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DMEPOS Bond - Walnut Creek and other Medical Cities Have Covered Businesses - What about an individual MD?

DMEPOS bonds affect Walnut Creek and similar hospital towns as businesses selling these covered products must post the bond in order to sell DME goods under various federal programs.  But individual physician offices may find it profitable and/or a benefit to their patients to sell these goods and the DMEPOS bond may be required.  Other issues can arise.

There are many medical companies in Contra Costa County and particularly in Walnut Creek which may utilize a DMEPOS surety bond for their business. A DMEPOS surety is a type of security guarantee used in the medical industry especially in the Medicare context.

The DMEPOS rule has existed since 2009. It applies to suppliers of DME’s which are broadly defined as Durable Medical Equipment and more specifically includes Orthotics, Prosthetics, and other items as well. The rule simple, you post a bond in order to sell these goods to patients when the reimbursement is by the government. ( BTW a medical bond is known by several names including Medicare Bonds, Medicaid Bonds and CMS Bonds.)

Walnut Creek & Other Hospital Towns Have Lots of Commercial DME Providers

We use Walnut Creek as a location where DMEPOS bonds are common because there are dozens of DME suppliers the largest of which is John Muir Hospital. They even have a JMH DME webpage

This page would apply to the Walnut Creek or Concord campus and their list of DME supplies includes:

TENS units
Traction units
Muscle stimulators
Orthotics and prosthetics
Insulin pumps and supplies
Hearing aids
Ostomy, urological, tracheostomy supplies
Mastectomy bras and prosthetics
Continuous passive motion rentals: Coverage is based on health plan benefit (have your physician contact us to confirm coverage)

Some DME providers are outside the bond requirements.  In general terms, some physicians and physician groups are excluded depending upon the structure of the DME entity/aspect of the practice.  Physical therapists and occupational therapists are generally exempt.  

Meeting CMS Standards is Easy - Unless You Get Burned by Your Supplier!

Remember that DMEPOS suppliers must meet CMS DMEPOS Quality Standards under the Medicare Prescription Drug, Improvement, and Modernization Act of 2003.  So how many of these items are made in China or in locations where qualitiy control is outside your direct observation?  If you watch Shark Tank you know that items sold by U.S. companies are often made overseas.  The DME bond is not going to protect you from a million dollars in failures due to poor manufacturing practicies.  You need a lawyer to review your DME supply contract and the DMEPOS requirement should be viewed as a trigger to warn you that you need some business lawyering to make sure you are safe.

Let's ask this core question.  Is your DME supplier as reliable as your pharmacist? Surgical equipment supplier?  Your major U.S. corporate giant supplier?  Are you getting real items?  Are you getting counterfeits?  How much of your DME supply chain operates on trust vs. trust but verify?

However, our physician lawyers know that bonds and bond requirements are well known to established hospitals and large suppliers. The greatest danger of an inadvertent violation arises with medical groups and medical offices where DME supplies are small ancillary business items or added as a convenience to the patient. These arrangements also trigger potential Stark and AKS issues.)

We urge that you obtain the advice of a California medical lawyer before you engage in the sale of DME items to medicare or government funded patients/programs. The DMEPOS bond is not meant as a burden. It is a process to ensure that Medicare patients receive quality products and services from legally recognized vendors. It avoid the danger of sales of defective goods by fly by night entities. In a sense, the insurance company will not post a medical device bond unless it has checked out the vendor and verified that the vendor is legitimate. Now that being said, the standard DMEPOS bond is not a large amount and realistically it will rarely reimburse the government for any real losses (which often run in the hundreds of thousands or millions) but again, it should be viewed not as a monetary protection to the government and instead as a fee and barrier to entry requiring a third party to vouch for you.

Who needs to get a DMEPOS bond?

If you are asking the question you need an attorney to provide the answer - or you can just apply for one and hope that the insurance company accurately assesses whether you do or do not need the bond. But legal advice is necessary to evaluate the overall structure in terms of medical ethics and other legal perils. A business overview in terms of how the DME business is structured may reveal tax or other benefits that are useful to you. Our group of physician advisors have a range experience including tax experts, business experts and corporate structure experts.

Self Help is Like Your Patients Consulting Dr. Google (It's correct until it's not)

While we discourage self help and strongly discourage doctors using “Google” to create their legal paperwork, the CMS website does have a useful page for DME providers.

But if you want to do everything yourself, did you know that Medicare operations are managed by independent contractors known as fee for service contractors. To contact a fee for service entity here is the list.

DME Fraud Exposure

In December of 2023, Alexandra Stchastlivtseva, was arrested for DME fraud.  He owned several durable medical equipment companies.  The charges were filed by the U.S. Department of Justice which claimed that Stchastlivtseva offered and paid kickbacks and bribes  telemedicine companies and marketing companies.  The idea was that they recruited patients who were then referred to chart review doctors who approved medically unnecessary orthotic braces and continuous glucose monitors.   The doctors who approved these devices are subject to criminal prosecution and loss of their ability to bill federal programs.  We have represented doctors in this difficult situation and many are young and inexperienced.  For a few dollars per file ($ 8-10 per file review), their entire career is at risk.

If do it yourself is not your choice, please call our physician lawyers and we will provide you with the best advice, review your systems and structures to ensure that you are not only compliant but effective, efficient and (hopefully) profitable.

One last caution.  Within our group of attorneys we have two who handle most aspects of DME, in office sales of goods, referrals for sales etc. .... This is a specialty area and while it is not rocket science, it does require experience and attention to the specific details of your medical practice and structures.

Daniel Horowitz has his medical law practice in Contra Costa County (Lafayette office).  His affiliated attorneys are in Orange County, Calabasas (Dr. Mark Ravis attorney and MD), Vallejo and Martinez.  We can meet by Zoom or travel if necessary.  We value and respect our clients.  We are your lawyers and your advisors.