(Medicare Claims Processing Manual)

B3-5102.2.B   Replacement of equipment which the beneficiary owns or is purchasing or is a capped rental item is covered in cases of loss, or irreparable damage or wear, and when required because of a change in the patient's condition subject to the following provisions .  Expenses for replacement required because of loss or irreparable damage may be reimbursed without a physician's order when, in the DME MACs judgment, the equipment as originally ordered, considering the age of the order, still fills the patient's medic al needs.  However, claims involving replacement equipment necessitated because of wear or a change in the patient's condition must be supported by a current physician's order.  (See the Medicare  Benefit Policy Manual, Chapter 16, for payment for equipment replaced under a warranty.)  DME MACs investigate and deny cases suggesting malicious damage, culpable neglect or wrongful disposition of equipment as discussed in the Benefit Policy Manual, Chapter 15, where it is  determined that it is unreasonable to make program payment under the circumstances.  They refer such cases to the program integrity specialist in the RO.  DME MACs do not pay for replacement of rented equipment except capped rental items.  (See 50.1)  However, they pay for replacement of purchased equipment in the following classes:  inexpensive or routinely purchased, customized items, capped rental (where the beneficiary has elected to purchase the item), and other prosthetic and orthotic devices.  They do not pay for purchase or replacement of items that require frequent and substantial servicing or oxygen equipment.   50.1 - Payment for Replacement of Capped Rental Items  (Rev. 1, 10- 01-03) A3-3629   Effective May 1, 1991, if a capped rental item of equipment has been in continuous use by the patient, on either a rental or purchase basis, for the equipment's useful lifetime or if the item is lost or irreparably damaged, the patient may elect to obtain a new piece of equipment.  The MAC determines the reasonable useful lifetime for capped rental equipment but in no case can it be less than five years .  This is a different requirement from that in the following section about prosthetic devices that are not capped rental .  Computation of the useful lifetime is based on when the equipment is delivered to the beneficiary, not the age of the equipment.  If the patient elects to obtain a new piece of equipment, payment is made on a rental or purchase basis.  50.3 - Payment for Replacement of Parenteral and Enteral Pumps  (Rev. 1, 10- 01-03) B3-3324 Payment for replacement of PEN pumps purchased more than eight years prior to the current date may be considered, with documentation that indicates proof of purchase date.  Medicare will consider payment for either a replacement by purchase or 15 months of  rental.   50.4 - Payment for Replacement of Oxygen Equipment in Bankruptcy Situations  (Rev. 1961, Issued: 04- 30-10, Effective: 10 -01-10, Implementation: 10- 04-10)  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 begins on the date of delivery of the replacement oxygen equipment.  In advance of payment, A/B MACs (HHH), and DME MACs must review  supporting documentation to verify that the supplier declared bankruptcy to assure that payment for replacement of oxygen equipment can legitimately be made to a successor supplier.   For a Chapter 7 bankruptcy, supporting documentation must include court records documenting that the previous supplier filed a petition for a Chapter 7 bankruptcy in a United States Bankruptcy Court,   For a Chapter 11 bankruptcy, supporting documentation must include Court records documenting that the previous supplier filed a petition for a Chapter 11 bankruptcy in a United States Bankruptcy Court; and documents filed in the bankruptcy case confirming that the equipment was sold or is scheduled to be sold as evidenced by one of the following:   o The Court order authorizing and/or approving the sale; or   o Supporting documentation 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   o A Court order authorizing abandonment of the equipment.  Similar to other situations where oxygen equipment is lost, stolen, or irreparably damaged, the A/B MAC (HHH) or DME MAC must verify the following information is included and valid with the claim: blood gas testing results, Oxygen Certificate of Medical Ne cessity (CMN), the Healthcare Common Procedure Coding System (HCPCS) code for the replacement oxygen equipment, the HCPCS modifier RA Replacement of a DME Item, and a narrative note on why the equipment was replaced.   Under no circumstances may payment be made for replacement equipment when the original supplier divests business and equipment outside of the court bankruptcy process.   50.5  Payment of a Part of a DMEPOS Item  (Rev.  3593, Issued: 08- 17-16, Effective: 10 -01-16, Implementation: 10- 03-16)  The RB modifier is used on a DMEPOS claim to denote the replacement of a part of a DMEPOS item (base equipment/device) furnished as part of the service of repairing the DMEPOS item (base equipment/device).  All repair part claims billed with the RB modifie r, whether within or outside a competitive bidding area, shall be paid on a lump sum purchase basis.   Payment for repair parts that are described by HCPCS codes for competitive bidding items and are furnished in competitive bidding areas for use in repairing base equipment that are competitive bid items is made based on the single payment amount established for the HCPCS code.  Payment for such repair parts that are f urnished for use in repairing base equipment that are not competitive bidding items in the area is made in accordance with 42 CFR 414.408(k)(1)(ii), which provides that payment for the part is made based on the contractors consideration of the item under 42 CFR 414.210(e).  When making payment determinations for parts described by HCPCS codes for competitive bidding items furnished for use in repairing base equipment that are not competitive bidding items, contractors have discretion to use the single paym ent amounts for the item in establishing the Medicare allowed amount for the repair part.   60 - Payment for Delivery and Service Charges for Durable Medical Equipment  (Rev. 1, 10- 01-03) B3-5105  Delivery and service are an integral part of oxygen and durable medical equipment (DME) suppliers' costs of doing business.  