Durable medical equipment (DME) compliance has long been fertile ground for government scrutiny, but bone growth stimulators present a particularly nuanced—and risky—intersection of reimbursement rules, medical necessity, and marketing practices. A review of enforcement actions, civil litigation, and regulatory guidance reveals recurring compliance failures that should be top of mind for compliance officers overseeing providers, DME suppliers, manufacturers, and clinical relationships.

According to the FDA, non-invasive bone growth stimulators are composed of a waveform generator and transducer (e.g., coils, electrodes, and/or ultrasound transducers) that promote bone growth and health to support fixing bone breaks or spinal fusion treatments. Under the Healthcare common Procedure Coding System (HCPCS), they are coded as E0760, E0770, E0747, and E0749, which cover the various types of stimulators.

These stimulators (often referred to as “stims”) require a prescription and are classified as a Class III device (the most regulated). The FDA indicates that Class III devices present a potential unreasonable risk of illness or injury, and there is insufficient information to determine that general and special controls are sufficient to provide reasonable assurance of their safety and effectiveness. This is why a doctor’s oversight is particularly important; unfortunately, a search of large online marketplaces recently revealed many of these available.

Kickbacks and “Personal Services” in Disguise

One of the clearest cautionary tales dates back to a 2009 False Claims Act settlement involving a bone growth stimulator manufacturer. Federal authorities alleged that, over a multi‑year period, the company paid staff at physicians’ offices to influence ordering decisions. These payments were structured as “personal service agreements,” a familiar label that often masks kickback schemes.

The government concluded that these arrangements violated the Anti‑Kickback Statute and led to false claims submitted to federal healthcare programs, including Medicare. The settlement also resolved allegations that the company received reimbursement for refurbished stimulators that failed to meet the adequate disclosure standard for restored DME.

Template Billing and “One‑Size‑Fits‑All” Medical Necessity

More recent civil litigation highlights a different, but equally troubling, risk area: billing practices. In one case, an insurance company sued a DME supplier alleging the use of “template billing” to ensure that virtually every patient encounter resulted in a billed bone growth stimulator, regardless of medical indication. The supplier, in collusion with others who allegedly orchestrated the schemes and secretly owned the DME suppliers and clinics involved, used nearly identical receipts that indicated the exact same type of DME “prescribed” for nearly all patients, by various providers.

The insurer noted that between July 11, 2023 and November 14, 2024, the DME supplier submitted more than $1.1 million in fraudulent claims to the insurer, obtained more than $530,000 and have outstanding claims of $400,000 that have yet to be adjudicated. Much of these, they allege, are driven by template-billing. Issues with documentation and billing can quickly cross the line from efficiency to falsity when it overrides individualized clinical judgment and is used with almost every single patient, regardless of actual need.

Billing Compliance Issues

Billing for bone growth stimulators carries several technical requirements that have featured prominently in fraud allegations. As in other healthcare fraud cases, providers who routinely prescribe osteogenesis stimulators without medical indication are not only committing fraud, but are also potentially harming their patients.

Compliance professionals must be mindful of the technical aspects of proper billing for osteo stims, including:

• Claims must include the KF modifier, indicating a Class III medical device.
• Suppliers must submit a Certificate of Medical Necessity (CMS‑847).
• The CMS‑1500 form requires modifiers identifying whether the device is rented (RR), purchased new (NU), or purchased used (UE).

Forging documents, including medical records, can also occur. In 2012, federal prosecutors filed charges against a territory sales representative for a DME supplier; the sales representative submitted false notes from the physician, as well as a forged prescription for the osteo stim. These were submitted to the DME supplier, who processed them not knowing about the forgeries.

Billed But Never Delivered

A 2017 False Claims Act case charged a DME supplier with billing the state’s Medicaid Program for an Osteogenesis Stimulator, Knee/Ankle/Foot Orthotic, Cough Stimulating Device, Wheelchair Accessories/Power Seat System, Powered Air Flotation Bed, and a Lightweight Portable Motorized Wheelchair on the same day (April 8, 2016), but listed dates of service on these claims from May, 2015 through September, 2015.  However, the supplier never delivered these products to the patient. Ironically, the government alleged that the DME supplier’s records showed that these products were provided a year before the indicated patient even became a patient of the DME supplier.

This pattern is consistent with other DME cases, where patients are “prescribed” as many high-dollar DME as possible, regardless of whether they actually need it or not. Because osteo-stims are often higher value than other DME, they can slip through the cracks if there aren’t sufficient controls in place to ensure that the patient actually needs them.

Final Thoughts for Compliance Leaders

Bone growth stimulators may appear niche, but the compliance risks surrounding them are anything but. Kickbacks, off‑label use, documentation shortcuts, modifier misuse, and aggressive billing all show how quickly DME operations can drift into problematic territory.

For compliance professionals, this area offers a clear lesson: where reimbursement rules are complex, regulators will look closely—and patterns will tell the story. Other important considerations include:

• Identifying financial relationships with referral sources—especially when framed as consulting or services agreements
• Uniform billing decisions inconsistent with clinical realities
• Technical billing requirements are not mere formalities and often are the basis for frequent enforcement actions. Documentation is critical.
• Automated or templated billing processes must be carefully audited to ensure they do not hard‑code assumptions about medical necessity.

Osteo stims are but one example of complex DME; however, ambiguity in coverage rules is not a safe harbor, nor a successful fraud defense. Compliance professionals must understand the common risk areas and analyze litigation and enforcement actions to remain up-to-date on the issues. Compliance officers must help companies navigate the terrain and ensure that all those in their ecosystem, from vendors, providers, suppliers, and others, know how to manage the risk and report wrongdoing.

Colin May, CFE, 3CE, INCI, is Professor of Forensic Studies and Criminal Justice at Stevenson University in Owings Mills, Md. A member of the American College of Healthcare Executives, he has spent the past 20 years in oversight, investigations, and compliance. The views expressed are his own. He can be reached at cmay3231@stevenson.edu.