Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

JUNE GIBBS BROWN 

Inspector General 

NOVEMBER 1998 

OEI-07-96-00222 

Medicare Reimbursement for 

Hospital Beds in the Home 

Payment Methodology 
OFFICE OF INSPECTOR GENERAL 

The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, is to 

protect the integrity of the Department of Health and Human Services programs as well as the 

health and welfare of beneficiaries served by them. This statutory mission is carried out through a 

nationwide program of audits, investigations, inspections, sanctions, and fraud alerts. The 

Inspector General informs the Secretary of program and management problems and recommends 

legislative, regulatory, and operational approaches to correct them. 

Office of Evaluation and Inspections 

The Office of Evaluation and Inspections (OEI) is one of several components of the Office of 

Inspector General. It conducts short-term management and program evaluations (called 

inspections) that focus on issues of concern to the Department, the Congress, and the public. The 

inspection reports provide findings and recommendations on the efficiency, vulnerability, and 

effectiveness of departmental programs. 

OEI's Kansas City Regional Office prepared this report under the direction of James H. Wolf, 

Regional Inspector General. Principal OEI staff included: 

REGION HEADQUARTERS 

Perry A. Seaton, Team/Project Leader Lisa A. Foley, Program Specialist 

Tim Dold, Team Leader Stuart Wright, Associate Director 

Barbara Tedesco, Mathematical Statistician 

To obtain copies of this report, please call the Kansas City Regional Office at 816/426-3697. 

Reports are also available on the World Wide Web at our home page address: 

http://www.dhhs.gov/progorg/oei 
EXECUTIVE SUMMARY

PURPOSE 

To compare Medicare's rental reimbursement methodology and utilization patterns for hospital 

beds used in the home to policies utilized by other Federal, State, private insurance companies, 

and managed care organizations. 

BACKGROUND 

The Medicare Supplemental Medical Insurance program pays for the rental or purchase of 

medically necessary Durable Medical Equipment (DME) used in a beneficiary’s home when 

determined by a physician to be medically required. Suppliers receive monthly reimbursement 

from the Medicare Durable Medical Equipment Regional Carriers based upon a fee schedule. 

This schedule is limited by the Health Care Financing Administration’s (HCFA) established 

national payment ceilings, and is adjusted annually for inflation based upon the Consumer Price 

Index. Certain categories of DME, including hospital beds, are reimbursed as “capped rental” 

items. The fee schedules reimburse a supplier: 

C 10 percent of the allowed purchase price for new equipment for each of the first 3 

months of rental; and 

C 7.5 percent of the allowed purchase price for new equipment for each of the 

remaining months for which Medicare will make payment. 

We surveyed sampled entities from Medicare risk managed care organizations, Medicaid State 

Agencies, the top 50 health insurance companies as ranked by policies in force, and a listing of 

companies providing national and local coverage in the Federal Employees Health Benefits 

program. Overall, we achieved an 82 percent response rate. 

This is one of two reports examining Medicare’s policies and reimbursement for hospital bed 

equipment. A companion report, “Medicare Reimbursement for Hospital Beds in the Home: 

Prices” OEI-07-96-00221, compares the reasonableness of Medicare’s reimbursement rates for 

this equipment to those of other medical insurance payers. 

FINDINGS 

Only Medicare Provides Suppliers Enhanced Reimbursement for Initial Rental Months 

Of the respondents surveyed, Medicare was the only insurer that allows a higher rate of 

reimbursement for rental periods lasting less than 4 months (10 percent of the allowed charge for 

purchase as compared to 7.5 percent of the allowed charge for purchase for rentals lasting from 

4 to 15 months duration). 

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Almost Half of Medicare Beneficiaries Only Rent Beds During Enhanced Payment Months. 

Claims information from January 1995 - December 1996 established that 47 percent of the 

Medicare beneficiaries rented beds for 3 months or less, two-thirds rented for 7 months or less, 

and only 12 percent completed 15 months of rental. The relative short rental periods for 

Medicare patients means that the enhanced rate, which the program pays for the first 3 months, is 

an important reason Medicare pays more for hospital bed rental than other payers. 

