AMARILLO, TX – Providing oxygen will always be an important part of the DME industry. The reason is simple: DME suppliers furnish products and services to people who need them to function on a daily basis. Normally, the people who need such products and services are the elderly. And as we age, the incidences of COPD increase.

Gone are the days when DME suppliers would place an oxygen concentrator on a patient and would receive rental payments from Medicare for the duration of the patient’s life. Now, the supplier is required to furnish the concentrator for five years…but will receive rental payments only for the first three years.

A common question arises: Are there scenarios in which DME suppliers can start the initial 36 months over? The answer is “yes.” This three part series discusses when the 36 months can start over:

• Part 1 – After the Five Year Reasonable Useful Lifetime (“RUL”) Has Expired, Specific Incident of Damage Beyond Repair, or the Item is Stolen or Lost.
• Part 2 – During the 36 Month Cap Period After a 60 Day (Plus) Break in Medical Need.
• Part 3 – Abandonment of Oxygen Patients, Oxygen Patients of a Closed DME Supplier, and Oxygen Patients of a Bankrupt Supplier.

Abandonment of Oxygen Patients

In late August 2013, CMS published the following announcement regarding “abandonment” of patients:

• MLN Connects Provider eNews 08/22/13.
• Replacement of Home Oxygen Services in the Event that a Supplier Exits the Medicare Oxygen Business .
• 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 DME supplier standards set forth at 42 CFR 424.57(c).

This is particularly relevant in the competitive bidding arena. A DME supplier may be motivated to walk away from its oxygen business after losing out on a competitive bid contract. Without the influx of new patients, the Medicare oxygen business can quickly become unprofitable. CMS has used this announcement to protect oxygen patients in the event their supplier walks away from the business, leaving the patients “abandoned” with nowhere to go for equipment repairs. 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.

This announcement appears to be meant to deter DME suppliers, that provide DME products in addition to oxygen equipment, from voluntarily leaving the Medicare oxygen business without fulfilling their oxygen obligations to patients. The “deterrence” is CMS’s statement that such abandonment is a violation of the supplier standards, and could lead to the revocation of the DME company’s Part B supplier number. It appears that CMS does not want a DME supplier, that provides a variety of products, to drop its oxygen business because it is no longer profitable.

Oxygen Patients of Closed DME Supplier

The DME MACS have published additional guidance that states:

Suppliers voluntarily exiting the program must provide a minimum of thirty (30) days notice to the beneficiary of their intention to no longer provide oxygen therapy services. This must be provided in writing and must take one of two forms:

• 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
• Working with the beneficiary, a letter to a new supplier selected by the beneficiary, transferring provision of oxygen therapy services to the new supplier as of a specific date.

For suppliers that assume responsibility for beneficiaries from suppliers that have elected to voluntarily exit the Medicare oxygen business, claims for replacement equipment must:

• Include the RA modifier (replacement of a DME item) on the claim line(s) for the replacement equipment; and
• Document in the narrative field of the claim that “Beneficiary acquired through supplier voluntarily exiting Medicare program” or similar statement.
• When submitting claims electronically, use loop 2400 (line note), segment NTE02 (NTE01+ADD) of the ASC X12, version 5010A1 electronic claim format.
• When billing using the Form CMS-1500 paper claim, include the narrative information in item 19 of the claim form.

In addition to providing the above information on the replacement equipment claim, in the event of an audit, suppliers 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:

• Copy of notice sent to the beneficiary from the old supplier indicating that the supplier’s services were being terminated; or
• Letter from the old supplier to the new supplier indicating transfer of the beneficiary due to the voluntary exit from the Medicare program; or
• Attestation statement from the beneficiary indicating that the beneficiary [(or his/her caregiver)] has attempted to contact [his/her] existing supplier and has been unable to obtain service.
• If the new supplier is unable to obtain the documentation required above, the supplier may not append the RA modifier to the claim and may not initiate a new 36-month capped rental period.

Suppliers accepting transfer of beneficiaries are reminded that all Medicare rules apply. This includes obtaining:

• New order.
• New initial Certificate of Medical Necessity (“CMN”).
• Repeat blood gas testing is not required. Enter the most recent qualifying value and test date. This test does not have to be within 30 days prior to the Initial Date. It [can] be the test result reported on the most recent prior CMN.
• There is no requirement for a physician visit that is specifically related to the completion of the CMN for replacement equipment.
• Medical necessity documentation as outlined in the Oxygen LCD.

The “take away” for the DME supplier exiting the oxygen 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 and obtain the necessary documentation to withstand an audit.

Oxygen Patients of Bankrupt DME Supplier

Competitive bidding is forcing a number of DME suppliers to close their doors. Many of these suppliers are having to go into bankruptcy. The guidance issued by CMS related to payment for replacement oxygen equipment in bankruptcy situations is contained in Section 50.4 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.”

The supporting documentation that will be required to verify that the supplier declared bankruptcy depends on whether the bankruptcy is a Chapter 7 (liquidation) or a Chapter 11 (reorganization). For a Chapter 7, the “supporting documentation must include court records documenting that the previous supplier filed a petition for a Chapter 7 bankruptcy in a United States Bankruptcy Court . . .” For a Chapter 11, the “supporting documentation must include Court records documenting that the previous supplier filed a petition for a Chapter 11 bankruptcy in a United States Bankruptcy Court; and documents filed in the bankruptcy case confirming that the equipment was sold or is scheduled to be sold as evidenced by one of the following:

• The Court order authorizing and/or approving the sale; or
• Supporting documentation that the sale is scheduled to occur or has occurred, e.g., a bill of sale, or an asset purchase agreement signed by the seller and the buyer; or
• A Court order authorizing abandonment of the equipment.”

Because this policy contemplates the establishment a new reasonable useful lifetime, it should allow for a new 36-month payment period regardless of whether a patient of the bankrupt supplier was still in the 36-month rental payment period or the non-rental payment period consisting of rental months 37-60. As with any other situation in which oxygen equipment is lost and replacement equipment is furnished, the RA modifier must be submitted on the claim and a narrative explanation should be included on the claim. In addition, the replacement supplier must obtain the necessary qualifying documentation, including the blood gas testing results, a new order and/or CMN, and proof of delivery.

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 [email protected].