As focused ultrasound becomes more widely adopted, it is inevitable that it will find applications as an at home treatment or a relatively low-cost wearable device to treat chronic conditions. There are already several neuromodulation and immunomodulation companies that are developing wearable at-home solutions using therapeutic ultrasound.
Since its inception, the Focused Ultrasound Foundation has explored in detail the regulatory and reimbursement paths for focused ultrasound treatments that involve capital equipment. The regulatory process for a wearable or home-based solution is the same as that for capital purchases; however, at-home products have a different reimbursement path than that of capital equipment because they are considered durable medical equipment (DME). This blog presents an introduction to that path, an understanding of which is important for manufacturers, providers, clinicians, and patients.
Durable Medical Equipment (DME)
In order to be classified as DME, the Centers for Medicare and Medicaid Services (CMS) requires a device to meet ALL of the following criteria:
- Durable (able to withstand repeated use by more than one patient)
- Primarily and customarily used for a medical reason
- Generally not useful to someone unless they are sick or injured
- Is appropriate for use in the home (outside of a treatment center)
- Expected to last at least three years
Again, for a device to receive a DME designation, it must meet all five of the above criteria. Wearable and home-based technologies are typically classified as DME. Examples of DMEs are wheelchairs, nebulizers, ventilators, and blood sugar meters.
Multi-Component Devices
Sometimes, a product may include a component that meets the definition of a DME along with a component that does not. CMS defines a multi-component device as one consisting of durable and nondurable components that together serve a medical purpose. An example of this is if the device requires a disposable that cannot be used by a second patient.
A multi-component device cannot be classified as a DME if the component that performs the medically necessary function of the device is non-durable. This is true even if other components that are part of the device meet the DME requirements.
In other words, if the portion of the multi-component device that is at the core of the device is durable, the entire device is durable. It is possible that a wearable therapeutic ultrasound device that requires the use of a daily disposable component to secure the device to the patient may be considered a DME because the active component is a DME.
Coding Process
The Healthcare Common Procedure Coding System (HCPCS) is a complex standardized coding system to ensure Medicare and other health insurance programs can process claims in an orderly and consistent manner. When new devices enter the market, manufacturers can request a new HCPCS code or an amendment to an existing HCPCS code description. The application process for DME designation and an associated HCPCS code occurs twice a year, generally around January 1 and July 1. After CMS makes a preliminary decision on the application – which can include denying DME status, placing the device under an existing DME HCPCS code, or issuing a new HCPCS code – it holds a public meeting during which applicants and the public can present more information confirming or challenging CMS’s preliminary decision. CMS then makes a final decision.
It is considered extremely difficult to obtain a new HCPCS code because, rather than issuing a new code, CMS has adopted the policy of modifying existing HCPCS codes whenever possible to make them more generic. It is important to note that all payers, not just Medicare, generally follow CMS’s HCPCS code decisions.
The application for a DME payment code is on the CMS website at: https://www.cms.gov/medicare/coding-billing/healthcare-common-procedure-system.
Pricing
Contrary to the payment rate for capital equipment, which is based on claims data submitted by hospitals for performing procedures that use the equipment, DME reimbursement pricing is established based on how much the manufacturer is paid for the DME.
If a new device falls under an existing DME HCPCS code, then it is priced at the established rate for that code regardless of how much the new device costs.
For a new code, the fee schedule for items and services are dependent on pricing history, if it exists. This history is submitted to CMS using data on payments made for the items. Historically, supplier price lists, including catalogs and other retail price lists, could be used to provide information on commercial pricing for the item. However, in 2019, CMS issued a final rule that set regulations for establishing payment amounts for new DME items and services, stating that it would no longer use the manufacturer’s suggested retail price (MSRP) to set the fee schedule rates. Rather, CMS would rely on fees actually paid for the item. Potential appropriate evidence of commercial payments can include those made by Medicare Advantage plans, verifiable information from supplier invoices, and non-Medicare payer data, including cash pay by patients.
If there is no price history, then pricing is delayed until a history can be established.
Payments
Unlike capital equipment, which is purchased and paid for by the acquiring institution or facility, payments to DME suppliers are made on a monthly rental/purchase basis by the insurer. Although it varies, in general a DME is paid as a rental and used by a single user for up to 13 months. If the user requires the equipment longer than that, the equipment is considered fully purchased by the user after the 13th month.

CMS and most providers pay 10% of the determined total fee for the DME for each of the first three months, then 7.5% for each of the next ten months (totaling 105%), after which there is no further reimbursement for that specific piece of equipment. After 13 months, the DME is considered “purchased” and owned by the user. The supplier must transfer title of the item to the beneficiary (patient) on the first day after the 13th continuous month in which payments are made. Suppliers must also offer a purchase option to beneficiaries beginning during the 10th continuous rental month. If there is a disposable component to the equipment, the fee associated with that component will continue to be paid monthly to the supplier after the 13th month if the patient continues using the DME.

It is important to note that CMS does not determine whether or not a fee for the technology is appropriate. It does not evaluate the cost effectiveness of the equipment or whether the determined fee is, for instance, too high relative to the cost required to manufacture the equipment. Commercial insurance carriers, on the other hand, may make such a determination and elect not to pay for a DME if the carrier determines it is too costly.
If there is a disposable or non-durable component to the equipment that falls under an established HCPCS code for that component, it is paid at the fee assigned to that code regardless of actual cost. These fees are assessed annually and may fluctuate depending on the data submitted to CMS regarding the amounts paid for a component covered by a given code. Payment for a disposable or non-durable component that requires a new HCPCS code is priced the same way the payment rate for the durable portion of the equipment is set.
Note that at times, when CMS issues a new DME code, that code may also include the cost of the disposable.
DME Maintenance and Servicing
Since DME is treated as a rental for the first 13 months of use, the supplier is responsible for servicing and maintaining the equipment. This cost should be factored into the amount charged for the DME. After ownership transfers to the patient, CMS will pay for maintenance and servicing of the DME. The amount that CMS will pay depends on where the device is located. If the specific local payment amount (the amount for the geographic region) for maintenance and servicing is between 85% to 100% of the median of all local payment amounts (the entire country), CMS will pay 100% of the specific local payment amount. If the local payment amount does not fall within that range of the median, CMS will pay 85% of the median of all local payment amounts.
Conclusion
There is a growing number of manufacturers who are looking to bring to market therapeutic ultrasound technologies designed for home use either continuously or intermittently. These technologies have the potential to treat chronic diseases and illnesses that cannot be addressed by a single intervention. They could also help demonstrate that therapeutic ultrasound is a safe and noninvasive tool while increasing the number of patients who could benefit from the technology.
CMS has developed a specific reimbursement mechanism for covering the costs associated with such technology, namely one that effectively pays the manufacturer directly over an extended period. This approach is different than the typical one whereby the manufacturer receives payment upfront for the capital costs associated with their technology, plus ongoing payments for any single patient use items. DME designation makes it possible to receive adequate payment for a non-capital-intensive device that, when coupled with the large unit placements typical of home solutions, can generate a significant financial return. An early understanding by the manufacturer as to how DME devices are priced and paid will help the company design, develop, and package its technology in such a way as to improve the likelihood of product and corporate success when the device comes to market.
Mark Carol, MD, is a senior consultant at the Focused Ultrasound Foundation.