Medicare and Most Other Payers Cap the Duration of the Rental Period and the Amount 

Paid 

Medicare caps rental reimbursement at 15 rental months. This policy is comparable to industry 

practices that limit both the duration and amount of rental reimbursement for hospital beds. 

Of the 74 respondents, 72 (97 percent) pay for the rental of hospital beds used in the home, with 

56 (75.7 percent) capping the duration of rental. 

RECOMMENDATION 

Eliminate Enhanced Rates for the First 3 Rental Months 

The HCFA should seek legislation to eliminate the 2.5 percent enhanced rate for the first 

3 months of rental. We estimate Medicare would annually save approximately $15 million. 

Projected over 5 years, Medicare would save over $74 million. 

We realize that legislative action could take some time. Therefore, in the interim, we recommend 

that HCFA use the authority under the Balanced Budget Act of 1997 to reduce rates overall. 

This action would make Medicare’s method of payment comparable to methods used by other 

payers. This is further explained in the companion report. Overall, we believe that a combination 

of both approaches would be best. However, the savings would not be additive. 

The savings estimates are based on CY 1996 payments and are not indexed for inflation. 

AGENCY COMMENTS 

The HCFA concurs with the intent of our recommendation. However, it is deferring a decision 

on this matter pending receipt of information on hospital bed pricing. At that time, HCFA will 

assess whether the approach presented in our report is appropriate or whether an alternative 

pricing method is preferable. Appendix D contains the complete text of these comments. We 

remain available to provide technical assistance to HCFA on this issue. 

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TABLE OF CONTENTS

PAGE 

EXECUTIVE SUMMARY 

INTRODUCTION .......................................................... 1

FINDINGS ................................................................ 5

Only Medicare Provides Enhanced Reimbursement for Initial Rental Months ......... 5

Almost Half of Beneficiaries Only Rent Beds During Enhanced Payment Months ...... 5

Medicare and Most Other Insurers’ Cap the Duration and Amount of Rental ......... 5

RECOMMENDATION ....................................................... 7

COMMENTS ON THE DRAFT REPORT ........................................ 7

APPENDICES 

A: Entities Included In the Sample ............................................ A-1

B: Sample Response Rate .................................................. B-1

C: Calculation of Savings ................................................... C-1

D: Agency Comments ..................................................... D-1
INTRODUCTION

PURPOSE 

To compare Medicare's rental reimbursement methodology and utilization patterns for hospital 

beds used in the home to policies utilized by other Federal, State, private insurance companies, 

and managed care organizations. 

BACKGROUND 

The Medicare Supplemental Medical Insurance program pays for the rental or purchase of 

medically necessary Durable Medical Equipment (DME) used in a beneficiary’s home when 

determined by a physician to be medically required. Certain categories of DME, including 

hospital beds, are reimbursed as “capped rental” items. 

Medicare Reimbursement Methodology for DME 

Medicare Part B pays for the rental or purchase of durable medical equipment (DME), used in the 

patient's home when determined by a physician to be medically required. There are six payment 

categories: 

C  Inexpensive or other routinely purchased equipment;

C  Items requiring frequent and substantial servicing;

C  Customized items;

C  Other prosthetic and orthotic devices;

C  Oxygen and oxygen equipment; and

C  Capped rental items.

Medicare's Policies for Capped Rental DME 

Capped rental items include hospital beds, wheelchairs, support surfaces and other pieces of 

DME. Suppliers receive monthly reimbursement from the Medicare Durable Medical Equipment 

Regional Carriers (DMERC) based upon a fee schedule. This schedule is limited by the Health 

Care Financing Administration’s (HCFA) established national payment ceilings, and is adjusted 

annually for inflation based upon the Consumer Price Index. The fee schedules reimburse a 

supplier: 

C  10 percent of the allowed purchase price for new equipment for each of the first 3 

months of rental; and 

C  7.5 percent of the allowed purchase price for new equipment for each of the 

remaining months for which Medicare will make payment. 

