How to Bill DME Claims and Understand DME Payments

Billing durable medical equipment differs significantly from billing a standard office visit. It depends on HCPCS Level II coding, any kind of product-specific coverage rules, medical necessity documentation and even rental-versus-purchase requirements. It further needs proof of delivery and a payment methodology that varies by payer. Missing any one of these requirements can cause the claim to be denied or paid below the expected amount.

How DME Billing Differs from Standard Medical Billing

A few structural differences set DME apart, starting with:

• DME billing primarily covers equipment and supplies rather than professional services delivered during an office visit.
• It relies on HCPCS Level II codes rather than CPT codes alone.
• Purchase and rental classifications affect the required modifiers and the duration of the billing cycle.
• Recurring supplies and ongoing rentals need to be billed on a schedule, not as a single event.
• Proof of delivery is a critical documentation requirement for DME claims.
• Same-or-similar equipment checks are important because Medicare may deny payment when its records show that the beneficiary already has medically equivalent equipment and the requirements for replacement or additional equipment are not met.
• Coverage depends on product-specific Local Coverage Determinations (LCDs) and policy articles, which may vary by equipment category and MAC jurisdiction.

How Do You Bill the DME Claims?

Billing a DME claim is quite easy if you start with verifying the patient’s benefits. Then confirm that the item meets the payer’s coverage criteria, obtain the required order and medical records, assign the correct HCPCS code and modifiers, document delivery, and submit the claim to the appropriate payer. After submission, monitor the claim for payment, rejection or denial.

Related Reading: 5 Powerful Ways Outsourced RCM Vendors Transform DME Billing 

The 7 Vital Steps in DME Claim Submission

Step 1: Verify Eligibility and DME Benefits — Confirm active coverage on the anticipated date of service, and confirm the DME benefit specifically, as general medical coverage doesn’t guarantee coverage for a particular item. Also, check primary and secondary coverage, deductible as well as the coinsurance status, whether the supplier needs to be in-network or participating, same-or-similar equipment history, and whether prior authorization applies.

Step 2: Confirm Coverage and Medical Necessity — Medicare DME billing hinges on whether the item falls under a Medicare benefit category, isn’t specifically excluded, and meets the reasonable-and-necessary standard CMS applies to DME coverage decisions. One also needs to review the applicable National Coverage Determination, Local Coverage Determination, DME MAC policy article, or commercial payer medical policy.

Step 3: Collect the Required Order and Clinical Records — For Medicare claims, suppliers generally need a written order containing the required standardized elements before submitting the claim, as certain designated DMEPOS items require a face-to-face encounter and a written order prior to delivery.

Step 4: Assign the Correct HCPCS Code and Modifiers — Match the durable medical equipment with the HCPCS Level II code and pair it with the appropriate ICD-10-CM diagnosis code. Once done, confirm units of service and apply the modifiers the payer requires:

Modifier requirements depend on the specific item, the payer, and where the claim falls within the applicable rental or billing cycle. The same equipment may require different modifiers as it progresses through a capped-rental billing cycle.

Step 5: Obtain and Retain Proof of Delivery — Proof of delivery connects the billed item to the beneficiary and must satisfy the documentation and date-of-service requirements applicable to the delivery method. Required documentation depends on the delivery method: direct delivery, shipping, and delivery to a nursing facility each carry different documentation rules.

Step 6: Submit the Claim to the Correct Payer — DME claim submission for most Medicare DMEPOS claims happens electronically as an 837P; the CMS-1500 paper form applies only when a specific exception exists. Medicare Fee-for-Service claims route to the DME MAC covering the beneficiary’s state, while Medicare Advantage claims go directly to the beneficiary’s plan. Commercial and Medicaid submission rules vary by payer. Report ordering practitioner information, place of service, and any authorization number wherever the payer requires it.

Step 7: Track Adjudication, Payment and Denials — After submission, watch for clearinghouse or payer rejections and review the electronic remittance advice for the allowed amount, contractual adjustment, and patient responsibility. Flag underpayments, correct and appeal denials within the payer’s deadline, and submit to a secondary payer when coverage applies.

While it can be quite daunting for many, you can easily get it done by outsourcing DME billing services to professional expertise. But one question that still remains for new DME providers is the payment method.

What Is a DME Payment?

A DME payment is the amount paid for covered durable medical equipment or supplies after a payer processes the claim. The amount may come from Medicare, Medicare Advantage, Medicaid, a commercial insurer or the patient. It is generally based on the payer’s allowed amount and not necessarily the supplier’s submitted charge.

How DME Payments Vary by Payer

Original Medicare: Payment is generally based on the Medicare-approved amount. After the Part B deductible, Medicare typically pays 80% of the approved amount, while the beneficiary is responsible for 20%.

