Oxygen Equipment Billing Updates: What DME Providers Need to Know

Published in Member Communities on June 04, 2025

By Ronda Buhrmester, Sr. Director of Payer Relations and Reimbursement, VGM & Associates

Oxygen Equipment Groups

Within the oxygen equipment policy (LCD), oxygen coverage is grouped into three different categories. To determine which category the patient could potentially get coverage for oxygen equipment all starts with the test results. Once the test results are known that will then determine the specific group, the additional coverage criteria will need to be met.

The main category is Group I where the oxygen testing being conducted would show the patient qualify with a pulse oximetry at 88% or less. Group II is the group where oxygen saturations would result at precisely 89% and additional coverage criteria.

Group III is the newer group within the policy where the oxygen testing results would be normal. The oxygen saturation would not show hypoxemia. The additional coverage criteria for this group as outlined in the policy is, “A medical condition with distinct physiologic, cognitive, and/or functional symptoms documented in high-quality, peer-reviewed literature to be improved by oxygen therapy, such as cluster headaches (not all inclusive).”

This group mainly refers to cluster headaches because this was the reason the oxygen policy was updated in January 2023, and the condition of cluster headaches went through a clinical trial period.

Now is the time to review claims for oxygen equipment because these continue to be included in reviews and audits. Any supplier with CGS Medicare that are in jurisdictions B and C who have provided oxygen for Group III could receive an audit. When pulling reports from the billing software, this can be done by looking for the modifier N3. Remember the modifiers are N1 for Group I, N2 for Group II, and N3 for Group III.

A recent article states that suppliers were using the modifier N3 more than expected related to HCPCS E1390. This is really concerning for suppliers billing for oxygen claims. Because of the results found by the CERT contractor, CGS DME MAC will be performing a widespread pre-payment audit.

Don’t be surprised if there is a post-payment audit performed by another CMS contractor on the N3 modifier being overused with the E1390 HCPCS code.

For any questions regarding oxygen equipment coverage or audits, please reach out to me via email at ronda.buhrmester@vgm.com or by calling 217-493-5440.

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