Medicare to Pay for New Oxygen Equipment in Bankruptcy Cases

BALTIMORE — It’s the classic good news-bad news situation:
CMS says that effective Oct. 1, it will pay for replacement oxygen
equipment, that is, when a supplier files for Chapter 7 or 11
bankruptcy.

With the implementation of a 36-month rental cap on oxygen in
January 2009, providers and beneficiaries alike have been in a
quandary about Medicare coverage for new equipment when the
original provider has gone bankrupt.

Now, according to CMS, “When a supplier files for Chapter 7 or
11 bankruptcy under Title 11 of the United States Code 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 rental payment period begin on the date of delivery of the
replacement oxygen equipment.”

CMS added that “under no circumstances may payment be made for
replacement equipment when the original supplier divests business
and equipment outside of the court bankruptcy process.”

Under the new payment rules, CMS contractors must, in advance of
payment, verify that the supplier declared bankruptcy by reviewing
supporting documentation such as court records and documents
confirming that the equipment was sold or is scheduled to be
sold.

As well, CMS said, the contractor must “verify that the
following information is included and valid with the claim: blood
gas testing results, Oxygen Certificate of Medical Necessity, the
[HCPCS] code for the replacement oxygen equipment, the HCPCS
modifier RA Replacement of a [durable medical equipment] item, and
a narrative note on why the equipment was replaced.”

CMS said that proof-of-delivery documentation from the previous
supplier is not required for the claim to be paid.