To win the claims game, you’ve got to know the rules
by Roberta Domos

It’s not news that Medicare and even private insurance payers are requesting additional documentation and requiring complex medical review of DME claims at an alarming rate. Audits have exploded over the past several years and show no signs of slowing in the near future.
Providers who’ve been in the business more than 10 years surely look back longingly at the days when claims were simply paid without needing to provide extensive proof that medical justification criteria had been met. It’s a good bet that physicians also miss the days when their medical judgment was unquestioned.

As someone who reviews 50 or more audit responses for clients each week I can understand the frustration providers are feeling. While CMS states that the goal of audits is to reduce fraud, abuse and so-called improper payments, it often feels like the process is more focused on finding a reason not to pay the claim. And unfortunately, private insurance payers seem to be following CMS’s lead, but without the same volume of requests providers are experiencing from Medicare.
The bottom line is that the industry is in the midst of a fundamental change associated with obtaining payment from insurance payers. The good news is providers can adjust to this change by sharpening their documentation processes.

Let’s start by reviewing some general steps providers can take to implement a proactive medical necessity documentation process. The first thing DME business owners and managers must understand when making decisions about the documentation process is how to differentiate documentation required to bill the claim from additional documentation that will be needed if the claim is audited.

CMS documentation checklists can be useful in this regard, or providers can create their own simplified checklists based on the information provided by Medicare. Generally, the documentation required to bill the claim will be a dispensing order (which need not be signed by the physician); a detailed written order, CMN or other required certifying statement from the treating physician; valid proof of delivery; and test results for items such as oxygen or PAP devices. The specific details vary based on the product, but in most cases it includes all documentation required by the medical policy with the exception of physician or other relevant health-care provider’s progress notes.

The next order of business is to add a separate section to your checklist that includes what additional documentation will be required in the event of an audit, and what key points the health-care provider progress notes must contain in order to prove medical necessity.

For instance, if audited on an oxygen claim you’ll need to prove that the physician has evaluated the patient within 30 days prior to the start of care date. Ideally the progress notes will discuss the cardiopulmonary symptoms that prompted the physician to order oxygen saturation or arterial blood gas testing, confirm they have seen the results of that test and detail what other treatments have been tried.

Now that you have checklists available to your intake and documentation staff to use as a ready reference, the DME business owner or manager must decide what documentation their business will require from the referral source prior to delivering the product.

Providers are permitted to deliver most products with a simple dispensing order, which is defined as a verbal or written notification of the need for home medical equipment that includes patient name, the date of the order or start of care date, the name of the ordering physician or other qualified provider and the product being ordered. The exceptions are products that require the provider to receive a detailed written order such as TENS units, seat lift mechanisms, support surfaces, wheelchair cushions and seating, power mobility devices and negative pressure wound therapy.

However, even though it is permissible to deliver most products based on a dispensing order, it’s not always prudent. The key questions to ask in making documentation process decisions for the company are:

  • Is the product needed emergently or in order for the patient to be discharged from a facility? For instance, oxygen may be needed emergently. It’s not practical to expect the referral source to provide all required billing documentation prior to delivery. However, the qualifying test should be available and the provider would be wise to review it prior to arranging delivery.
  • What documentation is the referral source likely to have at hand during the referral process? As an example, it is generally safe to deliver a wheelchair or a bed even in the absence of a detailed written order. The risk is in whether the physician progress notes will withstand an audit review. If the patient is being discharged from a facility the most recent progress notes justifying the need for the product should be handy, and you may wish to require that they be faxed to the DME for review before accepting the order for delivery.
  • Is the referral source a trusted partner that has demonstrated they understand the qualifying criteria and will provide the required documentation on a post-delivery basis in a timely manner? Perhaps your DME works closely with a sleep lab that would like the DME to set up patients with a PAP device before they have provided all the necessary documentation. Given that most physicians do not order PAP devices for patients that don’t truly need treatment it may be safe to enter into a trusted arrangement with the lab so long as their documentation follow-up is completed on a timely basis. On the other hand, most patients that require a PAP device have lived with a sleep disorder for quite some time prior to the diagnosis, so treatment is probably not emergent.

The bottom line is that the DME provider should take the time to set up reasonable as well as practical rules for their staff members to follow regarding what documentation is required prior to delivery. The rules should be specific to the product, provided to staff members in writing via checklists and not contain so many exceptions for one referral source versus another that they become hard to follow. In other words, keep guidance to your staff as direct and simple as you can. And always allow managers to make exceptions to the rules so long as they are using the core principles of your policies.

The next business decision a DME provider must make is what additional documentation, typically in the form of progress notes, the company will require either pre-delivery or pre-billing that is not legally necessary in order to bill the claim, but will only be required in an audit situation. Providers who offer only specialty products that are not needed emergently may decide that they will require all documentation prior to delivery, or at least prior to billing. It’s certainly a reasonable decision for that type of DME provider, but it will likely slow down the delivery and billing processes and irritate your referall sources, as well.

