Moving the HME Industry Forward


Assuming Responsibility for Oxygen Patients

September 21, 2015

AMARILLO, TX – In a prior Medtrade Monday article, I wrote about the rights of a DME supplier that assumes responsibility of oxygen patients whose supplier has exited the Medicare oxygen market. Now let’s look at a “twist” on this scenario.

Assume that ABC Medical Equipment, Inc. (“ABC”) has locations in Town A, Town B, and Town C. Assume that ABC decides to continue to serve oxygen patients in Town A and Town B, but decides to cease serving oxygen patients in Town C. In other words, ABC will “abandon” its oxygen patients residing in Town C but will continue to service its oxygen patients who reside in Towns A and Town B. This will be a “partial abandonment,” but not a “100% abandonment.”

For the purposes of this article, assume that competitive bidding is not in the picture. Assume that XYZ Medical Equipment, Inc. serves residents of Town C. Assume that XYZ assumes responsibility for the oxygen patients that ABC abandoned in Town C. Can XYZ start the 36 months over? I believe the answer is “yes,” but there is a risk that CMS will disagree.

Restarting the 36-Month Rental Period
Apart from actual loss/irreparable damage, there are two general situations where the Centers for Medicare and Medicaid Services (“CMS”) will consider a beneficiary’s oxygen and equipment to be “lost” and a new 36 month rental payment will be permitted: (1) where the beneficiary’s existing supplier files for Chapter 7 or 11 bankruptcy and cannot furnish oxygen to its beneficiaries any longer and (2) where the beneficiary’s existing supplier voluntarily exists the Medicare program and is no longer able to furnish oxygen to its beneficiaries.

CMS has issued instructions for the processing of replacement oxygen and equipment where the DME supplier “voluntarily exists the Medicare oxygen business…and is no longer able to continue furnishing oxygen and oxygen equipment.” See CGS Website, News & Publications Page:

According to CMS guidance, in order to trigger the restart of the 36 month rental period, XYZ must:
Include the RA modifier (Replacement of a DME Item) on the claim line(s) for the replacement equipment.
Document in the narrative field of the claim that “Beneficiary acquired through supplier voluntarily exiting the Medicare oxygen program” or similar statement.

Obtain documentation demonstrating that the beneficiary was transferred from a supplier that exited the Medicare oxygen program. Examples include:


• Copy of the notice to the beneficiary from ABC indicating that ABC’s services are being terminated.
• Letter from ABC to XYZ indicating that the transfer of the oxygen patients is due to ABC voluntarily exiting the Medicare oxygen program.

If ABC is opting to exit the Medicare program completely or opting to cease providing oxygen to all of its Medicare patients, then XYZ will likely be able to obtain the documentation necessary to justify restarting the 36-month rental period.  If ABC is continuing to service oxygen patients out of its locations in Town A and Town B, and is simply refusing to service the patients residing in Town C, then XYZ should be able to obtain the documentation necessary to justify restarting the 36-month rental period.

However, there is a risk that CMS will take the position that because ABC has not totally exited the Medicare oxygen market, then XYZ cannot restart the 36 months. Having said this, the better argument is that “abandonment is abandonment”…….that the Town C patients have truly been “abandoned”…….and, therefore, it is appropriate for XYZ to restart the 36 months.

If ABC continues to service some of its Medicare oxygen patients, but not all, then XYZ will not likely be able to obtain a letter from ABC indicating that it is exiting the Medicare oxygen program. However, XYZ will  likely be able to obtain a copy of the notice to the Town C oxygen beneficiaries from ABC indicating that the ABC’s services are being terminated in Town C.

The guidance on restarting the 36 month rental period is not specific regarding a situation where the old supplier closes one location but does not voluntarily terminate its Medicare oxygen business for all locations. Thus, there is a risk that ABC’s letter to its Town C patients may not be sufficient if ABC continues to service Medicare oxygen patients in Town A and Town B.  Nevertheless, as discussed above, a credible argument can be made that XYZ should be able to restart the 36 months for ABC’s former Town C patients.

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