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FAQs About Patients Paying Cash For DME

Thursday, February 1st, 2018

Suppliers with insurance contracts need to understand how those contracts impact cash sale transactions. To help suppliers avoid legal landmines while navigating the DME cash-pay landscape, health law attorneys Jeffrey Baird and Lisa Smith presented a free webinar on August 2, 2017. Set out below are select questions and Brown & Fortunato’s answers, as well as a glossary of terms. These FAQs are generalizations and do not apply to every supplier situation or payor contract, so the answers provided below may not specifically apply to your situation. Suppliers should contact their payors directly and/or consult with an experienced healthcare attorney to get specific answers to their situation. These FAQs are for informational purposes only. These FAQs are not intended to be legal advice and should not be relied upon by the reader without consulting his/her health care attorney. If you have questions, contact Jeffrey S. Baird, Esq., (806) 345-6320, jbaird@bf-law.com or Lisa K. Smith, Esq., (806) 345-6370, lsmith@bf-law.com.

General Q&A:

Q: What is Medicare’s Advance Beneficiary Notice of Noncoverage (ABN)?
A: An ABN is a form that allows a Fee-For-Service Medicare patient to make an informed decision about items usually covered by Medicare but for specific reasons may not be paid (eg, lack of medical necessity). When an ABN is properly executed by a Medicare patient, financial liability is transferred from the supplier to the patient. The supplier should have the Medicare patient sign an ABN only when the supplier has reason to expect that Medicare will not pay for a covered item. For more information on ABNs, please reference Medicare’s ABN interactive tutorial (Dec. 7, 2017).

Q: Do commercial payors use ABNs or what should suppliers use to transfer financial liability to non-Medicare patients?
A: Prior to cash-pay transactions, commercial payors may require different forms than an ABN, like a patient signed financial liability waiver or claim denial. The supplier should check with their payor for specific requirements before engaging in cash-pay transactions.

Q: Can I charge cash to my patients with commercial insurance?
A: Due to unique payor contractual agreements, accreditation requirements, and federal, state, and local laws, we cannot provide cash-pay guidance for patients with commercial insurance. Suppliers should directly contact their payors and/or consult with a health attorney to get answers specific to their situation.

Q: For a patient who wants to pay cash for a non-medically necessary covered item, what insurance document(s) should a DME supplier obtain to minimize liability?
A: For items expected to be denied payment by the payor, the supplier should obtain a signed Medicare ABN or commercial payor’s financial waiver form.

Q: If a patient wants to submit a reimbursement claim to their health insurance for an item purchased upfront with cash, what documentation may they require?
A: Suppliers with a Medicare PTAN are required to submit a claim to Medicare on the patient’s behalf, and Medicare will not pay for items obtained from a supplier without a PTAN. Most other insurances require that the patient submit a medical claim form when seeking reimbursement if the DME supplier does not file the claim on the patient’s behalf. The payor may also require that with the claim the patient submit an itemized invoice, a letter explaining the medical necessity of the claim, and any supporting documents. It is the payor’s authority to determine if payment is appropriate. The patient should check with their payor for the proper claim form.

Q: How does a supplier calculate their usual, customary or reasonable (UCR) charge?
A: Suppliers are responsible for setting their own UCR charge amount. These amounts should be consistent with their internal policies and be established in a non-discriminatory manner.

Q: Is there a limit on how much a Medicare supplier can charge a Medicare patient when submitting non-assigned claims?
A: No. Medicare’s limiting charge doesn’t apply to DME suppliers, so there are no upper limits on how much suppliers can charge a patient for DME items. When billing Medicare, the UCR billed amounts should be submitted on the claim. For more details, please see Balance Billing for Medical Equipment and Supplies (dated Jan. 2001); 42 U.S..C. §1320a-7(b)(6)(A). DME Supplier Participation and Assignment Reminders, (dated Dec. 6, 2017)

Q: Does a product’s coding verification in the DME PDAC’s coding system determine whether or not the product must be billed to Medicare or sold to patients for cash?
A: An item’s PDAC code-verification presence in the coding system does not determine whether an item must be billed to Medicare or sold for cash. While PDAC does require specific items to be PDAC code-verified, most products, including cpap and portable oxygen concentrators, are not required to be code-verified. Obtaining PDAC HCPCS code verification for non-required items is voluntary. In the absence of a PDAC coding verification, it is the supplier’s responsibility to determine whether the item falls within an existing HCPCS definition, and if so, use the associated HCPCS code when submitting claims. To search for HCPCS codes based on a description of an item, the DMECS keyword search may be queried or the supplier may contact DME PDAC directly.

Q: If the patient owns the oxygen equipment (e.g. patient purchased the item for cash), will Medicare pay for oxygen accessories (eg supply tubing, nasal cannula)?
A: Accessories, maintenance, and repairs are statutorily non-covered by Medicare for patient-owned oxygen equipment (Local Coverage Article: OXYGEN and OXYGEN Equipment – Policy Article A52514, dated Sep. 9, 2017). However, a supplier may obtain a voluntary ABN signed by the patient and request the patient pay cash for these items.

