Medicare generally pays for capped rental durable medical equipment through monthly rental payments for up to 13 months of continuous use. The supplier bills the appropriate rental and month-sequence modifiers during this period. After the final covered rental month, ownership of most capped rental equipment transfers to the beneficiary.

Although the basic concept appears simple, mistakes involving modifiers, rental periods, interruptions, replacement equipment and ownership transfer can lead to denied claims or incorrect payments.

What Is Capped Rental DME?

Capped rental DME includes equipment that Medicare pays for monthly rather than purchasing immediately. This category generally includes certain wheelchairs, hospital beds, continuous positive airway pressure devices and other equipment that does not fall into a separate Medicare payment class.

For most standard capped rental equipment, Medicare makes payments for a period of continuous use that does not exceed 13 months. The beneficiary generally takes ownership after the rental cap is completed.

Some equipment follows different payment rules. Oxygen equipment, certain pumps and specific power wheelchair situations should not automatically be processed using the standard capped rental workflow.

How the 13-Month Rental Cycle Works

The rental period can be divided into three billing stages.

Month 1

The first rental claim generally includes:

• RR, indicating that the equipment is being rented
• KH, indicating the first rental month

The first month establishes the beginning of the equipment’s rental history. The supplier should record the delivery date, beneficiary information, HCPCS code, serial number when applicable and the month-one billing status.

Months 2 and 3

The second and third rental claims generally include:

• RR
• KI

The KI modifier identifies the second and third rental months.

Months 4 Through 13

Beginning with the fourth rental month, claims generally include:

• RR
• KJ

The KJ modifier descriptor refers to later rental months, while the current standard capped rental payment period for most affected equipment ends after 13 months of continuous use. Billing teams should confirm the correct treatment for the specific equipment category and current DME MAC instructions.

Why Payment Changes After Month 3

For most capped rental equipment other than power wheelchairs, the Medicare fee schedule calculation is based on a higher percentage during the first three months and a reduced percentage beginning with month four.

CMS explains that months one through three are generally calculated using 10 percent of the applicable base purchase price. Beginning with month four, the amount is generally calculated using 7.5 percent of the base purchase price. Power wheelchairs have a different percentage structure.

Suppliers should therefore avoid assuming that every rental month will produce the same allowed amount.

What Happens After Month 13?

After the 13-month rental period is completed, ownership of most standard capped rental equipment transfers to the beneficiary.

The supplier should:

1. Stop routine rental billing.
2. Update the equipment status in the billing system.
3. Document the ownership transfer.
4. Retain the complete rental history.
5. Review any future repair or replacement request under the rules for beneficiary-owned equipment.

The transfer should occur immediately after the final applicable rental month. Certain categories, including enteral or parenteral nutrition pumps, may follow different rules.

Does an Interruption Restart the Rental Period?

Not every interruption creates a new 13-month rental cycle.

A short hospital stay, billing delay, address change or temporary interruption does not automatically establish a new rental period. A qualifying new rental period may require an interruption in medical necessity lasting more than 60 consecutive days plus the remaining days in the rental month in which use ended. A substantive change in the beneficiary’s condition may also support a different item and a new rental period when properly documented.

Before restarting a rental cycle, the supplier should obtain documentation explaining:

• When the original medical need ended
• How long the interruption lasted
• When the need resumed
• Whether the patient’s condition changed
• Why the same or different equipment is now required
• Whether a new order is necessary

Common Capped Rental Billing Errors

Using the Wrong Month Modifier

Submitting KH, KI or KJ for the wrong month can cause the claim sequence to conflict with Medicare’s rental history.

Restarting the Cycle After a Supplier Change

Changing suppliers should not automatically be treated as the beginning of a new rental cycle. The beneficiary’s previous rental history must be reviewed before the new supplier submits a claim.

Billing Beyond the Rental Cap

Rental claims should not continue indefinitely after the standard payment period has been completed.

Failing to Track Interruptions

When equipment is returned, discontinued or temporarily unused, the dates and reason should be documented. A simple gap in billing does not necessarily mean that the period of continuous use has ended.

Treating Every Equipment Category the Same

Oxygen equipment, power wheelchairs and certain pumps can have specialized payment rules. Staff should confirm the product’s payment category before applying a standard 13-month workflow.

Recommended Internal Workflow

A reliable capped rental process should include:

1. Confirm the equipment’s Medicare payment category.
2. Check the beneficiary’s previous rental history.
3. Record the delivery date and first rental month.
4. Apply the correct modifier sequence.
5. Track each paid and unpaid rental month.
6. Document hospitalizations, returns and interruptions.
7. Review continued medical need when required.
8. Stop rental billing at the appropriate point.
9. Document ownership transfer.
10. Retain records for future repair, replacement or audit requests.

Frequently Asked Questions

Does Medicare purchase capped rental equipment immediately?

Generally, no. Most capped rental equipment is paid through monthly rental claims before ownership transfers to the beneficiary. Some specialized equipment may have different purchase or rental options.

Can a supplier bill 13 months again when a patient moves?

A change of address by itself does not establish a new rental period.

What happens when the equipment is no longer medically necessary?

The supplier should stop billing when it learns that the equipment is no longer reasonable and necessary. The reason and effective date should be documented.

Final Takeaway

Capped rental billing requires more than submitting the same claim every month. Suppliers must maintain an accurate month sequence, use the correct modifiers, track periods of use and stop billing when the rental cap is reached.

A well-maintained rental tracker can prevent duplicate claims, incorrect modifier usage, missed ownership transfers and unnecessary follow-up work.

Need support managing complex rental claims? QHS helps DME suppliers with claim review, electronic submission, denial management, A/R follow-up, payment posting and billing analysis.