Why Perfect Allowable Amounts Don’t Exist in DME (Durable Medical Equipment)

Written By Jeremiah Fuller

(And why chasing them can quietly hurt collections)

In an ideal world, every claim would have a clean EOB, a correct allowable amount, and a perfectly calculated outstanding balance. In Durable Medical Equipment (DME), that world doesn’t exist — and pretending it does can actually make revenue cycle performance worse.

This article explains why “perfect allowable amounts” are a myth in DME, and how finance teams should think about allowables in a way that supports collections, denial management, and accurate financial reporting.

1. The theoretical promise of “actual allowables”

On paper, using the allowable amount from the EOB seems like the gold standard:

  • It reflects the payer’s adjudicated rate

  • It incorporates patient responsibility

  • It should define exactly what is collectible

In low-denial, high-clean-claim environments, that logic mostly holds.

DME is not that environment.

2. Why EOB allowables break down in DME

1. High denial and no-response rates

A significant percentage of DME claims:

  • Have no EOB yet

  • Are denied without an allowable

  • Are later reversed, canceled, or resubmitted

If you rely only on actual allowables, many claims cannot be valued at all at the time they matter most.

2. Short pays distort allowables

Short pays are common in DME due to:

  • Authorization unit limits

  • Partial rental periods

  • Documentation timing issues

In many systems:

  • The allowable is incorrectly posted as the short-paid amount

  • No retraction occurs when the balance is later paid

  • The EOB looks “final” but isn’t economically correct

This silently corrupts downstream reporting.

3. Retractions and repostings aren’t consistent

Some payers:

  • Retract the original payment and repost a full allowable
    Others:

  • Post incremental payments with no adjustment to the original allowable

Both behaviors can exist within the same payer. There is no universal rule you can safely code around.

4. Human posting errors are unavoidable

Even strong posting teams occasionally:

  • Enter payment amount as allowable

  • Miss secondary adjustments

  • Post paper EOBs inconsistently

At the claim level, these errors are hard to spot. At the aggregate level, they become obvious.

3. Why average allowables exist (and why they work)

Because of these realities, many high-performing DME organizations use average allowable models:

  • Average allowable by HCPCS × Insurance

  • Built from large volumes of paid claims

  • Used as a valuation and prioritization guide, not gospel

This approach:

  • Values claims with no EOB

  • Smooths short-pay noise

  • Enables consistent AR prioritization

  • Keeps reps focused on insurance recovery, not pennies of variance

  • Create a reliable guidepost for what should be paid for plans whose allowable amount varies slightly due to individual plan variations and type (HMO, PPO etc.)

In practice, a well-built average allowable system is often 92–95% accurate, which is more than sufficient for operational decision-making.

4. The real risk isn’t imperfection — it’s blindness to change

The biggest legitimate concern with averages is rate drops.

That’s why the most effective systems include:

  • Allowable trend tables by HCPCS and insurance

  • Focus on top CPTs driving 80–90% of revenue

  • Monthly monitoring for step-changes, not claim-by-claim noise

This is how finance detects:

  • Contract changes

  • Systemic short pays

  • Posting issues

  • Reimbursement erosion

Not by staring at individual EOBs.

5. The right mental model: guidance, not precision

In DME, allowables should be treated as:

  • A directional signal

  • A prioritization tool

  • A financial estimate, not a legal truth

Claims reps still:

  • Review the actual EOB

  • Validate payment correctness

  • Escalate material discrepancies

Finance provides the map, not turn-by-turn GPS.

6. What “perfect” actually looks like in the real world

A mature DME RCM system typically uses:

  • Average allowables for valuation and AR prioritization

  • Actual EOB allowables where reliable and available

  • Trend monitoring to catch structural issues (sudden extreme rate drops or systemic short pays)

  • Static Rate tables when needed to correct for known problem insurances whose posted allowable fluctuate due to short pays or sudden rate drops

Not perfection — control.

Final thought

If your system demands perfect allowable amounts to function, it will fail in DME.

If your system accepts reality, measures patterns, and highlights exceptions, it will outperform teams chasing theoretical accuracy while missing real dollars.

Perfect allowables don’t exist in DME. Good financial judgment does.

Here is a comment I made on Linkedin about allowable amount estimation in healthcare (read the entire 3 or 4 comments I made for context and understanding):

https://www.linkedin.com/feed/update/urn:li:activity:7424859532117368832?commentUrn=urn%3Ali%3Acomment%3A%28activity%3A7424859532117368832%2C7424876587076132864%29&dashCommentUrn=urn%3Ali%3Afsd_comment%3A%287424876587076132864%2Curn%3Ali%3Aactivity%3A7424859532117368832%29

Jeremiah Fuller
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