Under Medicare capped rental DME rules, a hospital bed is initially furnished to a beneficiary as a 

rental item. The beneficiary is offered the option of purchasing a new or used bed at the 

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1

2

3

4

5

6

7

8

9

10

11

12

 13 

14

 15 

10th rental month, which is effective with the 14th month. If the beneficiary uses a purchased bed 

for its entire useful life, the item can be replaced and Medicare will reimburse the supplier for the 

replacement equipment. Medicare currently recognizes a 5 year useful life for hospital beds. 

If the beneficiary elects to continue to rent the bed, Medicare payments will end upon completion 

of the 15th month. After rental payments end, Medicare will pay for necessary servicing and 

maintenance of capped rental equipment once every 6 months (which cannot exceed the charge 

for a 1 month rental). When the hospital bed is no longer needed by the beneficiary (due to death 

or medical improvement) the supplier is free to reclaim the used item for rental or sale to other 

clients. 

Medicare's Payment for Capped Rental DME 

Medicare allowed charges for all capped rental items totaled $886 million in 1995. There are 

16 codes for hospital beds and Medicare's allowed charges for these codes totaled more than $287 

million in 1995. 

Table 1 is a summary of the Medicare fee schedule. Medicare allows 105 percent for a purchased 

item or 120 percent if rented through the 15th month. 

Table 1 

Medicare Reimbursement Schedule for Capped Rental Items 

Rental Month Percent of Fee Schedule Cumulative Percent 

10.0% 10.0% 

10.0% 20.0% 

10.0% 30.0% 

7.5% 37.5% 

7.5% 45.0% 

7.5% 52.5% 

7.5% 60.0% 

7.5% 67.5% 

7.5% 75.0% 

7.5% 82.5% 

7.5% 90.0% 

7.5% 97.5% 

1 7.5% 105.0% 

7.5% 112.5% 

2 7.5% 120.0% 

1 If elected, the purchase option is effective with the 14th rental month. 

2 Rental payments terminate upon completion of the 15th rental month. 

In 1996 the DMERC allowed charges of over $272 million for the four categories of hospital beds 

included in this study. Semi-electric beds (code E0260) comprised 86 percent of this total while 

total electric beds accounted for less than one-half of one percent (refer to Table 2). 

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Table 2

Allowed Charges for Hospital Beds

January 1, 1996 - December 31, 1996 1

Manual Hospital Bed (E0250)

Manual Adjustable Hospital Bed (E0255)

Semi-Electric Hospital Bed (E0260)

Total Electric Hospital Bed (E0265)

Total: 

$7,085,989 

$30,720,446 

$233,607,390 

$1,084,068 

$272,497,893 

1 Source: Statistical Analysis DMERC (Palmetto Government Benefits Administrators) 

Previous Office of Inspector General (OIG) Study 

A May 1993 OIG report, “Review of Medicare Part B Reimbursement of Hospital Beds,” 

A-06-91-00080, found that Medicare reimbursement rates for “capped rental” hospital beds were 

excessive because HCFA failed to take into account the useful life of the bed and how many times 

it can be rented. The OIG estimated Medicare savings of $6.2 to $7.8 million in just one State. 

HCFA did not accept OIG's recommendations to change the way they reimburse for hospital beds 

in part because the study was limited to rentals in only one State. 

METHODOLOGY 

We researched the Federal laws, regulations and HCFA policies that cover the establishment, 

reimbursement, and purchase options for capped rental hospital beds. We also reviewed various 

private and governmental entities’ reimbursement methodologies for these items. 

We obtained listings of Medicare risk managed care organizations (MCOs), Medicaid State 

agencies, the top 50 private health insurance companies in the United States as ranked by number 

of policies in force, and a listing of the companies providing national and local coverage in the 

Federal Employees Health Benefits Program. We selected a sample from each of these groups to 

request completion of a mailed survey questionnaire (for MCOs we included in the universe only 

those with 450 or more members). For the sampled private insurance companies which have 

multiple components, we surveyed their private, MCO, and government insurance divisions. In 

total, we contacted 90 entities. 

