(Medicare Claims Processing Manual)

In claims for medical equipment and supplies, payment reductions may be based on partial denials of coverage for additional expenses not attributable to medical necessity. A medical necessity partial denial is the denial of coverage for the unnecessary component of a covered item or service, when that component is in excess of the beneficiarys medical needs. Any such excess component is not medically reasonable and necessary and therefore, under 1862(a)(1) of the Act, it is not covered. A partial denial  may be used to base payment on the least costly, medically appropriate, alternative. The beneficiary liability protections of 1879 and of 1834(j)(4) of the Act apply to any payment reductions due to partial denials of coverage for medical equipment or s upplies on the basis of medical necessity under 1862(a)(1) of the Act. (See 140 for its similar provision for the applicability of the refund requirements under 1842(l) of the Act to partial denials of coverage for physicians services.)   When the refund provisions of 1834(a)(18), 1834(j)(4) and 1879(h) of the Act apply and the supplier is held to be liable, a required refund must be made on a timely basis. Suppliers which knowingly and willfully fail to make refund within specified time limits may be subject to civil money penalties and/or exclusion from the Medicare program.   Refund is not required if the supplier is held not to be liable, that is, if it is held that the supplier did not know and could not reasonably have been expected to know that Medicare would not pay on the basis of 1834(a)(17)(B), 1834(j)(1), 1834(a)(15 ), or 1862(a)(1) of the Act, or if it is held that, before the item or service was furnished, the beneficiary was informed by the supplier that Medicare would not pay and the beneficiary agreed to pay for the item or service. In any case where the supplier is held not to be liable, the beneficiary is liable for payment.  150.1 - Definition of Medical Equipment and Supplies  (Rev. 1, 10- 01-03)  The following definitions of medical equipment and supplies control the application of the provisions of this section.  150.1.1 - Unassigned Claims Denied on the Basis of the Prohibition on Unsolicited Telephone Contacts (Rev. 1, 10- 01-03)  For unassigned claims denied on the basis of the prohibition on unsolicited telephone contacts under 1834(a)(17)(B)  of the Act, the term medical equipment and supplies means:    Durable medical equipment, as defined in 1861(n)  of the Act; and   Medical supplies, as described in 1861(m)(5) of the Act, including catheters, catheter supplies, ostomy bags, and supplies related to ostomy care.   150.1.2 - Unassigned Claims Denied on the Basis of Not Being Reasonable and Necessary  (Rev. 1, 10- 01-03)  For unassigned claims denied on the basis of not being reasonable and necessary under 1862(a)(1)  of the Act; or Medicare payment being denied in advance under 1834(a)(15) of the Act; the term medical equipment and supplies means:    Durable medical equipment, as defined in 1861(n)  of the Act;    Prosthetic devices, as described in 1861(s)(8) of the Act;    Orthotics and prosthetics, as described in 1861(s)(9) of the Act;    Surgical dressings, as described in 1861(s)(5) of the Act; and    Such other items as the Secretary may determine.   150.1.3 - Unassigned Claims Denied on the Basis of Failure of the Supplier to Meet Supplier Number Requirements  (Rev. 1, 10- 01-03)  For unassigned claims denied on the basis of failure of the supplier to meet supplier number requirements under 1834(j)(1)  of the Act, the term medical equipment and supplies means:    Durable medical equipment, as defined in 1861(n)  of the Act;    Prosthetic devices, as described in 1861(s)(8) of the Act;    Orthotics and prosthetics, as described in 1861(s)(9) of the Act;    Surgical dressings, as described in 1861(s)(5) of the Act;    Home dialysis supplies and equipment, as described in 1861(s)(2)(F) of the Act;   Immunosuppressive drugs, as described in 1861(s)(2)(J) of the Act;    Therapeutic shoes for diabetics, as described in 1861(s)(12) of the Act;    Oral drugs prescribed for use as an anticancer therapeutic agent, as described in 1861(s)(2)(Q) of the Act;    Self-administered erythropoietin, as described in 1861(s)(2)(P) of the Act; and   Such other items as the Secretary may determine.   150.1.4 - Assigned Claims Denied on the Basis of the Prohibition on Unsolicited Telephone Contacts (Rev. 1, 10- 01-03)  For assigned claims denied on the basis of the prohibition on unsolicited telephone contacts under 1834(a)(17)(B)  of the Act; or Medicare payment being denied in advance under 1834(a)(15) of the Act; the term medical equipment and supplies means:    Durable medical equipment, as defined in 1861(n)  of the Act;    Prosthetic devices, as described in 1861(s)(8) of the Act;    Orthotics and prosthetics, as described in 1861(s)(9) of the Act;    Surgical dressings, as described in 1861(s)(5) of the Act; and    Such other items as the Secretary may determine.   