DME Payment Categories: When a Code Creates a Recurring Claim

DME payment categories determine whether Medicare pays for durable medical equipment through a purchase, a rental that ends at a cap, or monthly rental payments that continue while the equipment remains medically necessary. For someone inside a supplier’s billing department, the category determines more than the amount on a claim. It determines when equipment payments stop, who owns the device, and what the supplier must keep doing afterward. The patient can still need the equipment long after the rental revenue ends.

That is where payment categories become a durable medical equipment fraud question. Does the claim describe the equipment and service the patient actually receives? Has the rental reached its limit? Did the business keep billing after its own staff knew the patient had stopped using the machine?

What Is Considered Durable Medical Equipment?

Durable medical equipment withstands repeated use, serves a medical purpose, is generally useful because of illness or injury, and is appropriate for use in the home. Equipment newly classified as DME from January 2012 must also have an expected life of at least three years. Hospital beds, wheelchairs, ventilators and oxygen equipment fall within this benefit.

DMEPOS brings together more than equipment. It also covers separate benefits for prosthetics, orthotics, prosthetic devices, surgical dressings and other items. A back brace and a home ventilator can both pass through a supplier’s billing department while following very different payment rules.

How DME Payment Categories Differ

The Medicare payment regulations divide equipment and devices into seven classes. The Centers for Medicare & Medicaid Services assigns items to those classes through its program instructions. The item’s assignment determines which payment rule applies.

The inexpensive category rests on a historical test: an average purchase price of no more than $150 during July 1986 through June 1987. The routinely purchased test asks whether equipment was purchased at least 75% of the time nationally during that same period. Those definitions refer to the historical equipment class, not today’s retail price sticker.

Customized equipment must be uniquely constructed or substantially modified for a particular patient, beyond what can be grouped with ordinary items for pricing. The contractor considers documented labor and material costs. Calling an item customized has a payment consequence that the actual work must support.

TENS has its own narrow rental exception: two months of rental may accompany the purchase payment while the physician assesses whether buying the device is appropriate. It does not follow the ordinary capped-rental schedule.

Do DMEPOS Providers Bill Medicare?

Yes. Medicare-enrolled DMEPOS suppliers submit claims for covered items and services. The Centers for Medicare & Medicaid Services describes the supplier’s role as furnishing the items and submitting claims to the Medicare contractors that process them.

The order, supporting clinical documentation and proof of delivery connect the claim to the patient. Some items also require authorization before payment. For recurring claims, the rental period, continued use and applicable refill requirements add further conditions. A billing system can repeat a claim every month. The patient’s circumstances can change between those claims.

Allowed Amount Versus Medicare Payment

The allowed amount is the basis for payment, not necessarily the amount Medicare itself pays. Medicare generally pays 80% of the lower of the supplier’s actual charge or the applicable fee-schedule amount, after the deductible. The beneficiary is responsible for the 20% coinsurance.

This distinction matters when someone compares a supplier’s charges, the fee schedule and the remittance. A rental percentage is applied to the recognized purchase-price basis, not automatically to the supplier’s acquisition cost or its advertised selling price.

Why the Fee Schedule Has Different Bases

Payment categories use different historical purchase-price and charge bases. A supplier’s current selling price does not set the fee schedule.

Later updates and competitive-bidding adjustments change the payable amounts. Geography matters too: the payment rules distinguish rural, noncontiguous and other areas. The service date, location and category belong beside the code when we examine a payment. A price taken from another period or another category can obscure the very discrepancy a billing employee has noticed.

Bidding also changes supplier access. Contract suppliers furnish designated products under the bidding program. During the temporary gap in 2019 and 2020, CMS allowed any willing supplier to furnish products in former bidding areas on a fee-schedule basis, as MedPAC’s payment overview describes.

Capped Rental and the Power-Wheelchair Exception

Ordinary capped rental pays for medically necessary equipment for no more than 13 continuous paid months. The monthly fee-schedule amount is 10% of the recognized purchase-price basis for each of the first three months and 7.5% for each remaining month.

Power wheelchairs use a different schedule: 15% for each of the first three months and 6% for each remaining month. Both schedules recognize 105% of the purchase-price basis across the full rental period. The wheelchair schedule brings more of that amount forward.

Complex rehabilitative power wheelchairs retain an additional exception. Suppliers must offer the patient a purchase option when initially furnishing the equipment, and payment is a lump sum if the patient chooses it. Treating every wheelchair as an ordinary rental misses both the different monthly schedule and that purchase option.

When Does a Rental Period Start Over?

Changing suppliers or adding something to the existing equipment does not restart the rental period. A temporary interruption also leaves the clock intact: the rule allows 60 consecutive days plus the remaining days in the rental month when use stopped. A new period after a longer break requires documentation that the prior medical need ended and that the equipment is needed again.

A billing employee can see a fresh rental period on a claim while the patient’s equipment and medical need remain unchanged. The rental history and clinical record explain whether that restart has any basis.

Who Owns Durable Medical Equipment?

Ownership depends on the payment category. For ordinary capped rental, the supplier transfers title to the patient on the first day after the thirteenth continuous paid rental month. For oxygen equipment, the supplier retains ownership after equipment rental payments end.

That distinction also changes the repair question. Medicare can pay reasonable and necessary repair charges for beneficiary-owned equipment outside warranty coverage. The payment rules separately address the supplier’s continuing responsibility for rented equipment.

Ventilator, Respiratory Assist Device and CPAP Payments

Ventilators fall within the frequent-and-substantial-servicing class, which pays monthly until medical necessity ends. The rule expressly separates them from CPAP devices and respiratory assist devices with bi-level pressure capability. A respiratory product’s name does not settle its payment category.