In many cases an “all the documentation, including what will be needed in an audit” business decision is not a practical solution to the audit explosion. However, the provider can still take a proactive stance in protecting themselves in the case of audits. The key is to know which products are currently being audited routinely, either by CMS or private insurance payers, and adjust your documentation practices accordingly.

Gut instinct and business intellect have a place in any successful business, but it would be a mistake to try to use those talents here. Instead you need to use business intelligence to make decisions about your company’s documentation processes, and the best way is to analyze data. The solution is to create a spreadsheet that tracks every audit request your company receives. Here are the fields the spreadsheet should need to contain and what do to with all of the information you collect:

Patient name/date of service—You will need this to track back to the outcome of audit review by the insurance payer based on remittance advice, or if the payer claims that the audit response was not received (CMS-CO226 denial).

Date of audit request—You will need to know when the audit response is due and how much time you have left to obtain the required documentation if you did not obtain it prior to delivery or billing.

Ordering physician—You will need this to track patterns regarding quality of progress notes from specific physicians. For instance, do progress notes from this physician result in frequent audit denials; can you reeducate the physician or provide cheat sheets to help them include key, necessary phrases in their progress notes?

Product—You will use this information to understand which products are currently being routinely audited. Use it to adjust decisions about what additional documentation the DME will begin to request proactively before an audit occurs.

Date response sent—You can use this information to determine if a decision not to require additional documentation prior to billing is resulting in responses being sent late. You will also need this information to know when to follow up on audits if a decision is not received via remittance advice in a timely manner. CMS has 60 days to render a decision on most types of audits, and is currently “losing” a lot of audits, which restarts the 60-day period. You may need to prove when the audit response was sent when you resend the documents. Retain fax confirmation or delivery confirmation if mailed.

Pass or fail—If the audit failed, note the specific reason for recoupment or denial and the next action taken. Failed audits can often be successfully appealed. Use the information from legitimately failed audits to adjust company documentation requirements, retrain staff members and/or reeducate physicians about required documentation and key phrases that should be contained in progress notes.

Now that we’ve covered the basics of developing an effective medical necessity documentation process for your DME, let me offer a few product-specific tips providers may wish to consider adopting:


  • Get a copy of qualifying test results prior to delivery and evaluate them. Ensure they include results of test, testing condition and amount of oxygen or room air patient was using at the time.
  • Get physician progress notes either prior to delivery or billing that document physician evaluation no more than 30 days prior to the start of care.
  • Have your system remind you to urge the patient back to their physician for reevaluation prior to recertification.

PAP Devices

  • Obtain notes of pre-study physician evaluation. These notes should include signs and symptoms of OSA or CSA that prompted study, and the intention of the physician to order a sleep study.
  • Retrieve and review sleep study prior to dispensing. Remember that you cannot use RDI as qualifying if it includes respiratory effort related arousals (RERA). The apnea-hypopnea index (AHI) does not include RERAs, and in some cases the respiratory disturbance index (RDI) is reported without RERAs.
  • Ensure that the sleep study has been signed by the interpreting physician. It contains a medical opinion used to justify medical necessity, so it must be signed by the physician.
  • E0471 for apnea requires documentation of complex or central sleep apnea and corresponding diagnosis on claim.
  • Inform Medicare patients at the time of initial setup, in writing, of the rules regarding compliance and physician follow-up required for continued reimbursement after the third month.

Basic DME

  • Try to obtain a recent history and physical or progress notes at the time of order if you are routinely experiencing audits for basic items and read them carefully. They often contain information that documents that the patient does not qualify for the item ordered. Be aware that physicians rarely document the level of detail concerning medical justification that Medicare policy requires. Physician reeducation is key if you are experiencing denials on these items after an audit is completed.
  • Don’t forget to complete the home evaluation for manual wheelchairs. This can be done verbally via if you do not deliver to the home. This document is required in audits for either manual or power mobility devices.

Power Mobility Devices

  • Carefully evaluate the face to face mobility examination before providing the PMD. If it is lacking information, request that the physician order a physical therapy evaluation with a PT who understands Medicare requirements.
  • Educate physicians, C-NPs and C-PAs about coverage criteria, specifically regarding subjective (bad) versus objective (good) statements in notes. For instance, the evaluation must clearly document why less-costly alternatives would not be sufficient to address the patient’s mobility limitation.
  • Provide written educational materials to referral sources, either materials you have developed or CMS “dear physician” letters.

It’s not easy to be a successful DME provider these days, but hopefully with this guidance and these product-specific tips you can develop a documentation process that is both practical and effective, even in the face of ever-increasing medical necessity documentation requirements.