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November 5, 2009

Medicare Policy Regarding Replacement of Oxygen Equipment Lost as a Result of Supplier Bankruptcy

The Centers for Medicare & Medicaid Services (CMS) has issued instructions to contractors regarding processing of claims for replacement oxygen equipment in situations in which the equipment is considered lost because a supplier files for Chapter 7 or 11 bankruptcy and is unable to continue furnishing oxygen and oxygen equipment.

The regulation at 42 CFR §414.210(f) 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.

Oxygen equipment is considered lost if:

  1. the supplier of the equipment has declared bankruptcy by filing a petition under Chapter 7 in a United States Bankruptcy Court; or
  2. the supplier of the equipment has declared bankruptcy by filing a petition for Chapter 11 bankruptcy in a United States Bankruptcy Court and the oxygen equipment was sold or scheduled to be sold.

Billing for Replacement Oxygen Equipment

Claims for replacement oxygen equipment due to Chapter 7 and 11 bankruptcy will be processed similar to other situations where oxygen equipment is deemed lost. A new 36-month rental period and new reasonable useful lifetime begins on the date that the replacement equipment is furnished by the new oxygen supplier. Similar to other situations where equipment is lost and new replacement oxygen equipment is provided, repeat blood gas testing is not required, but the new supplier must provide a new, initial Oxygen Certificate of Medical Necessity (CMN) with the first claim. The most recent qualifying value and test date should be entered on the CMN. The initial date provided on the CMN should be the date of delivery for the replacement oxygen equipment.

On the claim for the first month of use, the new oxygen supplier must include the HCPCS code for the new oxygen equipment, the RA HCPCS modifier and a narrative describing why the equipment was replaced along with the specific type of bankruptcy (i.e. Chapter 7 or 11). When submitting claims electronically, suppliers may use loop 2400 (line note), segment NTE02 (NTE01+ADD) of the ASC X12, version 4010A1 electronic claim format. Suppliers billing using the Form CMS-1500 paper claim may report the narrative information in item 19 of the claim form. In addition, contractors shall instruct home health agencies billing using the UB-04 paper claim that they may report this information in Form Locator 80 (Remarks).

To document that the equipment was lost due to supplier bankruptcy, the new oxygen supplier must submit supporting documentation to the contractor for review.

For a Chapter 7 bankruptcy, the supplier must submit:

For a Chapter 11 bankruptcy, the supplier must submit:

    1. The Court order authorizing and/or approving the sale; or
    2. Evidence 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
    3. A Court order authorizing abandonment of the equipment.

Upon receipt of a claim for replacement of oxygen equipment lost due to bankruptcy, the contractor will request the supporting court documents from the supplier in order to evaluate whether the equipment can be considered lost. A new 36 month rental period and a new reasonable useful lifetime will not begin unless this documentation is made available to the contractor and, in the case of a Chapter 11 bankruptcy, the contractor is able to verify that the oxygen equipment that was being furnished to the beneficiary was one of the assets that was liquidated.

A Change Request (CR) and a MLN Matters Article will be forthcoming that will incorporate the information contained in this listserv message.

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