The economic difference is substantial. In the Centers for Medicare & Medicaid Services’ 2024 claims data, average payment per rental service was about $34 for the E0601 CPAP device and about $953 for the E0466 non-invasive home ventilator. CPAP follows the capped-rental path. The ventilator category supports continuing rental payments while medical need continues.

Continuing payment depends on more than leaving a machine in the patient’s home. In February 2024, Lincare Inc. agreed to a $25.5 million civil settlement over claims involving non-invasive ventilator rentals and coinsurance waivers. Lincare admitted that, in some instances, it continued seeking monthly payments while aware that patients were not using their devices.

The admissions reached the work behind the claim. Clinical staff frequently missed home visits required by company protocols. Some centers lacked enough staff to monitor patients adequately. Lincare could remotely monitor usage for certain newer models but did not use those systems to confirm use as directed. It also continued seeking payments where staff had not verified use or retained documentation of it.

For a respiratory therapist or billing employee, the useful connection is between the usage information, the missing or completed visits, and the monthly claim. An uncapped rental still has a stopping point: the end of medical necessity.

What Is the DME 36-Month Rule for Oxygen?

The DME 36-month rule limits how long Medicare pays rent for oxygen equipment. The oxygen equipment thirty-six-month cap and five-year service obligation run on different clocks: equipment payments end first, while the supplier must continue furnishing medically needed equipment for the remainder of its reasonable useful lifetime, generally five years from delivery.

The company keeps the equipment on its books and keeps the obligation to serve the patient. For oxygen equipment already past its cap, no new rental period begins before the equipment’s reasonable useful lifetime ends.

Oxygen contents have their own payment treatment. Necessary liquid or gaseous oxygen can remain payable after the equipment cap. These contents payments cover delivered oxygen, not oxygen generated by a concentrator. Certain other oxygen equipment can qualify for maintenance and servicing payments, subject to the separate timing and home-inspection requirements.

Oxygen Claims After the Oxygen Equipment Payments End

Lincare Holdings admitted that it improperly billed Medicare, Medicare Advantage plans and beneficiaries for oxygen equipment rentals and copayments after receiving three years of payments. Its August 2023 settlement was $29 million.

The company admitted inadequate controls for Medicare Advantage billing and ineffective controls for some traditional Medicare claims. It also admitted that employees raised concerns and officials at its regional billing office and corporate headquarters instructed them that the billing practices would continue. The employees had identified the problem inside the business. Management chose to keep billing patients and taxpayer-funded health care programs.

The oxygen contents have a separate failure point. Rotech Healthcare agreed to a $9.68 million settlement in April 2018 and admitted knowingly billing Medicare for portable oxygen contents that beneficiaries did not use or require. It also admitted billing regardless of delivery.

Together, the cases show why a general description of oxygen service misses the question a billing insider can answer. Was the company collecting another equipment rental after the cap, or claiming payment for oxygen that the patient neither needed nor received?

The Device Starts the Relationship, and Supplies Keep It Going

Equipment ownership can pass to the patient while replacement masks, tubing, filters and other supplies continue to generate claims. The supplier’s continuing business can sit in those repeat orders after the device’s rental line closes.

The manufacturer sees the same recurring demand. ResMed reported that masks and other consumables accounted for 42% of its fiscal 2026 Sleep and Breathing Health revenue and grew faster than devices in its annual filing.

For products subject to the ordinary refill rule, the supplier must contact the beneficiary and document an affirmative response before dispensing the refill. It cannot automatically ship a predetermined quantity. The rule changed in January 2024: the former remaining-quantity and functionality documentation requirements were removed, while the affirmative-response requirement remained.

The category-specific exceptions matter here too. The continuous glucose monitor supply allowances A4238 and A4239 are exempt from that ordinary refill requirement, with a 90-day supply cap instead. A rule for mask cushions cannot simply be carried across to every recurring supply claim.

The Centers for Medicare & Medicaid Services’ instructions for reviewing essential replacement accessories make another important distinction. For beneficiary-owned CPAP, respiratory assist devices and continuous glucose monitors, contractors review continued medical necessity and the need for the refill. They need not re-establish whether the patient met the original qualification requirements.

When the Billing Records Tell a Different Story

Payment-category evidence connects what the supplier furnished with what it claimed and why it chose that description. An order, device record, delivery ticket, rental history, usage report or refill contact can answer a different part of that question. Internal instructions can explain why the discrepancies kept recurring.

In a whistleblower complaint against Hill-Rom Holdings, the whistleblower alleged that the business used a miscellaneous equipment code to obtain higher reimbursement for products that already had specific codes. The complaint recounts an internal warning:

The warning goes straight to the alleged code-selection decision. The complaint also alleged that Hill-Rom billed used beds with the NU modifier for new equipment instead of UE for used equipment. Both allegations turn on what the company supplied and what it told the payer.

A rental can also fail at its payment limit. In a separate Iowa Medicaid matter, Mercy Respiratory Care and Med Supply settled allegations in May 2018 that it kept charging after the purchase price had been reached. Its practical connection to Medicare rental cases is the comparison between accumulated payments, the applicable limit and the decision to submit another claim.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

When You Know Why the Claims Continued

If you work in billing, respiratory care or resupply and know why claims continued after the patient stopped using the equipment or the payment limit was reached, speak with our whistleblower experts about the decisions behind those claims. We connect the payment rules, patient records and instructions inside the supplier to build your strongest durable medical equipment whistleblower case. We bring in healthcare fraud whistleblower lawyers who understand recurring equipment and supply claims, and work beside you throughout the case.