Payment for Replacement of Oxygen Equipment in Bankruptcy Situations

When a supplier files for Chapter 7 or 11 bankruptcy under Title 11 of the United States Code and cannot continue to furnish oxygen to its Medicare beneficiaries, the oxygen equipment is considered lost in these situations and payment may be made for replacement equipment. For replacement oxygen equipment, a new reasonable useful lifetime period and a new 36 month rental payment period begins on the date of delivery of the replacement oxygen equipment.

In advance of payment, contractors must review supporting documentation to verify that the supplier declared bankruptcy to assure that payment for replacement of oxygen equipment can legitimately be made to a successor supplier.

• For a Chapter 7 bankruptcy, supporting documentation must include court records documenting that the previous supplier filed a petition for a Chapter 7 bankruptcy in a United States Bankruptcy Court,

• For a Chapter 11 bankruptcy, supporting documentation must include Court records documenting that the previous supplier filed a petition for a Chapter 11 bankruptcy in a United States Bankruptcy Court; and documents filed in the bankruptcy case confirming that the equipment was sold or is scheduled to be sold as evidenced by one of the following:

• The Court order authorizing and/or approving the sale; or

• Supporting documentation that the sale is scheduled to occur or has occurred, e.g., a bill of sale, or an asset purchase agreement signed by the seller and the buyer; or

• A Court order authorizing abandonment of the equipment.

Similar to other situations where oxygen equipment is lost, stolen, or irreparably damaged, the contractor must verify the following information is included and valid with the claim: blood gas testing results, Oxygen Certificate of Medical Necessity (CMN), the Healthcare Common Procedure Coding System (HCPCS) code for the replacement oxygen equipment, the HCPCS modifier RA Replacement of a DME Item, and a narrative note on why the equipment was replaced.

Under no circumstances may payment be made for replacement equipment when the original supplier divests business and equipment outside of the court bankruptcy process.