As a means to obtain direct information and validate it, we selected a sub-sample from each of the 

above organizations for on-site visits. The criteria for selection was based upon size, location, 

and proximity to other on-site contacts for economy of travel. In addition, we sent surveys to the 

Department of Veterans Affairs, the Indian Health Service, and the Department of Defense TriCare program , formerly the Office of Civilian Health and Medical Program of the Uniform 

Services (CHAMPUS). 

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As part of all surveys, we requested the entities' written procedures and policies for 

reimbursement methods, schedules, and rates for the following types of new and used hospital 

beds: 

C Manual Hospital Bed (HCPCS Code E0250) 

C Manual Adjustable Hospital Bed (HCPCS Code E0255) 

C Semi-Electric Hospital Bed (HCPCS Code E0260) 

C Total Electric Hospital Bed (HCPCS Code E0265) 

We inquired if these purchasers of hospital beds maintain on-going data or have conducted studies 

to address supplier costs (i.e., equipment acquisition, delivery, setup, patient education, 

maintenance, tear down, pick up, sanitation, billing, supplier profit and life of the product). We 

also asked if they are utilizing competitive bidding for either the rental or purchase of these items. 

Any unclear responses were clarified by telephone and follow up contacts were made to nonresponders. Overall we achieved a 82 percent response rate. Appendix A breaks out the various 

entities surveyed and identifies responders by sample category. It should be noted that since all 

responders did not provide answers to each question on the survey instrument, we reported our 

data based on the percentage of responders who answered the question. Appendix B lists the 

response rates for each of the sample categories. 

We queried the Medicare DMERC to validate particular aspects of claims processing for rented 

hospital beds. We also requested information on payment methodology for capped as compared 

to non-capped items. 

We utilized a 1 percent sample of HCFA's National Claims History File for January 1994 through 

March 1996 to obtain information on beneficiary rental patterns for the four procedure codes 

listed in Table 2 (E0250, E0255, E0260, and E0265). The Statistical Analysis Durable Medical 

Equipment Regional Carrier (SADMERC) updated this information for rentals commencing in 

1995. 

This is a companion report to “Medicare Reimbursement for Hospital Beds in the Home: 

Prices” OEI-07-96-00221, which compares the reasonableness of Medicare’s reimbursement for 

rental of hospital beds to other Federal, State, private insurance companies and managed care 

organizations. 

We conducted our review in accordance with the Quality Standards for Inspections issued by 

the President’s Council on Integrity and Efficiency. 

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FINDINGS

ONLY MEDICARE PROVIDES SUPPLIERS ENHANCED REIMBURSEMENT FOR 

INITIAL RENTAL MONTHS 

Medicare is the only insurer that allows a higher rate of reimbursement for rental periods lasting 

less than 4 months (10 percent of the allowed charge for purchase as compared to 7.5 percent of 

the allowed charge for purchase for rentals lasting from 4 to 15 months duration). When we 

compared Medicare’s rental reimbursement for the first 3 months of rental to the rates paid by 

other insurers. We found that Medicare’s rates for months 1 - 3 were from 18 percent to 

38 percent higher 

ALMOST HALF OF MEDICARE BENEFICIARIES ONLY RENT BEDS DURING 

ENHANCED PAYMENT MONTHS. 

We analyzed claims information from 1994 through 1995 and determined that 47 percent of the 

Medicare beneficiaries rent beds for 3 months or less, two-thirds rent beds for 8 months or less, 

and only 16 percent complete 15 months of rental. 1 

The chart on the following page depicts the declining duration of rental for the four hospital beds 

surveyed in this study. As is noted, the majority of the rentals are semi-electric, with very few 

total-electric beds rented after the second month. 