Medicare Advantage: Payment depends on the plan’s reimbursement rules, network requirements and member benefits. Claims are submitted to the plan rather than a DME MAC.

Commercial insurance: Payment is usually based on a contracted rate, fee schedule or another payer-specific methodology.

Medicaid: Reimbursement varies by state and may follow a state fee schedule or, at times, a Medicaid managed care contract.

Patient responsibility: The patient may owe a deductible, copayment, coinsurance or the cost of a non-covered item. Secondary insurance may cover some of this amount. The difference between the submitted charge and allowed amount cannot automatically be billed to the patient. Suppliers must follow payer contracts, assignment rules and applicable notice requirements.

Understanding How Medicare Determines Payment for DME

Medicare calculates payment against the Medicare approved amount under the DMEPOS fee schedule, which varies by whether the item is purchased or rented and by geographic or other applicable payment adjustments. When a DME supplier like you accepts assignment, Medicare pays its portion of the approved amount directly, and the beneficiary owes the remainder after the Part B deductible — generally 20% of the approved amount. Secondary or supplemental coverage may pay some or all of the beneficiary’s cost sharing.

Purchase, Rental and Recurring-Supply Payments

Payment rules differ by DME category. Many capped rental items are paid monthly for up to 13 continuous months, after which ownership generally transfers to the beneficiary. Oxygen equipment, items requiring frequent and substantial servicing, recurring supplies, repairs and replacement equipment follow different payment rules.

Why a DME Payment May Be Lower Than Expected

A payment may be lower than the submitted charge because of standard payer adjustments or a billing or adjudication error, which can include:

• Fee-schedule or contracted-rate adjustment
• Deductible or coinsurance applied
• Incorrect units billed
• Missing or incorrect modifier
• An accessory bundled into a base payment rather than paid separately
• A rental-month sequencing error
• A coordination-of-benefits issue with a secondary payer
• A partial denial
• Payer underpayment
• A non-covered item or service

What Information Is Required on a DME Claim?

• Beneficiary information
• Supplier identification and NPI
• Ordering or referring practitioner information
• Date of service
• HCPCS Level II code
• Required modifiers
• Units of service
• ICD-10-CM diagnosis code
• Place of service
• Prior authorization number, when required
• Assignment indicator
• Supporting documentation, when the payer requests it

Some Common Errors That Delay DME Claim Payments

Errors are inevitable in a billing process. However, many of them can be avoided if care consideration is ensured for cases like:

Billing Before Documentation Is Complete — Submitting before the order, medical necessity documentation, or authorization is finalized may trigger a denial that a complete claim would have avoided.

Using an Incorrect Rental or Purchase Modifier — A capped rental claim billed with the wrong sequencing modifier can deny mid-rental, even after earlier months paid correctly.

Missing Proof of Delivery — Missing or noncompliant proof of delivery can result in claim denial or payment recoupment, even when the equipment was medically necessary.

Billing the Wrong Payer or DME MAC — Sending a Medicare Advantage claim to the DME MAC, or vice versa, may result in rejection rather than a processed claim.

Overlooking Same-or-Similar Equipment — Billing for equipment that duplicates something the patient already has on file denies as a same-or-similar conflict.

Failing to Track Recurring Claims — Rental and resupply claims that aren’t tracked on schedule lead to missed billing windows and gaps in reimbursement.

Posting the Payment without Checking the Allowed Amount — Posting a payment without verifying it against the allowed amount on the remittance advice lets underpayments go unnoticed and uncorrected.

A DME claim can encounter errors at any stage of this process, which is why DME suppliers are increasingly handling their process with a dedicated DME billing team rather than running it in-house. This is mainly because it not only supports eligibility and same-or-similar checks but also complex documentation follow-up, prior authorization, order entry, HCPCS and modifier validation. Even proof-of-delivery review, claim submission, rejection and denial management, payment posting, underpayment identification, rental and resupply tracking, and accounts receivable follow-up are all taken care of by an expert like SunKnowledge, a complete RCM solution.

Related Reading: Why Proof of Delivery Is the Most Expensive Document in DME Billing 

How SunKnowledge DME Billing Services Support the Claim-to-Payment Process

For more than 15 years, SunKnowledge has been known for delivering outstanding solutions to DME providers across the US with a reported 97% first-pass collection rate. Catering to all the pre-billing work such as eligibility verification, prior authorization, and order confirmation, we not only ensure 99.9% accuracy but also seamless billing transactions.

DME reimbursement depends on the accuracy of every step, from benefit verification and documentation collection through claim submission and payment review. If you are struggling with the same, connect with our DME billing team to identify gaps affecting your claim payments.