Direct Answer
Durable medical equipment (DME) billing uses HCPCS Level II codes (A-codes, E-codes, K-codes, L-codes) rather than CPT codes, and is paid under the Medicare DMEPOS Fee Schedule rather than the Physician Fee Schedule. DME suppliers must hold a Medicare DMEPOS supplier number and meet all Medicare supplier standards. The most consequential DME billing compliance requirement is proper documentation — specifically the Certificate of Medical Necessity (CMN) for applicable items, the Written Order Prior to Delivery (WOPD) for all standard DME, and face-to-face examination documentation for high-cost items like power mobility devices. Without the correct prior documentation, DME claims are denied and often cannot be recovered.
Table of Contents
DME Coverage Definition and HCPCS Codes
Medicare Part B covers durable medical equipment when it meets the definition of DME and is medically necessary: Medicare DME definition — four criteria (the "DEAD" test): Durable: withstands repeated use; Equipment: not consumable/disposable; appropriate for use in the home (not primarily for use in an institutional setting); primarily serves a Medical purpose (not convenience); Medicare DME coverage categories: respiratory equipment: oxygen (E0431-E0445, K0738), nebulizers (E0570), CPAP (E0601), BiPAP (E0470-E0472), mechanical ventilators; mobility equipment: manual wheelchairs (E0950-E1298), power wheelchairs (K0800-K0908), scooters (K0800-K0803), rollators/walkers (E0130-E0159), crutches (E0100-E0118); orthopedic/prosthetic: braces (L0100-L2999 — orthotics; L5000-L9999 — prosthetics); hospital beds: E0250-E0373; support surfaces: E0181-E0199; HCPCS Level II code structure for DME: A-codes: medical/surgical supplies, dressings, ostomy supplies, glucose monitoring; B-codes: enteral/parenteral nutrition; E-codes: general DME (equipment); K-codes: temporary Medicare codes (often for new technology or items without permanent HCPCS codes); L-codes: orthotics and prosthetics; Capped rental vs. purchase: some DME is rented and some purchased outright; capped rental items (inexpensive or routinely purchased): option to purchase after 3 months; the patient owns the item after 13 months; oxygen: rented for 36 months — after 36 months Medicare pays for maintenance and servicing only; complex rehabilitative equipment (custom power chairs): typically purchased rather than rented; Billing modifiers for DME: Modifier KX — criteria for coverage met (documented in medical record); Modifier KZ — new coverage not excluded as a result of substantial change; Modifier RR — rental (monthly rental payment); Modifier NU — new equipment purchased; Modifier RR vs. NU determines the billing method and affects the payment amount.
DMEPOS Supplier Standards and Accreditation
DME suppliers must meet Medicare's DMEPOS supplier standards to bill Medicare: Medicare DMEPOS supplier number: DME suppliers must obtain a separate DMEPOS supplier number (distinct from the provider NPI used by physicians); to obtain a DMEPOS number, suppliers must: be accredited by a CMS-approved DMEPOS accreditation organization; meet 30 DMEPOS supplier standards; DMEPOS accreditation organizations: the Accreditation Commission for Health Care (ACHC); the Board of Certification/Accreditation (BOC); the Community Health Accreditation Partner (CHAP); Joint Commission (for eligible entities); accreditation must be renewed every 3 years; 30 DMEPOS supplier standards: key standards include: maintaining a physical location open to the public (non-internet-only requirement); having a local or toll-free phone number; maintaining a complaint resolution process; not requiring patients to sign documents that conflict with Medicare's requirements; not contacting beneficiaries with unsolicited contact (anti-kickback standard compliance); maintaining ordering documentation for all items supplied; Surety bond: DMEPOS suppliers must maintain a $50,000 surety bond per NPI; the bond protects Medicare against improper payments; failure to maintain the surety bond results in the supplier's Medicare billing privileges being revoked; Face-to-face examination requirement: for certain high-cost DME (power mobility devices — power wheelchairs, scooters), a face-to-face examination with the patient's treating physician or NPP must occur within the prior 6 months; the face-to-face exam must document the clinical indication for the DME; the treating physician, not the DME supplier, must conduct the examination; a supplier or DME salesperson conducting a "clinical assessment" and directing the physician to sign an order does not constitute a legitimate face-to-face exam.