Q: If a Medicare patient pays cash for a Medicare-covered item from a supplier that does not have a Medicare PTAN, does a disclaimer on the receipt stating the supplier is not a Medicare provider satisfy the patient notice requirement?
A: Possibly, if the disclaimer is “prominently displayed” so that it is very likely that the patient saw the disclaimer in advance of completing the purchase. The Medicare rules say that a supplier without a Medicare PTAN is required to refund the money it collects from a Medicare patient unless it has the patient sign an ABN acknowledging that Medicare will not pay for any item obtained from that supplier because it is not enrolled with Medicare. In the absence of a signed ABN, if the supplier can prove that it provided adequate prior written notice to the customer, it can keep the funds collected from the customer. 42 U.S.C. §1395m(j)(4)(A). CMS guidance recommends a printed sign posted in a place likely to be seen by customers. Whether a disclaimer printed at the bottom of the store’s receipt will be considered adequate prior written notice will depend on how prominently the notice is displayed on the receipt, and how likely it is that the patient saw the notice prior to completing the purchase. For example, is the patient required to sign the receipt prior to completing the sale?

  • Sample Notice Disclaimer:
  • “Medicare will pay for medical equipment and supplies only if a supplier has a Medicare supplier number. We do not have a Medicare supplier number. Medicare will not pay for any medical equipment and supplies we sell or rent to you. You will be personally and fully responsible for payment.”

Q: Must a DME supplier obtain an Rx for PAP and oxygen concentrator accessories and supplies?
A: Any item that is labeled as “Rx only” requires a prescription in order to dispense to the patient.

Q: Can patients use their Health Savings Account (HSA) or Flexible Spending Account (FSA) for covered items that have not been assigned a HCPCS code by the PDAC?
A: Yes, if the items are considered qualified medical expenses for use with HSAs or FSAs. For most items, obtaining a HCPCS code determination from the PDAC is voluntary.

Q: If a PAP machine that was originally paid by Medicare broke within the five year RUL, can a supplier charge the patient a monthly cash price for a PAP loaner?
A: If Medicare paid for the 13-month rental resulting in title to the PAP being transferred to the patient, the supplier is responsible for furnishing replacement equipment at no cost to the patient or to the Medicare program if the DME MAC determines that the item furnished by the supplier will not last the 5-year reasonable useful lifetime. If the PAP suffered irreparable damage, the patient can elect to obtain replacement equipment, in which case Medicare will pay for a new capped rental. Irreparable damage refers to a specific incident of damage to equipment such as equipment falling down a flight of stairs as opposed to equipment that is worn out over time.

Physician-DME Q&A

Q: Are there limitations to physicians selling a pap or portable oxygen concentrator (POC) as a cash item to Medicare patients?
A: The Stark law and regulations restrict the ability of a physician to refer Medicare or Medicaid patients for DME to a supplier with which the physician has a financial relationship OR to provide DME to his/her own patients, unless a Stark exception is met. You should seek legal guidance on whether your specific arrangement meets a Stark exception.

Participation and Assignment Q&A:

Q: For a medically necessary capped rental item (eg cpap, portable oxygen concentrator), does Medicare allow suppliers to collect the full purchase price upfront from the patient when billing non-assigned claims?
A: No. Claims that fall into the capped rental payment category cannot be processed as a purchased item. The patient cannot pay the full purchase price up front just because the claims are submitted as non-assigned. The supplier should collect their monthly UCR rental charge from the patient and submit a monthly non-assigned claim to Medicare. (dated Jun. 1, 2017)

Q: If a patient receives two cushions (A7032) on the same day and at the same place, may a non-participating supplier bill cash for one A7032 as non-assigned and the other one A7032 as assigned?
A: No, this is considered fragmented billing. The supplier must choose to submit two cushions (A7032) as either assigned or non-assigned. The Durable Medical Equipment Medicare Administrative Contractors (DME MACs) considers “fragmented” billing when a supplier accepts assignment for some services and payment from the patient for other services performed at the same place on the same date of service. https://med.noridianmedicare.com/web/jddme/article-detail/-/view/2230703/%E2%80%9Cfragmented%E2%80%9D-billing-for-non-participating-suppliers (dated May 25, 2017).

Competitive Bidding (CB) Q&A:

Q: May a CB non-contracted supplier sell covered items for cash to Medicare patients who reside in a competitive bidding area (CBA)?
A: Yes, with a properly executed ABN acknowledging that Medicare will not pay for the item since it is being provided by a supplier without a CB contract.

Q: May a contracted CB supplier sell covered items for cash to Medicare patients?
A: No, unless the item is not medically-necessary. CB contract suppliers must accept assignment on all items under their contracts. DMEPOS Competitive Bidding Program Contract Supplier Obligations, Palmetto GBA, Jan. 2011

Q:May a non-participating Medicare supplier sell covered items for cash to Medicare patients residing outside of a CBA when billing non-assigned claims?
A: Yes. A non-participating Medicare supplier would inform the patient about their options and collect their UCR charge from the patient for the item(s).

DME suppliers may be paid for covered items by health insurance companies and/or patients. While suppliers may prefer to charge patients cash, their contractual relationship with the patient’s payor and the item’s medical necessity status may impact their payment pathway options.

