Grandfathering for Non-Contract Suppliers Fact Sheet

On April 9, 2020, the non-invasive ventilators product category was removed from Round 2021 due to the novel COVID-19 pandemic. On October 27, 2020, the Centers for Medicare & Medicaid Services (CMS) announced the single payment amounts (SPAs) and began offering contracts for the off-the-shelf (OTS) back braces and OTS knee braces product categories. All other product categories were removed from Round 2021. Please see the CMS announcement for additional information.

Suppliers that are not awarded a Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Competitive Bidding contract for furnishing oxygen and oxygen equipment or rented durable medical equipment (DME) in a competitive bidding area (CBA) can decide to be grandfathered suppliers for Medicare beneficiaries to whom they are furnishing these items at the time Round 2021 is implemented. A supplier that chooses to become a grandfathered supplier for a product category is required to grandfather all items within that product category to all beneficiaries who are renting the DME or oxygen and oxygen equipment in the CBA. A grandfathered supplier cannot turn a beneficiary away if he or she chooses to continue receiving the item from the grandfathered supplier. The grandfathering provision also applies to beneficiaries who transition from a Medicare Advantage Plan.

In addition, any beneficiary in a CBA who is renting capped rental items, inexpensive or routinely purchased (IRP) DME, items requiring frequent and substantial servicing, or oxygen and oxygen equipment from a supplier that elects to be a grandfathered supplier may either:

• continue to receive the item from the grandfathered supplier, or
• elect to switch to a contract supplier at any time.

- For rented DME (other than non-invasive ventilators), a grandfathered supplier must furnish the item for the remaining months of the rental period, unless the beneficiary elects to switch to a contract supplier, or until the item is no longer medically necessary. For capped rental DME, the grandfathering relationship ends when ownership of the DME is transferred to the beneficiary or the item is no longer medically necessary. 

Grandfathered suppliers for rented DME may furnish competitively bid accessories and supplies that are used in conjunction with and are necessary for the effective use of a grandfathered item. Payment will be made at the Round 2021 SPA.

- For oxygen and oxygen equipment furnished for less than 36 months of continuous use, a grandfathered supplier must furnish the item for the remaining months of the 60-month reasonable useful lifetime for the equipment except for periods when the item is not medically necessary. In addition, a beneficiary may also elect to switch to a contract supplier prior to the end of the initial 36 months of continuous use.

- For oxygen and oxygen equipment furnished for 36 months or more of continuous use, Medicare law requires the supplier that furnishes the oxygen and oxygen equipment during the 36th month of continuous use continue to furnish the oxygen and oxygen equipment after the 36th month for any period of medical need for the remainder of the five year reasonable useful lifetime of the equipment. The obligation to continue furnishing the oxygen and oxygen equipment cannot be transferred to a contract supplier. This requirement also applies under the DMEPOS Competitive Bidding Program, regardless of the role of the supplier (i.e., contract supplier, grandfathered supplier, or non-contract supplier not electing to become a grandfathered supplier). It is important to know this requirement applies even in situations where the beneficiary relocates on a temporary (e.g., snowbird) or permanent basis outside of the supplier’s normal service area. The supplier that furnishes the oxygen or oxygen equipment in the 36th month of continuous use is prohibited from transferring its ongoing obligations to another supplier, regardless of whether it has elected to become a grandfathered supplier and regardless of whether the beneficiary remains in the CBA.

- For non-invasive ventilators, a grandfathered supplier must furnish the item for the remaining months of the contract period or until the item is no longer medically necessary. 

Payment for Grandfathered Equipment

Suppliers that choose to be grandfathered suppliers for rented competitively bid DME items, including non-invasive ventilators and oxygen and oxygen equipment, will be paid at the Round 2021 SPA for the relevant CBA. Beneficiaries are responsible for the 20 percent coinsurance and any unmet annual deductible.

The grandfathered supplier must accept assignment on all claims for items furnished to Medicare beneficiaries in a CBA. The only exception is for accessories furnished for the continued use of non-competitively bid base equipment. The rental payments will not continue if the item is no longer medically necessary or the beneficiary transitions to a contract supplier. 

After Round 2021 is implemented, if a new period of continuous use begins for capped rental DME or oxygen equipment furnished for less than 36 months of continuous use following a break in need of greater than 60 days plus the days remaining in the last paid rental month, the beneficiary must obtain new or additional equipment from a contract supplier.

When a Beneficiary Transitions from a Non-Contract Supplier to a Contract Supplier

A beneficiary who is entitled to receive rented DME or oxygen and oxygen equipment from a grandfathered supplier may elect to transition to a contract supplier at any time during the rental period, and the contract supplier is required to accept the beneficiary as a customer.

If a beneficiary transitions to a contract supplier, the rented DME and/or oxygen equipment must be returned to the original supplier that owns the equipment. The contract supplier must provide replacement equipment from its own inventory or contract with other companies for the purchase of items necessary to fill the order as required by DMEPOS Supplier Standard #4 (42 CFR 424.57(c)(4)). The original supplier and the contract supplier should coordinate the pickup of the old equipment and delivery of the new equipment so no break in service occurs for the beneficiary. See the Transitioning Beneficiaries fact sheet for more information.

- For capped rental DME, when a beneficiary switches from a non-contract supplier to a contract supplier at the start of Round 2021, a new 13-month rental period would begin. Payment would be based on the Round 2021 SPA for rental of the item. The new 13-month capped rental period would begin regardless of how many months the previous supplier was paid; however, rental payments would continue only if the item continues to be medically necessary. When a beneficiary switches from one contract supplier to another contract supplier to receive capped rental DME, the new contract supplier is NOT entitled to a minimum number of months of payment and will be paid the Round 2021 SPA for the duration of the equipment rental period.

- For IRP items, a new rental period would NOT begin. Rental payments would continue until the point at which total payments for the item equal 100 percent of the Round 2021 SPA for purchase of the item; payments would continue only if the item continues to be medically necessary.

- For items requiring frequent and substantial servicing, rental payments continue until the item is no longer medically necessary. Rental payments during Round 2021 would be based on the Round 2021 SPA. No payment would be made for the purchase of equipment, maintenance and servicing or for repair or replacement of items. Separate payment for supplies and accessories is not allowed.

- For oxygen or oxygen equipment, when a beneficiary switches from a non-contract supplier to a contract supplier at the start of Round 2021, the contract supplier would be paid for the duration of the rental period, not to exceed 36 monthly payments, but is guaranteed at least 10 monthly rental payments in the event that less than 10 months are remaining in the 36 month rental period. The minimum of 10 monthly rental payments would be made regardless of how many months the previous supplier was paid; however, payments continue only if the item continues to be medically necessary. The contract supplier must accept assignment on the monthly rental claims. A beneficiary may elect to transition to a contract supplier at any time during the 36-month rental period, and the contract supplier is required to accept the beneficiary as a customer.