Medical billing is a complex domain with new updates every year. Newer billing teams often struggle to comprehend the regulations for accurate billing. One such complication arises when professionals are faced with Home Medical Equipment (HME) and Durable Medical Equipment (DME) billing when processing requests.
For home-based healthcare billing, HME and DME are often used interchangeably. However, from a billing and compliance perspective, that is not the case.
DME in medical billing is a federally defined Medicare benefit category under Medicare Part B and is subject to the criteria in 42 CFR 414.202. 42 CFR 414.202.
Conversely, HME in medical billing is an umbrella term that covers supplies and equipment used in a home care setting. HME coverage may include items that do not comply with the Medicare definition of DME.
Why Does HME & DME Billing Matter?
Understanding the difference between HME and DME billing isn’t limited to semantics. It directly impacts:
- HCPCS coding documentation accepted by a payer.
- Medical necessity documentation required by the payer.
- Claim eligibility under Medicare Part B versus another payer or benefit category.
All of these are essential questions that any trained medical staff will ask when handling home supplies claims.
If a billing team fails to distinguish between HME and DME, it may:
- Create non-compliance exposure with Medicare Administrative Contractors (MACs) and DME MACs.
- Misclassify claims.
- Trigger avoidable denials.
What is HME in Medical Billing?
Home medical equipment, or HME, refers to an umbrella industry term applicable to various supplies, devices, or equipment provided for a patient’s at-home care. HME may include items that both meet and do not meet Medicare’s formal definition of DME. Therefore, HME may include:
- Consumable supplies
- Comfort items
- Equipment from other benefit categories or payers
Examples of Home Medical Equipment
Depending on the payer, HME may include:
- Wound care dressings
- Nebulizers
- Incontinence supplies
- Hospital beds
- Disposable supplies
- Walkers
- Bath safety equipment
How Does HME Billing Work?
HME billing may apply to multiple payers, which include:
- Medicare
- Cash-pay arrangements
- Multiple benefit categories
- Private insurance
- Medicaid
More importantly, HME is not limited to a single regulatory classification. Therefore, each item must be determined individually, along with specific coverage rules that may be applicable.
Important Billing Insight: Depending on the HME item, coverage may fall under DME benefits, surgical dressings, prosthetics/orthotics, another Medicare benefit category, or may not be covered at all.
HME Coverage & Payer Rules
Coverage for HME may vary by payer. Certain HME items can be bundled by a private payer within a home health episode of care. Under Medicare Part B, an item must independently satisfy the DME coverage requirements before it can be billed as DME.
These varying coverage rules can complicate billing for organizations managing multiple payer contracts.
What is DME in Medical Billing?
Durable Medical Equipment is a Medicare Part B benefit category according to Section 1861 of the Social Security Act. Medicare defines DME as equipment that meets specific regulatory requirements and is furnished by qualified Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) distributors or other eligible providers when applicable.
DME Qualifying Criteria (CMS’s Five Conditions)
Under current CMS regulations, an item must satisfy the following five conditions to qualify as DME:
- Durable, i.e., can be used repeatedly and is not disposable after a single use.
- Must have an expected useful life of at least 3 years, effective for items classified as DME after January 1, 2012.
- Primarily and customarily serves a medical purpose.
- Typically is not useful to a person after complete recovery from an illness or injury.
- Appropriate for use in the home, including a non-hospital or non-skilled nursing facility serving as the patient’s residence.
Along with these five equipment-level conditions, the item must also be medically necessary and ordered by a health care provider.
Some of the most common items recognized under CMS’s DME Reference List include:
- Diabetes monitoring supplies
- Oxygen equipment
- Wheelchairs
- CPAP machines
- Hospital beds
How Does DME Billing Work?
Medicare DME claims are billed using HCPCS Level II codes and shared with an eligible DME MAC for submission.
According to the CMS guidance, the DME Information Form (DIF) and Certificate of Medical Necessity (CMN) are no longer required (effective January 1, 2023).
Therefore, medical necessity documentation should be added to the patient’s medical record and not in a standalone form. During DME billing and claim submission, the supplier should pull the supporting information from this record.
Note: Certain DME categories, such as power mobility devices, may require prior authorization before they can be delivered.