MEDICARE AND MOST OTHER PAYERS CAP THE DURATION OF THE RENTAL 

PERIOD AND THE AMOUNT PAID 

Three-fourths of the Payers Cap the Duration of the Rental Period 

Medicare caps the duration of rental at 15 rental months. Total reimbursement is limited to 

120 percent of the purchase price of the bed. This method of payment is comparable to industry 

practices that limit both the duration and amount of rental reimbursement for hospital beds. 

Of the 74 respondents, 72 (97 percent) pay for the rental of hospital beds used in the home, with 

56 (75.7 percent) capping the duration of rental. Over half (38 of 74 respondents) limit rental 

payments to 12 months or less. Sixty percent (44 respondents) limit the aggregate rental 

payments for each rental period to the purchase price of the item. 

1 The SADMERC updated this information for claims with dates of service from January 

1995 through December 1996 and found that the duration of rental remains virtually 

unchanged from the 1994/1995 data with half of the Medicare beneficiaries rented beds 

for 4 months or less, two-thirds rented for 7 months or less, and only 12 percent 

completed 15 months of rental. 

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Duration of Monthly Hospital Bed Rental

by Medicare Beneficiaries

(January 1995 - December 1996)

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6 
RECOMMENDATION

Eliminate Enhanced Rates for the First 3 Rental Months 

The HCFA should seek legislation to eliminate the 2.5 percent enhanced rate for the first 

3 months of rental. We estimate Medicare would annually save approximately $15 million. 

Projected over 5 years, Medicare would save over $74 million. 2 

We realize that legislative action could take some time. Therefore, in the interim, we recommend 

that HCFA use the authority under the Balanced Budget Act of 1997 to reduce rates overall. 

This action would make Medicare’s method of payment comparable to methods used by other 

payers. This is further explained in the companion report. Overall, we believe that a combination 

of both approaches would be best. However, the savings would not be additive. 

Our calculations for these savings are described in detail in Appendix C. 

AGENCY COMMENTS 

The HCFA concurs with the intent of our recommendation. However, it is deferring a decision 

on this matter pending receipt of information on hospital bed pricing. At that time, HCFA will 

assess whether the approach presented in our report is appropriate or whether an alternative 

pricing method is preferable. Appendix D contains the complete text of these comments. We 

remain available to provide technical assistance to HCFA on this issue. 

2 These savings estimates are based on calendar year 1996 payments and are not indexed 

for inflation. 

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7 
APPENDIX A

ENTITIES INCLUDED IN THE SAMPLE

PRIVATE INDEMNITY COMPANIES

Name State Response Received 

Aetna Life and Casualty Co CT Y 

Blue Cross & Blue Shield of Florida FL Y 

Blue Cross & Blue Shield of Michigan MI Y 

Blue Cross & Blue Shield of Texas, Inc. TX Y 

Empire Blue Cross Blue Shield NY N 

Metropolitan Life Insurance Company FL Dropped (sold to United 

Health Care) 

Mutual of Omaha NE Y 

New York Life Insurance Company NE Y 

Prudential Insurance Company of America PA N 

United Health Care (formerly Travelers) CT Y 

Total Companies: 10 Total Responders: 7 

MEDICAID STATE AGENCIES 

Name State Response Received 

Arizona Health Care Cost Containment System 1 AZ Y 2 

Department of Human Services 1

Department of Human Services

Department of Health & Mental Hygiene

Division of Medicaid

Department of Human Services

New Mexico Human Services Department

Department of Social Services

Department of Human Services 1

Department of Human Services

Total States: 10

1 Medicaid § 1115 Waiver State

HI Y 

ID Y 

MD Y 

MS Y 

ND Y 

NM Y 

NY Y 

OH Y 

WI Y 

Total Responders: 10 

2 The Arizona Health Care Cost Containment System (the Medicaid State Agency) has seven subcontractors 

who provide Medicaid Coverage. Ventana Health Systems, provided the only response. This contractor 

furnishes Medicaid health care to 7 of 15 Arizona Counties. 

