Medicare classifies many Durable Medical Equipment (DME) items under the capped rental payment category. Instead of paying the full purchase price at once, Medicare generally pays suppliers monthly rental payments for eligible equipment. For most capped rental items, the rental period continues for up to 13 continuous months, after which ownership typically transfers to the beneficiary if all Medicare requirements are met.

To identify where a claim falls within the capped rental cycle, Medicare requires specific modifiers:

KH – First rental month
KI – Second or third rental month
KJ – Fourth through the applicable later rental months

Modifier KI is used only for the second and third months of a capped rental and helps Medicare apply the correct payment methodology.

Modifier

Modifier Name

Second or Third Month of a Capped Rental

Plain English Explanation

Modifier KI tells the insurance payer:

“This claim is for the second or third month of a Medicare capped rental period.”

It confirms that the initial rental month has already been billed using Modifier KH and that the rental continues.

Purpose of Modifier KI

Modifier KI is used to:

Identify the second or third month of a capped rental.
Distinguish these months from the first and later rental months.
Support proper Medicare rental payment processing.
Ensure accurate DMEPOS reimbursement.
Comply with CMS billing requirements.

Understanding Modifier KI

Medicare tracks capped rental claims using three rental-stage modifiers.

Modifier	Rental Period
KH	First month
KI	Second or third month
KJ	Fourth through the applicable later rental months

Modifier KI should be used only during rental months 2 and 3.

When to Use Modifier KI

Use Modifier KI when:

Billing the second month of a capped rental.
Billing the third month of a capped rental.
The HCPCS code falls under the Medicare capped rental payment category.
Medical necessity continues.
Required documentation remains valid.

Examples include:

CPAP devices (E0601)
Semi-electric hospital beds
Patient lifts
Standard wheelchairs
Other Medicare capped rental DME items

When NOT to Use Modifier KI

Do not use Modifier KI when:

Billing the first rental month (use KH).
Billing the fourth or later applicable rental months (use KJ).
Billing purchased equipment (use NU, if applicable).
Billing used purchased equipment (use UE).
Billing rental-only items that are not part of the capped rental category.

Medicare Rules

Under Medicare:

Modifier KI is reported only during the second and third rental months.
It is commonly billed together with Modifier RR because the equipment remains rented.
Continued payment requires ongoing medical necessity.
Suppliers must maintain proof of delivery and supporting medical documentation.
Rental month tracking must be accurate to avoid claim denials.

For most capped rental items, ownership transfers to the beneficiary after 13 continuous rental months, assuming all Medicare requirements are satisfied.

Commercial Insurance Rules

Many commercial insurers follow Medicare’s rental methodology.

However, commercial payer rules may differ regarding:

Rental duration.
Purchase conversion.
Prior authorization.
Modifier requirements.
Continued medical necessity.

Always verify payer-specific billing instructions before claim submission.

Documentation Requirements

Documentation should include:

Physician order.
Medical necessity documentation.
HCPCS code.
Modifier RR.
Modifier KI.
Proof of delivery.
Rental agreement.
Documentation supporting continued need.
Supplier records.

Real Billing Examples

Example 1 – CPAP Second Rental Month

A Medicare beneficiary continues CPAP therapy during the second month of the capped rental period.

Billing

HCPCS E0601
Modifiers RR KI

Example 2 – Hospital Bed Third Rental Month

A beneficiary continues using a rented semi-electric hospital bed during the third rental month.

Billing

Appropriate HCPCS code
Modifiers RR KI

Example 3 – Patient Lift

The supplier submits the third monthly rental claim for a patient lift.

Billing

Appropriate HCPCS code
Modifiers RR KI

Example 4 – Wheelchair Rental

A wheelchair rental continues into the second month under Medicare’s capped rental rules.

Billing

Appropriate HCPCS code
Modifiers RR KI

Example 5 – Incorrect Use

A supplier bills:

RR KH

for the third rental month.

This is incorrect because KI must be reported for the second and third months of a capped rental.

CMS-1500 Claim Example

Field	Example
HCPCS	E0601
Modifier 1	RR
Modifier 2	KI
Diagnosis Pointer	Appropriate ICD-10-CM diagnosis
Units	1 rental month

Common Denial Reasons

KI billed during the wrong rental month.
Missing RR modifier.
Incorrect rental month sequence.
HCPCS code not classified as capped rental.
Missing physician order.
Missing proof of delivery.
Continued medical necessity not documented.
Invalid modifier combination.

How to Correct the Denial

Verify the rental month.
Confirm the HCPCS payment category.
Review physician documentation.
Verify proof of delivery.
Confirm continued medical necessity.
Correct the rental-stage modifier.
Resubmit the claim or file an appeal.