DMEPOS Supplier Requirements
To bill Medicare for DMEPOS, suppliers must:
- Include an appropriate NPI, which is associated with each enrolled supplier location.
- Submit a Medicare enrollment application through PECOS using CMS-855S.
- Get accredited from a CMS-approved organization showcasing compliance with Quality Standards set for DMEPOS.
- Maintain a $50,000 surety bond for each NPI, unless exempt under Medicare regulations.
- Receive a Provider Transaction Access Number (PTAN). PTAN is the Medicare supplier number assigned to each practice location enrolled and associated with that location’s NPI.
Note: Effective November 7, 2022, DMEPOS enrollment applications are processed by the National Provider Enrollment (NPE) contractors rather than the National Supplier Clearinghouse (NSC). Medicare suppliers continue to receive a PTAN for each approved enrollment.
HME vs. DME: Key Billing Differences
The following table covers the key billing differences between HME and DME:
| HME | DME | |
|---|---|---|
| Supplier Enrollment | Enrollment requirements differ by payer; there is no standardized process. | Suppliers must obtain an NPI, enroll in PECOS, maintain CMS-approved accreditation, and secure a $50,000 surety bond for each location. |
| Regulatory Status | Primarily an industry and marketing term rather than an officially recognized payer classification. | A federally recognized Medicare Part B benefit category defined under the Social Security Act and CMS regulations. |
| Payer Coverage Rules | Coverage policies vary by payer and are frequently included within home health episode payments. | Coverage depends on meeting the medical necessity, CMS DME eligibility criteria, and any applicable coverage policies (including prior authorization where required). |
| Documentation | Documentation requirements vary by payer and benefit category. Many HME items still require documentation supporting medical necessity. | Medical necessity must be recorded in the patient’s medical record, and some items are subject to prior authorization requirements. |
| Coding | Coding requirements vary by product, payer, and benefit category. | Claims are submitted using HCPCS Level II codes via DME Medicare Administrative Contractors (DME MACs). |
| Claim Submission Responsibility | The payer’s contractual arrangements determine responsibility for submitting claims. | Participating DMEPOS suppliers submit Medicare claims on behalf of beneficiaries. |
Common HME & DME Billing Errors and Claim Denials
HME and DME billing errors are a major source of claim denials and errors. Typical issues include:
- Failure to obtain the required prior authorization for items included on the CMS prior authorization list before claim submission.
- Submission of claims with incomplete, insufficient, or missing documentation supporting medical necessity.
- Incorrect classification of an item as DME when it does not satisfy all five Medicare DME eligibility criteria.
- Billing under the NPI of a supplier that is not properly enrolled in Medicare or lacks the required accreditation results in automatic claim rejection.
- Furnishing equipment through a non-contract supplier within a Competitive Bidding Area (CBA) makes the claim ineligible for Medicare reimbursement.
- Failure to verify assignment status before billing increases the likelihood of claim disputes, payment issues, or beneficiary liability.
Consequences of Misclassifying HME vs. DME
Misclassifying HME and DME can affect a practice’s reimbursement and compliance. For example, denials are likely if a supplier bills an item as DME without confirming that it meets Medicare’s DME eligibility requirements.
Similarly, if DME billing is done without providing supporting documentation, the claim may face:
- Delayed payment
- Denial
- Post-payment audit recoupment
For suppliers and healthcare providers, misclassification may result in:
- Rework and resubmission, which can slow down the revenue cycle.
- Patients may receive unexpected bills or experience delays or denials in receiving medically necessary equipment because of billing or documentation errors.
- CMS may deactivate or revoke a supplier’s Medicare billing privileges (including the associated PTAN) for certain enrollment, compliance, or accreditation deficiencies.
Reduce Claim Denials with Expert DME Billing Services
Durable Medical Equipment, DME, has strict criteria for durability, medical necessity, and home use. Home Medical Equipment, HME, is broader and includes DME and supplies (ostomy, diabetic, and enteral products).
Understanding the difference between HME and DME billing is crucial for operational efficiency and revenue generation. Therefore, practices must ensure that billing teams fully understand the differences, billing practices, and their impact on finances.
However, if your in-house team is struggling to manage the administrative burden, MediBillMD’s DME billing services can help you avoid compliance and reimbursement challenges.
