Understanding Capped Rental Rules

By Claudia Amortegui, President, The Orion Group

So we're halfway through 2006 -- this seems like a good time to do a little self-assessment when it comes to how you're doing with the new Medicare capped rental category, which includes, but is not limited to, hospital beds, patient lifts and most wheelchairs.

All of the items in this category, with the exception of power wheelchairs, were required to be rented in the first 10 months. At that time the provider was required to send a purchase option letter to the beneficiary. If the beneficiary chose to purchase the item, the provider would receive three more payments for a total of 13. If the beneficiary chose to continue the rental, the provider would receive five more payments for a total of 15. In addition, the provider would receive a maintenance and servicing fee every six months beginning in month 22.

With the Deficit Reduction Act (DRA) of 2006, that plan has changed.

We must first understand that the change in the capped rental category is for those products whose initial rental started on January 1, 2006. If the rental period started prior to January 1, then that item (for that end-user) will fall under the "old" rules and will be "grandfathered" and handled according to the previous policy.

The DRA changed the capped rental category by eliminating the purchase option. You must still initially rent the item; however, the payments will automatically stop with the 13th payment (unless medical necessity ends prior to that period). The automatic maintenance and servicing fee has also been eliminated. The Centers for Medicare & Medicaid Services (CMS) has stated that they will reimburse for maintaining the equipment.

When the rental payments are completed, the "title" of the equipment will transfer to the end-user. Yes, the end-user will now own the equipment.

So that is how the capped rental products will be processed under the 2006 DRA. Unfortunately, providers cannot just read the rules. Now it's time to actually understand and know your business.

I strongly suggest that you analyze your business. What percentage of your business will be affected by these changes? How many rentals do you have that will be grandfathered? What is the average amount of capped rentals that you provide each month? Do the rentals come from primarily one or two referrals? Keep in mind that if you have more than one mobility/rehab location, you should analyze the numbers for each individual location, and not just the total for the company.

Be sure that you understand that your profit margins on this portion of your business will change. Your rental "fleet" will also be reduced. You may have a large portion of short-term rentals that will continue to go in and out of your doors, but your clients with lifetime needs will end up keeping their equipment. So run the numbers. Look at your inventory, and make sure your business is prepared for the change.

Lastly, do not forget to train everyone involved in your business. This includes customer service/intake staffers, reimbursement/billing/collections specialists, sales representatives, delivery/repair technicians, managers and, most importantly, your referral sources. Everyone needs to understand how this affects your business, his or her specific job function and the clients. Effective training and communication is the key. For example, the staffers responsible for sending out purchase-option letters must now know whom they should continue to send them to (all your "grandfathered" clients) and whom they should not (new rentals after January 1, 2006).

As I have said in the past, take a deep breath. Continuous change is the way of life in our industry. Keep reading and ask questions when needed. We are all learning.

Editor's note: Claudia Amortegui can be reached at info@orionreimbursement.net, or by calling (303) 623-4411.

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