Payment Rules Reminder - Home Oxygen Initial Qualification Testing

Joint DME MAC Publication

Home use of oxygen and oxygen equipment is eligible for Medicare reimbursement only when the beneficiary meets all of the requirements set out in the Oxygen and Oxygen Equipment Local Coverage Determination (LCD) and related Policy Article (PA). This article reviews the blood oxygen testing requirements. Refer to the LCD and PA for information on additional payment criteria.

Qualifying Test Results

The results of a blood gas study that has been ordered and evaluated by the attending physician are used as one of the criteria for determining Medicare reimbursement.

Medicare classifies qualification results into three groups, regardless of the test methodology used. The following table summarizes the qualifying results for each group.

Group ABG (mm HG) Oximetry (% Sat) Notes
Group I =55 =88 -
Group II 56-59 89 + Additional disease criteria
Group III >59 >89 Presumed noncovered


Qualification Tests

Blood oxygen levels are used to assess the beneficiary's degree of hypoxemia. Blood oxygen levels may be determined by either of two different test methods:

  • Arterial blood gas (ABG) measurement; or,
  • Pulse oximetry.

Arterial blood gas measurements are more accurate and therefore are the preferred measurement method. When both ABGs and oximetry are performed on the same day, the ABG value must be used for reimbursement qualification.

Pulse oximetry values may be obtained using a variety of techniques. The LCD describes the following as acceptable oximetry testing methods:

  • At rest and awake - often referred to as "spot" oximetry
  • During exercise – requires a series of 3 tests done during a single testing session:
    • At rest, off oxygen - showing a non-qualifying result
    • Exercising, off oxygen – showing a qualifying result
    • Exercising, on oxygen – showing improvement in test results obtained while exercising off of oxygen
  • During sleep
    • Overnight sleep oximetry
      • May be done in hospital or at home.  Refer to the LCD for detailed information about home overnight sleep oximetry.
    • Titration Polysomnogram
      • Must be used for beneficiaries with concurrent (OSA) in order to establish that the beneficiary is in the "chronic stable state"
      • Refer to the Positive Airway Pressure Devices LCD for information about testing for OSA

Note: The overnight sleep oximetry and the titration polysomnogram referenced above are not the same test as home sleep testing used for the diagnosis of Obstructive Sleep Apnea.

Chronic Stable State (CSS)

All qualification testing must be performed while the beneficiary is in the CSS. CSS requires that all of the following be met:

  • [O]ther forms of treatment (e.g., medical and physical therapy directed at secretions, bronchospasm and infection) have been tried, have not been sufficiently successful, and oxygen therapy is still required. 
  • Each patient must receive optimum therapy before long-term home oxygen therapy is ordered.
  • It is expected that virtually all patients who qualify for home oxygen coverage for the first time under these guidelines have recently been discharged from a hospital where they submitted to arterial blood gas tests… If more than one arterial blood gas test is performed during the patient's hospital stay, the test result obtained closest to, but no earlier than two days prior to the hospital discharge date is required as evidence of the need for home oxygen therapy. (Note: this is the only exception to the CSS requirement)

For those patients whose initial oxygen prescription did not originate during a hospital stay, blood gas studies should be done while the patient is in the chronic stable state, i.e., not during a period of an acute illness or an exacerbation of their underlying disease.

Qualified Testing Providers

Oxygen qualification testing may only be performed by providers designated as qualified to perform such testing. Testing done by non-qualified entities is not valid for purposes of qualification for Medicare reimbursement for home oxygen. The LCD states:

All oxygen qualification testing must be performed in-person by a physician or other medical professional qualified to conduct oximetry testing. With the exception of overnight oximetry (see below), unsupervised or remotely supervised home testing does not qualify as a valid test for purposes of Medicare reimbursement of home oxygen and oxygen equipment.

The qualifying blood gas study must be one that complies with the Fiscal Intermediary, Local Carrier, or A/B Medicare Administrative Contractor (MAC) policy on the standards for conducting the test and is covered under Medicare Part A or Part B. This includes a requirement that the test be performed by a provider who is qualified to bill Medicare for the test – i.e., a Part A provider, a laboratory, an Independent Diagnostic Testing Facility (IDTF), or a physician. A supplier is not considered a qualified provider or a qualified laboratory for purposes of this policy. Blood gas studies performed by a supplier are not acceptable. In addition, the qualifying blood gas study may not be paid for by any supplier. These prohibitions do not extend to blood gas studies performed by a hospital certified to do such tests.

For purposes of meeting the "qualified provider" criterion, this policy uses a determination based upon two criteria:

  1. whether the test performed meets the applicable requirements for Medicare billing of the specific test, and
  2. the entity that performed the test meets the applicable requirements for Medicare billing of the specific test. 

Note that this does not require that the specific test be actually billed and/or paid, only that the testing entity meet the requirements necessary to perform and bill Medicare for the actual test. The following describes payment scenarios:

  • Under Medicare Part A
    • During a Part A covered stay payment is bundled such that services rendered are covered under a lump sum payment by Medicare. In this case, oxygen qualification testing performed in a hospital, nursing facility, Home Health or Hospice or other covered Part A episode meets the "qualified provider" standard. 
    • Outside of a covered Part A stay, testing done by a Part A provider does not meet the requirement and is not valid for qualification of home oxygen reimbursement unless the entity is also a qualified provider of diagnostic testing or laboratory services for individual testing performed outside of a covered Part A stay.
  • Under Medicare Part B
    • Testing performed and covered as "incident to" physician services meets the "qualified provider" standard.
    • Laboratory testing is also reimbursed "a la carte" or on a per test basis. The entity performing the specific test must meet the requirements to perform the specific test. Testing done by an entity that meets the requirements to bill for the individual test meets may be used for oxygen qualification.

Timing of Testing

For initial qualification testing scenarios, the qualification testing must be performed within the 30 days before the initial date of certification (prescription date). 

As described earlier, for oxygen initially prescribed at the time of hospital discharge, testing must be performed within the 2 days prior to discharge. This 2-day prior to discharge rule does not apply to discharges from nursing facilities.

Refer to the Local Coverage Determination, related Policy Article and the DME MAC Supplier Manual for additional information concerning the payment rules for reimbursement of oxygen and oxygen equipment.

Last Updated Nov 21 , 2023