Oxygen is one of the country’s most billed and reimbursed items through the DME benefit of Medicare Part B, and even though the fee schedule for oxygen has been reduced by over 25% in recent years, it remains, in my opinion, an excellent source of revenue and profit.

The main reason oxygen is still a money maker is that, prior to the reimbursement cut, a good five-liter concentrator with a 5-year warranty cost around $1,100. Since the cut, that same concentrator now sells for $700 to $800 and still has an estimated useful life of at least 60 months. Medicare’s reimbursement averages $207 per patient per month. This amount times 60 months yields $12,420 with a cost of goods of $750. Granted, there are ancillary costs such as cannulas, tubing, humidifier bottles, and water traps, but overall the profit picture is favorable.

To develop or improve your current oxygen business, start by identifying what a Medicare oxygen patient “looks like.” To begin with, the patient’s physician must determine that the patient has a severe lung disease or hypoxia-related symptoms that will likely improve by the patient’s use of oxygen therapy. Second, the patient’s blood gas study must meet Medicare’s guidelines for oxygen coverage. Last, but not least, the physician must have tried or considered alternative treatment measures and deemed them clinically ineffective.

Not All Tests Are the Same
Key to the qualification of the patient is the blood gas study, and Medicare is therefore understandably concerned about who performs the study. According to its criteria, the study can be completed only by an entity qualified to bill Medicare for the test, such as a Part A provider, a laboratory, an Independent Diagnostic Testing Facility (IDTF), or a physician. This study must also be one that complies with Fiscal Intermediary or Local Carrier policy and is covered by Medicare Part A or Medicare Part B. A supplier is not qualified (per these requirements) and is therefore not allowed to supply test results for use on a Medicare Certificate of Medical Necessity (CMN). Suppliers also may not reimburse any provider of laboratory services for the performance of blood gas studies.

Now that we know who can, and who cannot, perform these tests, a provider must determine whether the patient will qualify for reimbursement under Medicare guidelines. The two acceptable tests, an oximetry or an arterial blood gas study (ABG), have a range of acceptable values that qualify the patient for Medicare coverage. Acceptable test results place the patient into one of two covered groups, Group I and Group II.

Group I
To be covered as a Group I patient, the Medicare beneficiary’s laboratory test results must meet one of the following four criteria:

1. An ABG (aka arterial pulse oxygen or PO2) at or below 55 mg Hg or an arterial oxygen saturation (aka oxygen saturation or O2 sat) at or below 88% taken at rest, but not while asleep.

2. An ABG at or below 55 mg Hg or an arterial oxygen saturation at or below 88% for at least 5 minutes taken during sleep for patients with an arterial PO2 at or above 56 mm Hg or an arterial oxygen saturation at or above 89% while awake.

3. A decrease in arterial PO2 by more than 10 mm Hg or a decrease in arterial oxygen saturation of more than 5% for at least 5 minutes taken during sleep associated with symptoms or signs reasonable attributable to hypoxemia. (Note that the 5 minutes need not be continuous.)

4. An ABG at or below 55 mg Hg or an arterial oxygen saturation at or below 88% taken during exercise for patients with an arterial PO2 at or above 56 mm Hg or an arterial oxygen saturation at or above 89% at rest. In this case the oxygen is provided for during exercise if it is documented that the use of oxygen improves the hypoxemia associated with exercise when the patient was breathing room air.

Group II
To be covered as a Group II patient under Medicare, the patient’s laboratory test results must be derived under the same circumstances as a Group I patient and demonstrate an arterial PO2 of 56-59 mm Hg or an arterial blood gas saturation of 89%, and any of the following three symptoms:

1. Dependent edema suggesting congestive heart failure.

2. Pulmonary hypertension or cor pulmonale.

3. Erythrocythemia with a hematocrit greater than 56%.

Medicare does have a Group III for oxygen patients. These are patients with an arterial PO2 at or above 60 mm Hg or an arterial oxygen saturation at or above 90%. For these patients, Medicare concludes “there is a rebuttable presumption of noncoverage.”

Coverage Periods
Medicare CMN periods and patient retesting are directly related to these test results and must be completed and obtained on the following schedules:

Group I: The first (initial) CMN covers the shorter of 12 months or the physician’s specified length of need. The laboratory results reported on the initial CMN must be the most recent obtained prior to the CMN’s initial date and must be obtained within 30 days prior to that initial date.

The one exception to this rule is for patients coming off Medicare HMO coverage in which case the 30-day rule does not apply and the provider must obtain the patient’s most recent test results from when the patient was enrolled in the Medicare HMO. Recertifications for months 13 and beyond where the physician indicated “99” as the estimated length of need require only a recertification CMN. The original laboratory results on the initial CMN need only be transposed by the physician to the recertification CMN. If the physician indicated any length of need less than “99,” the patient must be retested within 30 days of the recertification date.

Group II: The first (initial) CMN covers the shorter of 3 months or the physician’s specified length of need. The laboratory results reported on the initial CMN must be the most recent obtained prior to the CMN’s initial date and must be obtained within 30 days prior to that initial date. The same transition Medicare HMO rules apply. Recertifications for months 4 and beyond require the patient to be retested regardless of the physician’s notation of estimated length of need.

As you can tell, furnishing oxygen is complex, and there is much more to know, including requirements for retesting and portable oxygen. But if I were to get back into the DME business and open a new DME company, oxygen would be at the top of my list of items to provide, despite the reimbursement cuts.

Bruce Brothis is president and CEO of Centralized Billing & Intake, a DME billing and consulting company located in Parker, Colo. A former DME company owner, Brothis has more than 24 years of industry experience. Contact him at (800) 396-9910 ext 13.