CMN and Documentation Requirements
Certificate of Medical Necessity (CMN) is required for certain DME categories and is the foundational compliance document for those claims: Items requiring CMN: oxygen (CMS-484); CPAP and BiPAP (CMS-484); power mobility devices (CMS-849); enteral nutrition (CMS-10126); transcutaneous electrical nerve stimulation (TENS) (CMS-854); pneumatic compression devices (CMS-10125); CMN structure: a CMN includes: Section A: supplier information and patient information; Section B: information obtained from the treating physician (answers to clinical questions); Section C: narrative description of items ordered; Section D: physician attestation and signature; Section B must be completed by the treating physician — suppliers cannot complete or alter Section B; the physician's signature on the CMN certifies that the information is accurate; Written Order Prior to Delivery (WOPD): all standard DME (not requiring CMN) must have a signed written order from the treating physician prior to delivery to the patient; a verbal order followed by a written order within 7 days is acceptable for some items; for items requiring CMN, the CMN serves as the written order; detailed written orders (DWO): for complex items (custom wheelchairs, power chairs, custom orthotics), a DWO specifying the item, features, and clinical justification is required instead of a simple WOPD; Documentation retention: CMNs, WOPDs, and clinical documentation supporting medical necessity must be retained for 7 years; DME auditors (RACs, ZPICs, UPICs) routinely request this documentation; records that cannot be produced result in automatic recoupment of the payment.
Oxygen Therapy and Power Mobility Devices
Oxygen therapy and power mobility devices (PMDs) are the two highest-value and most audit-intensive DME categories: Oxygen therapy coverage criteria: Medicare covers home oxygen when the treating physician documents: oxygen saturation (SpO2) at or below 88% (or PaO2 at or below 55 mmHg) while at rest, or; SpO2 at or below 88% during exercise or sleep with documented improvement with supplemental oxygen; testing must be performed at the treating physician's office or a qualified facility; home oxygen order must specify: delivery method (concentrator, liquid, compressed gas), flow rate, frequency, and anticipated duration; CMN CMS-484 is required; oxygen billing codes: E0424 — stationary compressed gas oxygen system, rental; E0431 — portable gaseous oxygen system, rental; E0439 — stationary liquid oxygen system, rental; E0441-E0445 — oxygen contents; K0738 — prescribed amounts of stationary oxygen with high concentration portable add-on; 36-month cap: after 36 months of capped rental, Medicare pays for equipment maintenance and servicing only (no equipment rental payment); the patient owns the oxygen equipment after 36 months; Power mobility devices (PMD): Medicare covers power wheelchairs and scooters when: the patient has a mobility limitation that significantly impairs their ability to participate in mobility-related ADLs in the home; the patient is unable to use a manual wheelchair or cane/walker; the patient has the physical and cognitive ability to safely operate the device; CMN CMS-849 required; face-to-face examination: within 6 months prior, the treating physician must examine the patient and document the mobility limitation; the face-to-face examination note is required at time of claim submission; PMD billing codes: K0800 — power wheelchair, group 1 standard; K0823-K0829 — group 2 various configurations; K0835-K0843 — group 3 complex rehab; K0856-K0864 — group 4 heavy duty; complex rehab technology (CRT) — K0835+ — has additional clinical documentation requirements and must be provided by an ATP (Assistive Technology Practitioner) credentialed supplier.
Competitive Bidding and Prior Authorization
The Medicare DMEPOS Competitive Bidding Program and Prior Authorization programs have significantly affected DME reimbursement and access: Competitive Bidding Program (CBP): in designated Competitive Bidding Areas (CBAs), Medicare contracts with a limited number of DME suppliers who submit bids; CBP applies to high-volume, off-the-shelf DME categories (CPAP, walkers, power mobility devices in some areas); only contract suppliers can supply CBP items to Medicare beneficiaries in CBAs; non-contract suppliers may supply items to Medicare patients in CBAs but must accept Medicare's single payment amount and cannot bill the patient any difference; CBP reimbursement rates are significantly below prior fee schedule rates for many items (30–50% reduction in some categories); Prior Authorization for certain DME: CMS implemented mandatory prior authorization for certain high-cost, high-fraud-risk DME categories; currently subject to prior authorization: power mobility devices (power wheelchairs) in all states; custom knee orthotics; transcutaneous electrical nerve stimulation devices (TENS) in certain states; Prior authorization DME process: the treating physician initiates the prior authorization request; clinical documentation (face-to-face exam, CMN, diagnosis documentation) is submitted to the DME MAC; the DME MAC reviews documentation for coverage criteria before approving; approval must be obtained before the DME is delivered to the patient; Non-Medical Necessity (NMN) advance determination: for items not under mandatory PA, suppliers can submit a voluntary advance determination (similar to pre-authorization) to confirm Medicare coverage before delivering the item; this reduces post-delivery denial risk; Common DME denial patterns: lack of face-to-face examination documentation for PMDs; CMN not completed by the treating physician; delivery before obtaining written order; items not meeting DME definition; patient in a nursing facility (nursing facility care includes DME under Part A); ordering provider not enrolled in Medicare (DMEPOS orders must be from enrolled providers).
