Medicare Compliance & Reimbursement

Faulty information from DME regional carriers led to overpayments, CMS alleges

Beginning April 1, 2006, Medicare will change the classification system for certain respiratory assist devices that help benes to breathe when their own spontaneous breathing efforts are insufficient. Although the move promises to reduce benes' out-of-pocket costs, it could put a strain on durable medical equipment suppliers who supply such devices.

Under the final rule, Medicare will no longer reimburse RADs with bi-level capability and a backup rate as DME items requiring "frequent and substantial servicing." Instead, Medicare will pay for RADs as DME "capped rental" items. The HHS Office of Inspector General determined in 2001 that RADs don't require frequent enough service to justify higher payments and recommended a classification change to CMS. In response, CMS initially proposed the final rule Aug. 22, 2003 to correct overpayments that have resulted, at least in part, from faulty information that DME regional carriers dispensed.

Rental payments for RADs prior to April 1, 2006, will not count toward the rental cap. In addition, Medicare will continue to pay 80 percent of the allowed payment amount for maintenance after the rental payments end.

Moving RADS to the capped-rental payment category will result in a nominal impact on Medicare revenue, CMS says; the agency expects only a 1-percent revenue reduction through 2009. CMS does, however, acknowledge that the changes could have a significant affect on suppliers who specialize in furnishing RADs. Nevertheless, "most small suppliers of respiratory assist devices with backup rate will not be significantly affected by this final rule," CMS maintains.