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CGS Administrators, LLC

Serving the states of MN, WI, IL, IN, OH, KY and MI

May 14, 2018

Retired: Supplier "Abandonment" of Beneficiaries and Oxygen Equipment

Recently the Centers for Medicare & Medicaid Services (CMS) issued instructions to the Durable Medical Equipment Medicare Administrative Contractors (DME MACs) to process claims for replacement oxygen and oxygen equipment in the event that a supplier voluntarily exits the Medicare oxygen business (for example, goes out of business) and is no longer able to continue furnishing oxygen and oxygen equipment. This applies to both competitive bid and non-competitive bid areas.

In these situations, CMS considers the equipment "lost" under the Medicare regulations at 42 CFR §414.210(f), which provides 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 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 furnishing replacement oxygen and oxygen equipment on the date that the replacement equipment is furnished to the beneficiary.

Obligations of Exiting Supplier

Suppliers voluntarily exiting the Medicare program are reminded that they are in violation of their regulatory and statutory obligations. Section 1834(a)(5)(F)(ii)(I) requires that the supplier that received the 36th month rental payment continue furnishing the oxygen equipment during any period of medical need for the reminder of the equipment's reasonable useful lifetime. Further, 42 CFR 414.226(g)(1) requires, barring a few exceptions, that 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. As such, oxygen suppliers that do not fulfill their oxygen obligations and voluntarily exit the Medicare oxygen business are not in compliance with the Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) supplier standards set forth at 42 CFR 424.535(c). Violations of the supplier standards are reported to the National Supplier Clearinghouse.

Suppliers voluntarily exiting the program must provide a ninety (90) day 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:

  1. A letter to the beneficiary notifying them of the supplier's intention to discontinue oxygen therapy services. The letter must specify a date upon which this will occur; or,
  2. 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.

Obligations of New Supplier

For suppliers who receive beneficiaries from providers who have elected to voluntarily exit the Medicare oxygen business, claims for replacement equipment must:

  1. Include the RA modifier (Replacement of a DME item) on the claim line(s) for the replacement equipment; and,
  2. Document in the narrative field of the claim that "Beneficiary acquired through supplier voluntarily exiting Medicare program" or similar statement.

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:

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:

  1. New order;
  2. New initial Certificate of Medical Necessity (CMN)
    1. 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 could be the test result reported on the most recent prior CMN.
    2. There is no requirement for a physician visit that is specifically related to the completion of the CMN for replacement equipment.
  3. Medical necessity documentation as outlined in the Oxygen LCD.

Suppliers should review the entire Oxygen LCDExternal Websiteand Policy ArticleExternal Websitefor additional information on coding, coverage and documentation requirements.

Publication History

September 12, 2019

Retired. Note: A revised version published to other DME MAC websites in June 2014, with title “Supplier Exit from Oxygen Equipment Business – Revised” (prior to CGS Administrators, LLC becoming the Jurisdiction B DME MAC)

May 2018

Article was added to CGS Jurisdiction B website, as the publication had originally published to other DME MAC websites on December 19, 2013 (prior to CGS Administrators, LLC becoming the Jurisdiction B DME MAC)

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