The critical supplier cash-pay considerations are:

  1. Is the item covered by an insurance policy?
  2. Is the supplier contracted with the patient’s health insurance company?
  3. Is the item considered medically necessary by the patient’s health insurance company?

The following decision tree may help a Medicare supplier determine if a cash-pay transaction opportunity exists.

chart showing Medicare DME Supplier Payment Transaction Options

*Grandfathered suppliers and traveling beneficiaries are not represented in the above decision tree. A grandfathered supplier must accept assignment on all claims for grandfathered items furnished to beneficiaries in a CBA1
**Except where an exception applies, a beneficiary has no financial liability to a non-contract supplier that furnishes an item included in the CB program for a CBA, unless the beneficiary has signed an ABN that indicates that Medicare will not pay for the item because the beneficiary is receiving it from a noncontract supplier and the beneficiary agrees to accept financial liability2

1The DMEPOS competitive bidding program grandfathering requirements for non-contract suppliers, November 2017
2The DMEPOS competitive bidding program non-contract supplier, April 2016


This glossary explains terms used in the FAQs above:

  • Advance Beneficiary Notice of Noncoverage (ABN): In Original Medicare, a notice that a doctor, supplier, or provider gives a person with Medicare before furnishing an item or service if the doctor, supplier, or provider believes that Medicare may deny payment. In this situation, if the patient doesn’t sign an ABN before he/she receives the item or service, and Medicare denies payment, then the patient may not have to pay for it. If the patient is given an ABN, and signs it, the patient will probably have to pay for the item or service if Medicare denies payment.
  • Assignment: An agreement by the doctor, provider, or supplier to be paid directly by Medicare, to accept the payment amount Medicare approves for the service, and not to bill the patient for any more than the Medicare deductible and coinsurance.4
  • Cash-pay: When a patient pays a supplier the full charge for the item or service at the time of service using cash, check, credit or debit card.
  • Covered services (items): The services the health plan will pay for according to the agreement between the health care carrier and either the employer group or the individual.
  • DMEPOS: Durable medical equipment, prosthetics, orthotics and supplies.
  • Medically necessary: Health care services or supplies needed to diagnose or treat an illness, injury, condition, disease, or its symptoms and that meet accepted standards of medicine.4 For DMEPOS items, items which meet the Medicare (or other payor) medical necessity criteria as established by the applicable coverage policies, such as the Medicare Local Coverage Determination (LCD) policies.
  • Non-Assignment (non-assigned): The supplier is not agreeing to accept the Medicare allowable as payment in full, can collect directly from the patient, and can charge more than the Medicare allowable in such cases. The supplier must file the claim with Medicare on behalf of the patient and any Medicare reimbursement will go directly to the patient.
  • Non-covered: Items or services a health plan will not pay for.
  • Not medically necessary: Health care services or supplies which are not needed to diagnose or treat an illness, injury, condition, disease, or its symptoms and don’t meet accepted standards of medicine. For DMEPOS items, items which do not meet the Medicare (or other payor) medical necessity criteria as established by the applicable coverage policies, such as the Medicare Local Coverage Determination (LCD) policies.
  • Non-participating provider: A provider which does not sign a Medicare Participating Physician or Supplier Agreement with Medicare and may choose to either accept or not accept assignment on Medicare claims on a claim-by-claim basis. If you choose not to accept assignment, you may not charge the beneficiary more than the Medicare limiting charge for unassigned claims for Medicare services.
  • Participating provider: Participating in the Medicare program means that the health care provider has signed a Medicare Participating Physician or Supplier Agreement with Medicare and agrees to accept assignment for all services furnished to Medicare patients. By accepting assignment the provider agrees to accept the amount approved by Medicare as total payment for covered services.8
  • Payor: Entities other than the patient that finance or reimburse the cost of health services. In most cases, this term refers to insurance carriers, other third-party payers, or health plan sponsors (employers or unions).
  • Patient (Beneficiary): A person who has health care insurance.4
  • Supplier: Generally, any company, person, or agency that gives you a medical item or service, except when you’re an inpatient in a hospital or skilled nursing facility.4
  • Usual, customary or reasonable (UCR) charge (fee): The amount routinely charged by a health care provider for an item or service.

These frequently asked questions (FAQs) are provided by health law attorneys Jeffrey S. Baird, Esq. and Lisa K. Smith, Esq. ResMed is providing these FAQs for informational and educational purposes only. ResMed does not endorse the opinions, information, or advice offered. The answers provided do not constitute legal advice. Please contact Jeffrey S. Baird at (806) 345-6320 or jbaird@bf-law.com, or Lisa K. Smith at (806) 345-6370, lsmith@bf-law.com if you have additional questions.

3 Medicare Glossary, Dec. 13, 2017
4 Cigna Glossary, Dec. 13, 2017
5 DMEPOS Supplier Standards
6 Billing non-assigned, Jeffrey S. Baird, Dec. 01, 2016
7 Participating vs. Non-Participating, Cahaba, Dec. 13, 2017
8 Mosby’s Dental Dictionary, 2nd edition. 2008 Elsevier, Inc.