150.1.5 - Assigned Claims Denied on the Basis of Failure of the Supplier to Meet Supplier Number Requirements  (Rev. 1, 10- 01-03)  For assigned claims denied on the basis of failure of the supplier to meet supplier number requirements under 1834(j)(1)  of the Act, the term medical equipment and supplies means:    Durable medical equipment, as defined in 1861(n)  of the Act;    Prosthetic devices, as described in 1861(s)(8) of the Act;    Orthotics and prosthetics, as described in 1861(s)(9) of the Act;    Surgical dressings, as described in 1861(s)(5) of the Act;    Home dialysis supplies and equipment, as described in 1861(s)(2)(F) of the Act;    Immunosuppressive drugs, as described in 1861(s)(2)(J) of the Act;    Therapeutic shoes for diabetics, as described in 1861(s)(12) of the Act;    Oral drugs prescribed for use as an anticancer therapeutic agent, as described in 1861(s)(2)(Q) of the Act;    Self-administered erythropoietin, as described in 1861(s)(2)(P) of the Act; and   Such other items as the Secretary may determine.   150.1.6 - Assigned Claims Denied on the Basis of Not Being Reasonable and Necessary  (Rev. 1, 10- 01-03)  For assigned claims denied on the basis of not being reasonable and necessary under 1862(a)(1)  of the Act, the term medical equipment and supplies means:    Durable medical equipment, as defined in 1861(n)  of the Act;    Medical supplies, as described in 1861(m)(5) of the Act;    Prosthetic devices, as described in 1861(s)(8) of the Act;    Orthotics and prosthetics, as described in 1861(s)(9) of the Act;    Surgical dressings, as described in 1861(s)(5) of the Act; or    Such other items as the Secretary may determine.   150.2 - Items and Services Furnished on an Unassigned Basis on or After January 1, 1995 (Rev. 1, 10- 01-03)  Nonparticipating suppliers which (1) Do not accept assignment, (2) Do not claim payment after the death of the beneficiary, and (3) Do not bill under the indirect payment procedure, if held to be liable, must refund to beneficiaries any amounts collected f or medical equipment and supplies for which Medicare payment is denied for one of the following reasons:    Under 1834(a)(18)(A)  of the Act, the supplier violated the prohibition on unsolicited telephone contacts under 1834(a)(17)(B) of the Act; or    Under 1834(j)(4) of the Act, the supplier did not meet supplier number requirements under 1834(j)(1); or the item is denied in advance under 1834(a)(15) of the Act; or payment is denied as not reasonable and necessary under 1862(a)(1) of the Act.  In any such payment denial under 1834(a)(17)(B), 1834(j)(1), 1834(a)(15), or 1862(a)(1) of the Act, the beneficiary has no financial responsibility and the refund provisions of 1834(a)(18), 1834(j)(4) or 1879(h) of the Act, as appropriate, apply, if it is held that the supplier knew or should have known of the likelihood that payment would be denied and that the beneficiary did not know.   For medical equipment and supplies furnished prior to January 1, 1995, Federal law does not limit beneficiaries liability with respect to unassigned claims for which payment was denied.   150.3 - Items and Services Furnished On an Assigned Basis On or After January 1, 1995  (Rev. 1, 10- 01-03)  Under 1879(h)  of the Act, suppliers, whether nonparticipating or participating, which accept assignment, if held to be liable, must refund to beneficiaries any amounts collected for medical equipment and supplies for which Medicare payment is denied for one of the following reasons:    Under 1879(h)(1) of the Act, payment is denied because the supplier did not meet the supplier number requirements under 1834(j)(1) of the Act;    Under 1879(h)(2) of the Act, payment is denied in advance under 1834(a)(15) of the Act; and    Under 1879(h)(3) of the Act, payment is denied based on 1834(a)(17)(B) of the Act, the prohibition on unsolicited telephone contacts.  In any such payment denial under 1834(j)(1), 1834(a)(15), or 1834(a)(17)(B) of the Act, the beneficiary has no financial responsibility and the refund provisions apply, if it is held that the supplier knew or should have known of the likelihood that payment would be denied and that the beneficiary did not know. However, in a denial of an assigned claim under 1862(a)(1) of the Act (i.e., payment is denied because the item or service is not reasonable and necessary), the 1879 Limitation on Liability provisions which applied to such denials prior to January 1, 1995, still apply.  150.4 - Time Limits for Making Refunds  (Rev. 1186, Issued:  02- 23-07; Effective:  01 -01-06; Implementation:  05 -23-07)  A refund of any amounts collected must be made to the beneficiary on a timely basis. Refund is considered to be on a timely basis only if made within the following time limits:    If the supplier does not request an appeal of the initial denial or reduction in payment within that time, the refund must be made to the beneficiary within 30 days after the date the supplier receives the remittance advice (RA).    If the supplier requests an appeal within 30 days of receipt of the notice of the initial determination, the refund must be made to the beneficiary within 15 days after the date the supplier receives the notice of the contractors determination of the su ppliers appeal.   150.5 - Supplier Knowledge Standards for Waiver of Refund Requirement  (Rev. 1, 10- 01-03)  A refund is not required of the supplier if the supplier did not know and could not reasonably have been expected to know that Medicare would not pay for the medical equipment or supplies.  Following are the knowledge standards applicable to the different types of denials.   150.5.1 - Knowledge Standards for 1862(a)(1) Denials  (Rev. 1, 10- 01-03)  In determining whether the supplier knew, or could reasonably have been expected to know, that Medicare would not pay on the basis of medical necessity, apply the same rules that are applicable in determining supplier liability under 1879 of the Act.