FAQ
How does Medicare pay for CPAP and BiPAP equipment, and what documentation is required?
CPAP (continuous positive airway pressure) and BiPAP (bilevel positive airway pressure) are among the most commonly supplied Medicare DME items, and their coverage requirements are well-defined: Coverage criteria for CPAP: obstructive sleep apnea (OSA) diagnosed by a polysomnography (PSG) study conducted in a facility-based sleep lab, or by a home sleep apnea test (HSAT) ordered by the treating physician; the PSG or HSAT must document an apnea-hypopnea index (AHI) or respiratory disturbance index (RDI) of 15 or greater events per hour; OR an AHI/RDI of 5-14 with documented excessive daytime sleepiness, impaired cognition, mood disorders or insomnia, hypertension, ischemic heart disease, or stroke; an initial supply of CPAP equipment and a 30-day mask/accessories supply are covered; continued coverage requires re-evaluation at the 31-91 day mark showing benefit from CPAP use; Documentation requirements: the prescribing physician must complete CMN CMS-484 certifying: the medical necessity of the CPAP; that the patient had a qualifying sleep study; the date of the study and the AHI/RDI results; the initial order must include equipment specifications; Usage compliance period: Medicare requires the patient to demonstrate compliance with CPAP therapy (use the device for at least 4 hours per night on 70% of nights in any 30-consecutive-day period during the 91-day compliance evaluation); at the end of the compliance period, the treating physician must document that the patient has been compliant and continues to benefit from CPAP; if the patient is non-compliant, Medicare does not pay for continued rental after the compliance evaluation period; BiPAP (non-invasive ventilation): E0470 — respiratory assist device, non-pressure support; E0471 — with pressure support; E0472 — respiratory assist device, bi-level pressure capability, with backup rate; requires either failed CPAP trial OR diagnosis of central sleep apnea or Cheyne-Stokes breathing with specific criteria; documentation requirements are more complex than standard CPAP.
What are the rules for a physician practice that wants to dispense DME directly to patients vs. referring to a separate DME supplier?
Physician practices that dispense DME in-office occupy a complex regulatory space with Stark Law, Anti-Kickback Statute, and DMEPOS supplier standard considerations: Option 1 — Refer to a separate DMEPOS supplier: the physician writes an order and refers the patient to an accredited DMEPOS supplier; the physician does not bill for the equipment; this is the lowest-compliance-risk option; Option 2 — Physician practice as DMEPOS supplier: the physician practice obtains a separate Medicare DMEPOS supplier number; meets all 30 supplier standards; obtains DMEPOS accreditation; maintains $50,000 surety bond; can then bill Medicare for DME dispensed to patients of the practice; Stark Law in-office ancillary services exception for DME: in-office dispensing of DME by physician practices is NOT protected by the Stark Law in-office ancillary services exception for most DME items; the In-Office Ancillary Services (IOAS) exception does NOT cover: power mobility devices (power wheelchairs, scooters); items listed in the competitive bidding program that would be covered under CBP in the service area; orthotics and prosthetics; The IOAS exception DOES cover: supplies incidental to the physician's services (e.g., wound care supplies dispensed at time of wound care visit); certain DME not excluded by the statutory list; Physician marking of DME: physicians cannot add a markup to DME they dispense and then bill the patient or insurer for the marked-up price; the claim must reflect the actual acquisition cost plus any allowable supplier overhead; practical implications: physician practices that want to dispense small-volume, incident-to-service supplies (e.g., topical wound care dressings at time of wound care visit) have more flexibility; practices that want to become full-line DMEPOS suppliers face significant regulatory and operational requirements and should consult healthcare compliance counsel before proceeding.
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