obtain a new piece of equipment that has been “lost.” When considering “lost” equipment, the DME MACs will establish a new 36 month rental period and reasonable useful lifetime for the new supplier beginning on the date that the replacement equipment is furnished to the beneficiary. The article reminds suppliers (voluntarily exiting the Medicare program) that they are in violation of their regulatory obligations. The regulations state that (i) subject to a few exceptions, the supplier that furnishes oxygen equipment in the first month must continue to furnish the equipment for the entire 36 month period of continuous use, unless medical necessity ends and (ii) the supplier that received the 36th month rental payment must continue furnishing the oxygen equipment during any period of medical need for the remainder of the equipment’s reasonable useful life.

The Joint DME MAC article states that oxygen suppliers that do not fulfill their oxygen obligations and voluntarily exit the Medicare oxygen business are not in compliance with the supplier standards. The article gives instructions to suppliers that are voluntarily exiting the Medicare oxygen market. Supplier are strongly encouraged to provide a minimum of 30 days’ notice to the beneficiary of the supplier’s intention to no longer provide oxygen therapy services. The notice must be provided in writing and must take one of two forms: (i) a letter to the beneficiary notifying him/her of the supplier’s intention to discontinue oxygen therapy services (the letter must specify a date upon which this will occur); or (ii) working with the beneficiary, a letter to the new supplier selected by the beneficiary that transfers the provision of oxygen therapy services to the new supplier as of a specific date. The article then gives the following instructions to the new supplier that assumes responsibility for beneficiaries of suppliers that have elected to voluntarily exit the Medicare oxygen business: The claims for replacement equipment must (i) include the RA modifier (replacement of a DME item) on the claim line for the replacement equipment and (ii) document in the narrative field of the claim that “Beneficiary acquired through supplier voluntarily exiting Medicare program” or similar statement.

Bankruptcy
The CMS guidance related to payment for replacement oxygen equipment in bankruptcy proceedings is contained in Section 50 of Chapter 20 in the Medicare Claims Processing Manual. It states that “when a supplier files for Chapter 7 or 11 bankruptcy….and cannot continue to furnish oxygen to its Medicare beneficiaries, the oxygen equipment is considered lost in these situations and payment may be made for replacement equipment. For replacement oxygen equipment, a new reasonable useful lifetime period and a new 36 month payment period begins on the date of delivery of the replacement oxygen equipment.”

Specific Incident of Damage Beyond Repair
A specific incident of damage to equipment is required such as equipment falling down a flight of stairs, as opposed to equipment that is worn out over time. A new 36 month cap rental period cannot be started if the equipment is replaced due to malfunction, wear and tear, routine maintenance or needed repair. A new 36 month rental period and new RUL period is started on the date that the replacement equipment is furnished to the beneficiary. Claims for the replacement of oxygen equipment for the first month of use only are billed using the HCPCS code for the new equipment and the RA modifier. The supplier must include on the claim for the first month of use a narrative explanation of the reason why the equipment was replaced and supporting documentation must be maintained in the supplier’s files.

During the 36 Month Cap Period After a 60 Day Plus Break in Medical Need
If the beneficiary enters a hospital, or enters a SNF, or joins a Medicare HMO, and continues to need/use oxygen, then when the beneficiary returns home or rejoins Medicare fee-for-service, payments will resume where they left off. If the need for/use of oxygen end for less than 60 days plus the remainder of the rental month of discontinuation and then resumes, then payments resume where they left off. During the 36 month rental period, if the need for/use of oxygen ends for more than 60 days plus the remainder of the rental month of discontinuation and new medical necessity is established, a new 36 month rental period will begin. If there is an interruption in medical necessity of greater than 60 days plus the days remaining in the last paid rental month, once the need resumes, the supplier needs to collect supporting documentation (made available uon request) of the new medical need. During months 37-60, if the need for/use of oxygen ends for more than 60 days plus the remainder of the rental month of discontinuance and new medical necessity is established, a new rental period does not begin. The supplier that provided the oxygen equipment during the 36th rental month must provide all necessary items and services for the duration of the RUL.

Jeffrey S. Baird, JD, is chairman of the Health Care Group at Brown & Fortunato, PC, a law firm based in Amarillo, Tex. He represents pharmacies, infusion companies, HME companies and other health care providers throughout the United States. Mr. Baird is Board Certified in Health Law by the Texas Board of Legal Specialization, and can be reached at (806) 345-6320 or jbaird@bf-law.com.