Many Durable Medical Equipment (DME) items covered by Medicare are paid under the capped rental payment methodology. Instead of paying the full purchase price immediately, Medicare pays the supplier monthly rental payments for a specified period. For most capped rental items, Medicare generally allows up to 13 continuous rental months, after which ownership transfers to the beneficiary if all coverage requirements are met.

Modifier KH identifies the initial claim for the first month of a capped rental. It tells Medicare that the supplier is beginning a new capped rental period for an eligible DME item.

Correct use of Modifier KH is essential because Medicare uses it to identify the first rental month and apply the appropriate payment rules.

Modifier

Modifier Name

Initial Claim for the First Month of a Capped Rental

Plain English Explanation

Modifier KH tells the insurance payer:

“This is the first month’s claim for a capped rental item.”

It establishes the beginning of the Medicare capped rental payment cycle.

Purpose of Modifier KH

Modifier KH is used to:

Identify the first month of a capped rental.
Begin the Medicare capped rental payment period.
Distinguish the initial rental month from later rental months.
Support proper DMEPOS reimbursement.
Comply with CMS billing requirements.

Understanding Modifier KH

Medicare uses three modifiers to identify different stages of a capped rental:

Modifier	Meaning
KH	First month of capped rental
KI	Second or third month of capped rental
KJ	Fourth through fifteenth rental months*

Note: Although Modifier KJ identifies months 4–15, Medicare generally transfers ownership of most capped rental equipment after 13 continuous rental months. Months beyond the thirteenth may apply only in limited situations or under specific payer instructions. Always follow current CMS and DME MAC guidance.

Modifier KH is used only once for the initial rental month.

When to Use Modifier KH

Use Modifier KH when:

Billing the first month of a Medicare capped rental.
The HCPCS code falls under the capped rental payment category.
The beneficiary meets Medicare coverage requirements.
Medical necessity has been established.
A valid physician order is on file.

Common examples include:

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

When NOT to Use Modifier KH

Do not use Modifier KH when:

Billing the second or third rental month (use KI).
Billing months four through the applicable later rental months (use KJ, when appropriate).
Billing purchased equipment (use NU, if applicable).
Billing used purchased equipment (use UE).
Billing equipment that is not classified as capped rental.

Medicare Rules

Under Medicare:

Modifier KH is reported only for the first month of a capped rental.
It is commonly billed together with Modifier RR because the equipment is rented.
Medicare tracks the capped rental period using KH, KI, and KJ.
Continued payment requires ongoing medical necessity.
The supplier must maintain documentation supporting coverage and proof of delivery.

For many capped rental items, Medicare transfers ownership to the beneficiary after 13 continuous rental months, provided all applicable requirements are met.

Commercial Insurance Rules

Many commercial insurers follow Medicare’s capped rental methodology.

However, commercial payers may have different rules regarding:

Rental duration.
Purchase conversion.
Prior authorization.
Modifier usage.
Payment methodology.

Always verify payer-specific policies before billing.

Documentation Requirements

Documentation should include:

Physician order.
Medical necessity documentation.
Face-to-face evaluation, when required.
HCPCS code.
Modifier RR.
Modifier KH.
Proof of delivery.
Rental agreement.
Supplier records.
Beneficiary acknowledgment.

Real Billing Examples

Example 1 – CPAP First Rental Month

A beneficiary begins Medicare-covered CPAP therapy.

Billing

HCPCS E0601
Modifiers RR KH

Example 2 – Hospital Bed Rental

A beneficiary requires a semi-electric hospital bed under Medicare’s capped rental rules.

Billing

Appropriate HCPCS code
Modifiers RR KH

Example 3 – Patient Lift

A supplier furnishes a patient lift under a capped rental arrangement.

Billing

Appropriate HCPCS code
Modifiers RR KH

Example 4 – Manual Wheelchair

A qualifying wheelchair is furnished under the capped rental payment methodology.