Coding Tips

Use KI only during rental months 2 and 3.
Report RR together with KI when required.
Maintain accurate rental month tracking.
Document continued medical necessity.
Review DME MAC guidance for updates.

Modifier KI vs Modifier KH

Modifier	Description
KI	Second or third rental month
KH	First rental month

Modifier KI vs Modifier KJ

Modifier	Description
KI	Second or third rental month
KJ	Fourth through the applicable later rental months

Modifier KI vs Modifier RR

Modifier	Description
KI	Identifies the second or third capped rental month
RR	Indicates the item is rented

Important: KI and RR are commonly billed together on Medicare capped rental claims.

Modifier KI vs Modifier NU

Modifier	Description
KI	Second or third rental month
NU	New equipment purchase

Frequently Asked Questions (FAQs)

Q1. What does Modifier KI mean?

Answer: It identifies the second or third month of a Medicare capped rental.

Q2. Can KI be billed during the first rental month?

Answer: No. The first rental month requires Modifier KH.

Q3. Can KI be billed after the third rental month?

Answer: No. Beginning with the fourth applicable rental month, Modifier KJ should be used according to Medicare billing instructions.

Q4. Is KI reported with RR?

Answer: Yes. KI is commonly billed together with Modifier RR for capped rental equipment.

Q5. Is KI used for purchased equipment?

Answer: No. KI applies only to capped rental equipment.

AR Caller Tips

When working capped rental denials involving Modifier KI:

Verify the rental month.
Confirm KH was previously billed for the first month.
Ensure KI is used only for months two and three.
Verify RR was reported.
Confirm continued medical necessity.
Review proof of delivery.
Document the payer representative’s name, reference number, and appeal instructions.

Interview Questions

Question 1

What does Modifier KI represent?

Answer: The second or third month of a Medicare capped rental.

Question 2

Which modifier is used before KI?

Answer: Modifier KH.

Question 3

Which modifier follows KI?

Answer: Modifier KJ.

Question 4

Is KI billed with RR?

Answer: Yes. RR identifies the equipment as rented, while KI identifies the rental stage.

Practice Scenario

Scenario

A Medicare beneficiary continues using a rented CPAP device during the second month of the capped rental period. The supplier submits the monthly claim.

Question

Which modifiers should be reported?

Answer

Report the appropriate HCPCS code with Modifiers RR and KI, indicating that the equipment is rented and the claim represents the second month of the capped rental period.

Related DME Modifiers

KH – Initial Claim for the First Month of a Capped Rental
KJ – Fourth Through the Applicable Later Rental Months
RR – Rental Durable Medical Equipment
NU – New Durable Medical Equipment Purchase
UE – Used Durable Medical Equipment Purchase
RA – Replacement of DME Item
RB – Replacement of a Part During Repair
NR – New Equipment Rented and Subsequently Purchased

Common Billing Mistakes

Using KI during the first rental month.
Using KI after the third rental month.
Omitting Modifier RR.
Incorrect rental month tracking.
Missing proof of delivery.
Missing documentation supporting continued medical necessity.
Billing a non-capped rental item with KI.

Key Takeaways

Modifier KI identifies the second or third month of a Medicare capped rental.
It is typically billed with Modifier RR.
KI should be used only during rental months two and three.
Accurate rental month tracking and continued medical necessity documentation are essential.
Proper use of Modifier KI helps reduce claim denials and supports correct Medicare reimbursement.

References

CMS Medicare Claims Processing Manual, Chapter 20 – Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS).
Medicare Benefit Policy Manual – Durable Medical Equipment.
DME Medicare Administrative Contractor (DME MAC) Supplier Manuals.
HCPCS Level II Code Book.
CMS DMEPOS Fee Schedule and Payment Policies.

Conclusion

Modifier KI is a Medicare DME modifier that identifies the second or third month of a capped rental. It works together with Modifier RR to indicate both the rental status and the stage of the rental cycle. Correct use requires accurate rental month tracking, complete documentation, and compliance with current CMS and DME MAC guidance. Proper application of Modifier KI promotes accurate reimbursement and minimizes claim denials.

Educational Disclaimer

This article was prepared with the assistance of artificial intelligence (AI) for educational and informational purposes. It is based on publicly available CMS guidance, Medicare DMEPOS billing principles, and general medical coding practices. It is not an official publication of CMS or the American Medical Association (AMA). Always consult the latest CMS Medicare Claims Processing Manual, HCPCS Level II Code Book, DME Medicare Administrative Contractor (DME MAC) guidance, Local Coverage Determinations (LCDs), National Coverage Determinations (NCDs), and payer-specific billing policies before coding, billing, or submitting claims.