Such costs are ordinarily assumed to have been taken into account by suppliers (along with all other overhead expenses) in setting the prices they charge for covered items and services.  As such, these costs have already been accounted for in the calculation of the fee schedules.  Also, most beneficiaries reside in the normal area of business activity of one or more DME supplier(s) and have reasonable access to them.   Therefore, DME MACs may not allow separate delivery and service charges for oxygen or DME except as specifically indicated in 90 or in rare and unusual circumstances when the delivery is not typical of the particular supplier's operation.   For example, there may be situations in which it is necessary for a DME dealer to incur extraordinary delivery expenses in order to meet the needs of beneficiaries living in remote areas that are not served by a local dealer or when a local dealer is tempo rarily out of stock of required oxygen or equipment.  For example, DME MACs may recognize a reasonable separate delivery charge when the supplier must deliver an item of DME outside its normal area of business activity and the beneficiary does not have acc ess to a supplier whose location is nearer.   When a supplier delivers oxygen or DME outside the area in which he/she normally does business, but the item could have been obtained locally, DME MACs may allow any separate additional delivery charge only to the extent that it does not raise the total payment for the oxygen or DME above the local fee schedule.   When a separate charge can be allowed for delivery/service, DME MACs base the amount (based on mileage or a flat rate) on all of the relevant circumstances, including:    The time and distance traveled;   The actual additional expenses incurred by the supplier;   The type and quantity of equipment or oxygen delivered;   The supplier's customary charge under such circumstances;   The prevailing charges in the locality under such circumstances; and   Delivery charges made elsewhere in similar localities.  Any separate delivery charges recognized because of unusual circumstances may, of course, be paid for only for deliveries that have actually been made.   Suppliers must be advised in the DME MAC service areas to bill a separate delivery charge only in those rare situations in which "unusual circumstances" were encountered.  Information issuances should be used to advise DME suppliers of the need to fully document unusual circumstances on claims/bills for separate delivery charges.  If a supplier, nevertheless, routinely itemizes delivery charges, DME MACs may consider payment for the charges to be included in the fee for the equipment.   80 - Penalty Charges for Late Payment Not Included in Reasonable Charges or Fee Schedule Amounts  (Rev. 1, 10- 01-03) B3-5106.1  Penalty charges imposed on a beneficiary by a physician or supplier because of failure to make timely payment on a bill are not covered under Medicare.   NOTE:   The Judicial Council of the American Medical Association has ruled that, "It is not in the best interest of the public or the profession to charge a penalty if fees for professional services are not paid within a prescribed period of time, nor is it proper to charge a patient a flat collection fee if it becomes necessary to refer the amount to an agency for collection."   90 - Payment for Additional Expenses for Deluxe Features  (Rev. 1, 10- 01-03) B3-5107, PM AB -02-114  The payment amount for a given service or item, whether rented or purchased, must be consistent with what is reasonable and medically necessary to serve the intended purpose (See the Medicare Benefit Policy Manual, Chapter 15).  Additional expenses for "deluxe" features, or items that are rented or purchased for aesthetic reasons or added convenience, do not meet the reasonableness test.  Thus, where a service or item is medically necessary and covered under the Medicare program, and the patient wishes to obtain such deluxe features, the payment is based upon the payment amount for the kind of service or item normally used to meet the intended purpose (i.e., the standard item.)  Usually this is the least costly item.  DME MACs may, of course, determine that the payment amount for a more expensive service or item is reasonable when the additional expense is for an added feature that is medically necessary in a given case.  For example, a more expensive item may be medically necessary where a patient in a weakened condition needs a power -operated wheelchair or a power -operated vehicle that may be appropriately used as a wheelchair since the patient is not strong enough to operate a manual wheelchair.   Finally the provider may not charge the beneficiary for features not medically required by his/her condition and which cannot be considered in determining the provider's allowable costs unless the beneficiary or her/his representative has specifically requ ested the excessive or deluxe items or services with knowledge of the amount s/he is to be charged.  An Advance Beneficiary Notification (ABN) is required as documentation that the beneficiary has made such an informed request.  See Chapter 30 for ABN requirements.   The acceptance of an assignment binds the supplier -assignee to accept the allowed charge for the medically required equipment or service as the full charge and he cannot charge the beneficiary the differential attributable to the equipment actually furnish ed.  Only if a more expensive item or model with special features is medically necessary for the beneficiary will the allowed charge be based on the more expensive model.  If the patient purchases or rents an item of durable medical equipment having more expens ive features than his condition requires, the supplier accepting assignment on such an item cannot charge or collect any amount in excess of the allowed charge for the appliance adequate for the patient's needs.  Acceptance of assignment binds the supplier  to accept the allowed charge determined by the DME MAC, as the full charge for the item.  A supplier who wishes to charge and collect the full price for equipment more expensive than medically required by the patient need not accept assignment.  In assignment cases, the beneficiary is responsible for paying the supplier the unpaid balance of the allowed charge when payments stop because his condition has changed and the equipment is no longer medically necessary.  Similarly, when payments stop because the beneficiary dies, his/her estate is responsible to the supplier for such unpaid balance.