Moving the HME Industry Forward


Exiting Oxygen Suppliers and New Rental Periods

July 7, 2014

AMARILLO, TX – Recent guidance from CMS has made clear that when a supplier exits the Medicare oxygen business and is no longer able to continue furnishing oxygen and oxygen equipment, CMS considers the oxygen equipment out on beneficiaries to be “lost.” This allows a supplier that furnishes replacement oxygen equipment to start a new 36-month rental period. 

The rationale behind giving a supplier a new 36 month rental period is based on the supplier actually furnishing replacement equipment. It does not appear that the CMS guidance is intended to apply to a situation in which the new supplier purchases the oxygen equipment currently out on the exiting supplier’s patients and does not have to furnish replacement equipment. Therefore, if the new supplier is only interested in pursuing the exiting supplier’s patients if the new supplier can start a new 36 month rental period without having to furnish replacement equipment, that may not be possible.

If the new supplier is willing to furnishing replacement equipment, then it will be able to get a new 36 month rental period if specific documentation can be obtained. CMS’s guidance states that the exiting supplier “is strongly encouraged to provide a minimum of thirty (30) days notice to the beneficiary of their intention to no longer provide oxygen therapy services.”

The guidance goes on to state that in the event of an audit, the replacement supplier “should be prepared to provide documentation demonstrating that the beneficiary was transferred from a supplier exiting the Medicare oxygen program.” The notice from the exiting supplier, and the documentation required to be maintained by the replacement supplier, are essentially the same thing, and can take different forms, such as:

• A letter from the exiting supplier to the beneficiary notifying him or her of the exiting supplier’s intention to discontinue oxygen therapy services and the date upon which this will occur; or
• A letter from the exiting supplier to the replacement supplier indicating that the beneficiary has agreed to be transferred to the replacement supplier as of a specific date due to a voluntary exit from the Medicare program.

In situations where an exiting supplier has made arrangements with a new supplier to furnish replacement equipment, an advisable course of action would be for the exiting supplier to call each patient to inform him/her of the situation and ask whether he/she would like to receive his/her replacement equipment and care from the new supplier.

For a patient who elects to go with the new supplier, the exiting supplier should send a letter to the patient and to the new supplier stating that the patient has elected to transfer its oxygen therapy services to the new supplier as of a specific date and that the new supplier will be furnishing replacement oxygen equipment to the patient on that date. Then, the first month claim submitted by the new supplier for patients who elect to transfer will need to include the RA modifier on the claim line for replacement equipment and the following language in the narrative field: “Beneficiary acquired through supplier voluntarily exiting Medicare program.”

In addition, the new supplier will need to obtain a new order and a new initial CMN and all medical necessity documentation required by the oxygen LCD. However, repeat blood gas testing and a physician visit related to the CMN will not be required.

If new medical necessity documentation is needed because the exiting supplier’s documentation does not support claims, the new supplier should obtain new testing and other medical necessity documentation.

Jeffrey S. Baird, JD, is chairman of the Health Care Group at Brown & Fortunato PC, a law firm based in Amarillo, Tex. Todd A. Moody, JD, is an attorney with the Health Care Group of Brown & Fortunato PC. They represent pharmacies, 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 Todd Moody can be reached at (806) 345-6343 or

Sign up now for Preparing For and Responding to Increasingly Aggressive Actions by ZPICs, Accrediting Organizations, and the NSC on Tuesday, July 15, 2014, 2:30-4:00 pm ET, with Jeffrey S. Baird, JD, chairman of the Health Care Group of Brown & Fortunato PC, and noted Medicare reimbursement specialist, Wayne van Halem of The van Halem Group, LLC.

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