Moving the HME Industry Forward


Taking Over Oxygen Patients From a DME Supplier That Shuts its Doors

December 23, 2013

AMARILLO, TX – The DME industry is caught in the “perfect storm” of competitive bidding, stringent documentation requirements, lower reimbursement, and aggressive post-payment audits and prepayment reviews. These factors are causing a number of suppliers to close their doors, resulting in Medicare patients switching from one supplier to another.

Back in September, I wrote a Medtrade Monday article entitled Abandonment of Patients Can Lead to Supplier Number Revocation. What I am about to discuss below ties into, and adds to, my September article.

DME MAC Jurisdiction
A posted article on 12/19/13 entitled Supplier Abandonment of Beneficiaries and Oxygen Equipment provides the following:
• 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 regulations provide that a patient may elect to obtain a new piece of equipment if the equipment has been in continuous use by the patient for the equipment’s reasonable and useful lifetime or has been lost, stolen or irreparably damaged. 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) 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 and (ii) subject to a few exceptions, the supplier that furnishes oxygen equipment in the first month, during which payment is made, must continue to furnish the equipment for the entire 36 month period of continuous use, unless medical necessity ends. The article then 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 the following instructions to suppliers that are voluntarily exiting the Medicare oxygen market. These suppliers must provide a 90 day 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 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 a similar statement). In the event of an audit, the new supplier should be prepared to provide documentation demonstrating that the beneficiary was transferred from a supplier exiting the Medicare oxygen program. Examples of documentation to meet this requirement are either (i) copy of notice sent to the beneficiary from the old supplier indicating that the supplier’s services were being terminated or (ii) letter from the old supplier to the new supplier indicating transfer of the beneficiary due to the voluntary exit from the Medicare program. The article further states that if the new supplier is unable to obtain the required documentation, then the new supplier may not append the RA modifier to the claim and may not initiate a new 36 month capped rental period.

• Lastly, the article reminds all suppliers (accepting transfers of beneficiaries) that all Medicare rules apply (e.g., new order, new initial CMN, and medical necessity documentation).

I believe that the other three jurisdictions have issued the same or similar instructions. However, as of the time of writing of this article, I have not confirmed this.

The “take away” for the DME supplier exiting the market is that if it can sell its business to another supplier, thereby insuring the orderly transition of oxygen patients, then that is the preferable course of action to take. If the exiting supplier cannot find a buyer for its business, then it needs to give the required advance notice to the beneficiary. The “take away” for the new supplier that intends to bill for the entire 36 months is that the supplier needs to properly submit the claim (as discussed above) and obtain the necessary documentation to withstand an audit.

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. Baird is Board Certified in Health Law by the Texas Board of Legal Specialization and can be reached at (806) 345-6320 or