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Capped Rental Guidelines

As you may know, a capped rental is a type of rental specific to Medicare. For some items, Medicare will only pay for a certain number of months' worth of rentals. To begin with, claims are submitted to Medicare and for the first three months, Medicare will pay 80% of their full allowable (on approved charges). Starting with the fourth month, Medicare will reduce their allowable by 25% and continue to do so until the tenth month. After the tenth month, they will require an additional modifier on the claim, stating that you have contacted the patient and he/she has indicated whether he/she would like to continue renting the item or if he/she would like to purchase the item. If he/she would like to continue renting, Medicare will continue to pay for every month up until the fifteenth month. After that, you may bill them for maintenance and service (MS) every six months (whether or not the item was actually serviced). If the patient decides to purchase the item, Medicare will continue paying for rental of the item until the thirteenth month, at which time they will cease payment and you should transfer the title and responsibility for the item to the patient. Medicare will make no further payments on the item.

Medicare requires you to use special modifiers for each month of a capped rental. An RR is always used to show that it is a rental, but K modifiers are also required. You will use a KH for the first month, KI for the second and third months, and KJ for the months after that. In addition, once you receive the rent/purchase letter from the patient, you will use a third modifier to show what the patient's decision was: if he/she chose to purchase, BP; if he/she chose to continue renting, BR; and if he/she was sent a letter and did not respond in over a month's time, you may use a BU to indicate that the patient was undecided. In this case, Medicare will continue to treat the item as if it is a rental. It is important that you make the best effort you can to find out what the patient's choice is, because if he/she decides later that he/she wanted to purchase the item, you will have to refund money to Medicare.

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