Billing

Appropriate HCPCS code
Modifiers RR KH

Example 5 – Incorrect Use

A supplier bills:

RR KI

for the initial rental month.

This is incorrect because KH must be used for the first month of the capped rental period.

CMS-1500 Claim Example

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

Common Denial Reasons

KH billed after the first rental month.
Missing RR modifier.
HCPCS code not classified as capped rental.
Missing physician order.
Missing proof of delivery.
Medical necessity not documented.
Incorrect rental month sequence.
Invalid modifier combination.

How to Correct the Denial

Verify the rental month.
Confirm the HCPCS payment category.
Review physician documentation.
Verify proof of delivery.
Correct the rental month modifier.
Submit supporting documentation.
Resubmit the claim or file an appeal.

Coding Tips

Use KH only once for the initial rental month.
Report RR together with KH when required.
Track rental months carefully.
Maintain complete documentation.
Verify the HCPCS payment category before billing.

Modifier KH vs Modifier KI

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

Modifier KH vs Modifier KJ

Modifier	Description
KH	First rental month
KJ	Fourth through later applicable rental months

Modifier KH vs Modifier RR

Modifier	Description
KH	Indicates the first capped rental month
RR	Indicates the item is rented

Important: These modifiers are commonly reported together on capped rental claims.

Modifier KH vs Modifier NU

Modifier	Description
KH	First month of capped rental
NU	New purchased equipment

Frequently Asked Questions (FAQs)

Q1. What does Modifier KH mean?

Answer: It identifies the first month of a Medicare capped rental.

Q2. Is Modifier KH used every month?

Answer: No. KH is used only for the initial rental month.

Q3. What modifier is used after KH?

Answer: KI is used for the second and third rental months, followed by KJ for the applicable subsequent rental months.

Q4. Is KH reported with RR?

Answer: Yes. For capped rental items, KH is commonly billed together with RR.

Q5. Can KH be used on purchased equipment?

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

AR Caller Tips

When following up on capped rental denials:

Verify the rental month.
Confirm KH was used only on the first month’s claim.
Check whether RR was reported.
Verify proof of delivery.
Review physician documentation.
Confirm continued medical necessity.
Document the payer representative’s name, reference number, and appeal instructions.

Interview Questions

Question 1

What does Modifier KH represent?

Answer: The initial claim for the first month of a Medicare capped rental.

Question 2

Can KH be billed every month?

Answer: No. It is reported only for the first rental month.

Question 3

Which modifier is commonly billed with KH?

Answer: Modifier RR.

Question 4

What modifier follows KH?

Answer: KI for the second and third rental months.

Practice Scenario

Scenario

A Medicare beneficiary receives a CPAP device that falls under the capped rental payment category. The supplier is submitting the first rental claim.

Question

Which modifiers should be reported?

Answer

Report the appropriate HCPCS code with Modifiers RR and KH, indicating that the equipment is rented and this is the first month of the capped rental.

Related DME Modifiers

RR – Rental Durable Medical Equipment
KI – Second or Third Month of a Capped Rental
KJ – Fourth Through Fifteenth Rental Months
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 KH after the first rental month.
Omitting Modifier RR.
Billing KH for purchase-only equipment.
Incorrect rental month tracking.
Missing physician documentation.
Missing proof of delivery.
Incorrect modifier sequencing.

Key Takeaways

Modifier KH identifies the first month of a Medicare capped rental.
It is typically billed with Modifier RR.
KH is reported only once at the start of the rental period.
Accurate rental month tracking and complete documentation are critical for Medicare compliance.
Proper use of Modifier KH helps ensure correct reimbursement and reduces claim denials.

References

CMS Medicare Claims Processing Manual, Chapter 20 – 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 KH is a key Medicare DME modifier that identifies the first month of a capped rental. Proper use requires understanding Medicare’s rental payment methodology, correctly tracking rental months, reporting Modifier RR when applicable, and maintaining complete documentation. Accurate application of Modifier KH supports compliant billing, timely reimbursement, and fewer DME 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.