BALTIMORE--CMS plans to overhaul its oxygen payment system, creating new categories and fees, under a proposed rule released Thursday.

The rule implements a capped rental provision in the Deficit Reduction Act that requires providers to transfer title of oxygen equipment to the beneficiary after 36 months of rental. Similarly, according to the proposal, beneficiaries will acquire title to other capped rental equipment after 13 months of rental. The beneficiary would continue to pay coinsurance of 20 percent of rental payments, but would no longer pay coinsurance on the equipment after the transfer of title.

Under the proposed rule, CMS calls for reworking the oxygen classification system, splitting stationary and portable oxygen contents into two separate payment classes. The proposal also calls for a third payment class for new technologies, such as portable concentrators and home transfilling systems, that eliminate the need for refilling and delivery of oxygen contents.

In a release accompanying the rule proposal, CMS said the new structure is intended to ensure that payments for oxygen and oxygen equipment are accurate, that beneficiaries who use traditional portable oxygen systems have sufficient access and that Medicare payments do not create incentives to provide particular types of oxygen technology.

According to the proposal, payment for portable oxygen contents would increase to $55 compared to the current average payments of $21, but the monthly payment amounts for stationary oxygen equipment and contents would drop from an average of $199 to $177.

The proposed payment rates are as follows:

• Stationary payment: $177
• Portable add-on: $32
• Oxygen-generating portable equipment add-on (portable concentrators or transfilling systems): $64
• Stationary contents delivery: $101
• Portable contents delivery: $55

According to CMS, under the proposed new oxygen and oxygen equipment class structure, in those cases where the beneficiary needs both stationary and portable oxygen, monthly payments of $241 or $209 (proposed revised stationary payment of $177 plus one of two proposed portable equipment payments, $32 or $64) would be made during rental months one through 36. The stationary payment (which includes payment for stationary equipment, as well as oxygen contents for stationary and portable systems) of $177 would be made during rental months one through 36 for beneficiaries who only need stationary oxygen and oxygen equipment.

Monthly payments of $101 for stationary oxygen contents and/or $55 for portable oxygen contents would be made in cases where beneficiaries own their stationary and/or portable oxygen equipment. The $101 payment is for stationary oxygen contents only and is derived from the current payment of $156, which is made for both stationary and portable oxygen contents. The $55 payment for portable oxygen contents only is also derived from the current payment of $156 that is made for both stationary and portable oxygen contents and would replace the current statewide portable oxygen contents fees (average of $21), which was based on a relatively small number of claims and allowed services compared to the number of claims and allowed services that were used in computing the statewide fees (average of $156) for a combination of stationary and portable oxygen contents.

After the rental period, the release said, "Medicare will continue to make monthly payments for oxygen contents for beneficiary-owned equipment as long as the beneficiary needs oxygen equipment." In addition, Medicare said it will pay for "reasonable and necessary maintenance and servicing of beneficiary-owned oxygen equipment and capped rental DME not covered by a supplier's or manufacturer's warranty."

CMS also calls for additional supplier requirements "to safeguard beneficiaries." These include requiring a supplier that furnishes rented oxygen equipment or a capped rental item in the first month to continue furnishing the item throughout the entire rental period. CMS said this is necessary to ensure beneficiary access, "which we believe could be jeopardized if suppliers have the option to take back the rented equipment just before the rental period expires in order to retain title to that equipment."

Suppliers also would not be allowed to switch out equipment during the rental period, except under specified circumstances, and they would also be required to disclose their intentions regarding assignment for the entire rental period.

The new requirements would take effect Jan. 1, 2007.

CMS is accepting comments on the proposed rule until Sept. 25. A final rule will be published later in the fall.

To view the rule, visit http://www.cms.hhs.gov/HomeHealthPPS/downloads/CMS1304Pdisplay.pdf.

A backgrounder on the DME portion of the rule can be found at www.cms.hhs.gov/HomeHealthPPS/downloads/DMEBackground.pdf.

To comment on the rule, click here.