FECA Circular 26-02: What the New DME Billing Rules Mean for Federal Workers Compensation Payers
FECA Circular 26-02, issued on February 2, 2026, introduces updated payment rules for Durable Medical Equipment (DME) under the Federal Employees Compensation Act that every claims professional and medical provider needs to understand.
The Office of Workers Compensation Programs, through its Division of Federal Employees Compensation, has released new guidance covering billing controls, equipment exclusions, modifier requirements, and the process for requesting exceptions.
This post breaks down exactly what changed, why it matters, and what claims teams need to do to stay compliant.
What Is FECA Circular 26-02 and Why Was It Issued?
FECA Circular 26-02 is the latest update from the Division of Federal Employees Compensation (DFEC) addressing how Durable Medical Equipment providers and claims teams bill and pay for equipment under the Federal Employees Compensation Act program.
DFEC previously issued FECA Circular 23-07 in 2023, which outlined billing restrictions and exclusions for DME at that time. Since then, HCPCS coding rules continued to change but no updated circular followed. As a result, billing inconsistencies grew across the program.
To address this gap and improve transparency, DFEC made two key decisions:
- Issue FECA Circular 26-02 with updated billing controls that reflect current coding standards and industry guidelines.
- Create a searchable webpage listing all covered, limited, and excluded DME codes so providers and payers can check current status at any time.
This update directly affects medical providers, federal agency claims managers, third-party administrators, and anyone involved in processing DME bills under the FECA program.
What Billing Problems Did FECA Circular 26-02 Address?
Before issuing this FECA Circular, DFEC’s Program Integrity Unit found a consistent pattern of billing errors across the DME program. The five most common issues identified were:
1. Ignoring warranty lifecycles:
Providers billed for equipment still covered under an active warranty, resulting in duplicate payments.
2. Wrong rental billing frequency:
Providers billed equipment daily instead of monthly, inflating costs significantly.
3. Unnecessary or non-standard equipment:
Providers billed for items that did not meet clinical need standards or were not customary for the condition being treated.
4. Billing higher-cost alternatives:
When a cheaper, clinically equal option was available, providers billed for the more expensive item instead.
5. Unspecified billing codes:
Providers used vague or generic HCPCS codes rather than the correct specific codes for the equipment provided.
These findings led DFEC to work with its medical operations team to build updated billing controls using industry standards and CMS guidance as the framework for FECA Circular 26-02.
Four Key Billing Controls Introduced in FECA Circular 26-02
FECA Circular 26-02 puts four specific billing controls in place that all DME providers and claims processors must follow.
A. Required Modifiers on Every DME Bill
This FECA Circular will automatically deny bills with missing modifiers.
All DME HCPCS codes must now include the correct modifier to show how the equipment is being provided:
- RR modifier — required for all rental equipment
- NU modifier — required for all purchased equipment
B. Rental and Purchase Limits Based on Clinical Guidelines
DFEC now sets clear limits on how often DME can be rented or purchased, based on two factors:
- Clinical guidelines for the specific type of equipment
- The expected useful lifespan of the item
For example, certain items are limited to once per year based on standard medical use expectations. The DME Rental and Purchase Limitations webpage now lists all current limits.
DFEC Durable Medical Equipment (DME) Rental and Purchase Limitations | U.S. Department of Labor.
C. Excluded DME Codes That Will Not Be Paid
Some DME items are excluded from payment entirely under this FECA Circular. DFEC excludes equipment when one or more of the following conditions apply:
- CMS has determined the item is not covered or clinically appropriate
- The item lacks clear medical necessity for the claimant’s condition
- A cheaper item exists that provides the same clinical function
DFEC posts a full list of excluded DME codes on the DME Excluded from Payment webpage
DFEC Durable Medical Equipment (DME) Excluded From Payment | U.S. Department of Labor.
Providers should check this list before submitting any DME bill to avoid unnecessary denials.
D. Excluded DME Codes That Will Not Be Paid
Not all DME requires pre-authorization under FECA Circular 26-02, but knowing when it does is critical to avoiding delays. Here is how the authorization process works:
- Providers can check whether specific DME requires pre-authorization using the eligibility tools available on the WCMBP portal before submitting a bill.
- If the bill is denied or if the item appears on the excluded list, the treating physician can still request an exception.
- Exception requests must include a written medical explanation showing why the item is medically necessary and why the approved lower-cost alternative will not work for this specific patient.
- The treating physician can submit exceptions through ECOMP or by mail to the appropriate DFEC office.
Stay Ahead of FECA Circular Updates With Expert Claims Support
FECA Circular 26-02 is a clear signal that DFEC is tightening billing oversight across the DME program. Furthermore, as HCPCS coding continues to change and CMS updates its own coverage guidance, more circulars will follow. Staying current with each update is essential for any organization that manages federal workers compensation claims.
At Frasco, our team supports federal workers compensation claims professionals with investigations, evidence gathering, and claims documentation services that help organizations manage FECA claims accurately and in full compliance with current program requirements. If your team is working through the implications of this FECA Circular or managing complex FECA claims, we are ready to help.
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Schedule a call with Craig DeMello, a nationally recognized expert in Federal Workers’ Compensation. With over 30 years of experience in public service, Craig provides practical insight and proven expertise to help clients navigate complex federal claims. As a Government Services Specialist at Frasco, he is dedicated to delivering clear answers and effective strategies to support your agency’s goals.
Disclaimer: This blog post is for informational purposes only and should not be considered legal advice. Please consult your general counsel for specific legal guidance. Frasco investigators are licensed, and our operations comply with US industry, federal, state, and local laws.