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FEDERAL EMPLOYEE HEALTH BENEFITS PROGRAM--LOCAL PLANS

Name State Response Received 

Foundation Health CA Y 

CIGNA Healthcare of Colorado CO N 

Health New England CT N 

Suburban Health Plan, Inc. CT Y 

Exclusive Health Care IA Y 

BCI HMO, Inc IL Y 

Personal Care Blue Shield HMO IL Y 

Advantage Care, Inc. KY Dropped--No longer 

participating in FEHB 

Plans. 

HMO Maine ME Y 

AETNA Health Plans of the Mid-Atlantic States MD Y 

Health Alliance MI N 

Prudential Health Care HMO MO N 

United Health Care Select MO Y 

Exclusive Health Care NE Y 

FHP New Mexico NM Y 

Presbyterian Health Plan NM N 

GHI Health Plan NY Y 

Healthsource HMO of New York NY Y 

Independent Health Association NY Y 

Personal Care Plan of North Carolina NC Y 

PHP, Inc. NC Y 

HMO Health Ohio OH Dropped--No longer 

participating in FEHB 

Plans. 

Prudential Northern Ohio OH Y 

Pacific Care of Oregon OR N 

United Health Plans of New England RI Y 

Harris Methodist TX Y 

HMO Blue TX Y 

Total Companies Contacted: 25 3 Total Responders: 19 

3 Total does not include the two companies that no longer participate in the Federal Employees Health 

Benefits Program. 

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FEDERAL EMPLOYEE HEALTH BENEFITS PROGRAM--NATIONAL PLANS

Name 

Alliance

American Postal Workers Union (APWU)

Blue Cross & Blue Shield

Government Employees Hospital Association (GEHA)

Mail Handlers

National Association of Letter Carriers (NALC)

Postmasters

Association Benefit Plan

BACE

Foreign Service

Panama Canal Area

Rural Carrier Benefit Plan

Special Agents’ Mutual Benefit Association (SAMBA)

Secret Service

Total Companies: 14 

Response Received 

Y 

Y 

Y 

Y 

Y 

Y 

Y 

Y 

Y 

N 

Y 

Y 

Y 

N 

Total Responders: 12 

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MEDICARE RISK HEALTH MAINTENANCE ORGANIZATIONS

Name 

Health Partners of Alabama

Blue Cross of Arizona

Blue Cross of California

FHP, Inc.

Foundation Health, A California Plan

Kaiser Foundation HP, Inc.

Kaiser Foundation HP of Colorado

Kaiser Foundation HP of NY

AV-Med Health Plan, Inc.

U.S. Healthcare Delaware

Health Alliance Plan of Michigan

State Response Received 

AL Y 

AZ Y 

CA N 

CA N 

CA Y 

CA Y 

CO Y 

CT Y 

FL Y 

DL Y 

MI N 

Partners National Health Plans of North Carolina, Inc. NC Y 

First Option Health Plan of New Jersey, Inc.

CIGNA Healthcare of New York

Independent Health Plan, Inc

NYLCARE Health Plans, Inc.

Family Health Plan, Inc.

Community Care HMO, Inc.

Kaiser Foundation of the Northwest

Geisinger Health Plan

Keystone Health Plan Central, Inc.

Qualmed Plans for Health, Inc.

U.S. Healthcare, Inc. - Delaware 

U.S. Healthcare Systems of Pennsylvania

IHC Care, Inc.

Total Companies: 25 

NJ Y 

NY Y 

NY N 

NY Y 

OH Y 

OK Y 

OR Y 

PA Y 

PA Y 

PA Y 

PA Y 

PA Y 

UT Y 

Total Responders: 21 

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OTHER FEDERAL GOVERNMENT HEALTH INSURANCE PROGRAMS 

Name Response Received 

Indian Health Service (Department of Health & Human Services Y 

Tri-Care (Department of Defense) 4 Y 

Railroad Retirement Board (RRB) Dropped 5 

Department of Veteran’s Affairs (VA) Y 

Total Government Programs in Sample: 6 4 Total Responders: 5 4 

4 Tri-Care (formerly CHAMPUS) contracts with several insurance companies to administer the rate and 

method of reimbursement for claims filed under their program. Three of these contractors responded 

to our survey. Each was coded as a separate response, since payment rates are State specific. 

