DME Purchase and Rental Limitations and Reimbursement

Policy ID: Adm 131

Effective Date: January 01, 2027

Last Reviewed: July 15, 2026

Applies To: Migrated Commercial

This policy applies only to physicians and other qualified health care professionals, including DMEPOS Suppliers.

Definitions

Code/Term

Code Description/Term Definition

Custom Durable Medical Equipment (DME)

Custom items are rarely necessary and are rarely furnished. Must be uniquely constructed or substantially modified for a specific beneficiary according to the description and orders of a physician and be so different from another item used for the same purpose that the two items cannot be grouped together for pricing purposes. Items that are measured, assembled, fitted, or adapted in consideration of a patient’s body size, weight, disability, period of need, or intended use (i.e., custom fitted items) do not meet the definition of customized items. An example of a genuine custom item would be a wheelchair that is modified to allow conjoined twins to use it in such a way that no other beneficiary could ever use it. An example of an item that is not a custom item would be a compression garment that comes in a variety of sizes, even if the beneficiary’s leg were measured for the item to determine which preset size they would be getting. This compression garment example would be a custom fitted item, not a Custom DME item.

Durable Medical Equipment (DME)

DME is equipment that:

Can withstand repeated use.
Is primarily and customarily used to serve a medical purpose.
Generally, is not useful to a person in the absence of an illness or injury; and
Is appropriate for use in the home.

All requirements of the definition must be met before an item can be considered durable medical equipment.

Durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) are classified by the Centers for Medicare & Medicaid (CMS) into 12 categories below:

IN Inexpensive and Other Routinely Purchased Items
FS Frequently Serviced Items
CR Capped Rental Items
OX Oxygen and Oxygen Equipment
OS Ostomy, Tracheostomy & Urological Items
SD Surgical Dressings
PO Prosthetics & Orthotics
SU Supplies
TE Transcutaneous Electrical Nerve Stimulators
TS Therapeutic Shoes
IL Intra Ocular lens
SC Splinting and Casting

Policy Statement

Purchase and Rental Limitations:

DME claims must indicate whether the item(s) is rented or purchased. Purchased equipment must specify whether it is new or used. If the claim does not indicate whether the item is new or used, the item may be denied for the appropriate modifier. The following table indicates the Healthcare Common Procedure Coding System (HCPCS) modifiers used to indicate status. Other modifiers may be used in addition to those listed below to increase specificity.

Modifier

Status

New when rented (use when an item that was new at the time of rental is subsequently purchased)

New equipment

Rental (use when DME is to be rented)

Used durable medical equipment

In addition to this policy, claim payments are subject to other plan requirements, including, but not limited to, medical necessity and reasonableness.

A DME item that has been purchased may not be purchased or rented again within a 60-month period. Back-up, upgrade, and replacement may be allowable as indicated on Medical Policy DME75 – Durable Medical Equipment, Prosthetic and Orthotic Upgrades, Replacements, Duplicates and Repairs.

A DME item that has been categorized by CMS on the Durable Medical Equipment, Prosthetics, Orthotics and Supplies (DMEPOS) Fee Schedule as a capped rental (CR) item will be considered purchased and owned by the member after 10 continuous rental months have been paid for the item. Rental charges received for the item after the 10th continuous month will be denied.

A DME item that is not on the DMEPOS Fee Schedule can be considered purchased and owned by the member after 10 continuous rental months have been paid for the item. Rental charges received for the item after the 10th continuous month will be denied.

A DME item that has been categorized by CMS on the DMEPOS Fee Schedule as a Transcutaneous Electrical Nerve Stimulation (TE) item will be considered purchased and owned by the member after three (3) continuous months have been paid for the item. Charges received for the item after the 3rd continuous month will be denied.

A DME item that has been categorized by CMS on the DMEPOS Fee Schedule as an Oxygen Equipment (OX) item reimbursement will be limited to 36 monthly rental payments. This allowance applies to stationary and portable items. Only charges submitted with modifier MS to indicate maintenance and servicing may be considered for additional payment beyond the 36-month rental period for parts and labor which are not covered under any manufacturer or supplier warranty.

Reimbursement:

Reimbursement of DMEPOS codes and Parenteral and Enteral Nutrition (PEN) will be at the lesser of billed charges or 100% of the current DMEPOS fee schedule.

For codes which do not have fee schedule rate, reimbursement will be at the lesser of billed charges, 120% of wholesale invoice cost or a % of charge.

References

Cross References

Medical Policy DME75 – Durable Medical Equipment, Prosthetic and Orthotic Upgrades, Replacements, Duplicates, and Repairs
Adm 114 - Medicare-Based Fee Effective Dates
Adm 105 – Bundling Edits
Adm 107 – Non-Reimbursable Services

Disclaimer

Your use of this Reimbursement Policy constitutes your agreement to be bound by and comply with the terms and conditions of the Reimbursement Policy Disclaimer.

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