Comparisons were performed against Medicare’s rates for those States. 

5 We dropped the Railroad Retirement Board (RRB) from the sample. Contact with them confirmed that 

retirees’ health claims are covered by Medicare and are processed by the DME Regional Carriers 

(DMERC). Therefore, HCFA policies for payment are followed and the reimbursement rates are the 

same as for non RRB Medicare clients. 

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APPENDIX B

SAMPLE RESPONSE RATE

Number in Number 

Type of Health Insurer Sample Responding Response Rate 

Private Indemnity Insurance 

Medicaid State Agencies 

Federal Employee Local 

Insurance Plans 

Federal Employee National 

Insurance Plans 

Medicare Risk Health 

Maintenance Plans 

Other Government Health 

Insurers 

Total: 

10 7 70% 

10 101 100%1 

25 19 76% 

14 12 86% 

25 21 84% 

6 5 83% 

90 74 82% 

1 The Arizona Health Care Cost Containment System (the Medicaid State Agency) has 

seven subcontractors who provide Medicaid Coverage. Ventana Health Systems, 

provided the only response. This contractor furnishes Medicaid health care to 

7 of 15 Arizona Counties. 

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APPENDIX C

CALCULATION OF SAVINGS

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Breakout of DMERC 1996 Payments for the Hospital Bed Codes Surveyed 

Total Payments for Total Payments for 

DMERC Rentals of only 1 Month Rentals of Only 2 Months 

Procedure Code Payments 1996 Duration Duration 

E0250 $7,085,989 $2,437,580 $836,147 

E0255 $30,720,446 $11,428,006 $3,102,765 

E0260 $233,607,390 $80,828,157 $28,266,494 

E0265 $1,084,068 $576,724 $106,239 

Total $272,497,893 $95,270,467 $32,311,645 

Total Payments for 

Rentals of Only 3 Months 

Duration 

$559,793 

$2,150,431 

$18,454,984 

$82,389 

$21,247,597 

Estimated Savings if Rental Reimbursement for Months 1 - 3 were Reduced 

From 10 Percent of Purchase Price to 7.5 Percent of Purchase Price 

Rentals of only Rentals of only Rentals of only Rentals of 

1 Month Duration-- 2 Months Duration-- 3 Months Duration-- 4 - 15 Months Duration 

Procedure Code Savings 1 Savings 2 Savings 3 Savings 4 

E0250 $60,940 $41,807 $41,984 $243,935 

E0255 $285,700 $155,138 $161,282 $1,052,943 

E0260 $2,020,704 $1,413,325 $1,384,124 $7,954,332 

E0265 $14,418 $5,312 $6,179 $23,904 

Total $2,381,762 $1,615,582 $1,593,569 $9,275,114 

Total Payments 

Rentals of 

4 - 15 Months Duration 

$3,252,469 

$14,039,244 

$106,057,755 

$318,716 

$123,668,184 

Total Savings 5 

$388,666 

$1,655,064 

$12,772,484 

$49,813 

$14,866,027 1 The amount in this column reflect the 2.5 percent savings for beneficiaries who rented these DME items for only 1 month. 

2 The amount in this column reflect the 5 percent savings for beneficiaries who rented these DME items for only 2 months. 

3 The amount in this column reflect the 7.5 percent savings for beneficiaries who rented these DME items for only 3 months. 

4 The amount in this column reflect the 7.5 percent savings for beneficiaries who rented these DME items from 4 - 15 months. 5 These savings estimates are based on calendar year 1996 payments and are not indexed for inflation. 

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C - 2 
APPENDIX D

AGENCY COMMENTS

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D - 4