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AI Medical Consignment Agreement Review

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Guided by Grayver Law Group
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A medical consignment agreement places medical devices, implants, or supplies at a hospital, ASC, or physician practice with payment due only upon use. Justee reviews medical consignment agreements against FDA Unique Device Identifier (UDI) requirements, Stark Law, AKS, UCC §2-326 (sale on consignment), and standard supplier-priority precedents.

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Key Takeaways

FDA Unique Device Identifier (21 CFR §830) requires lot tracking — consignment agreements must specify UDI compliance

UCC §2-326 governs consignment sales — improper UCC-1 filing risks loss to the hospital's creditors in bankruptcy

Pricing terms must reflect FMV under AKS personal-services principles to avoid inducement inferences

1-2 minutes*

Average Review Time

170+ compliance points analyzed*

Compliance Checks

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* Estimates based on typical documents. Actual results vary by document type and complexity.

Medical consignment agreements (most common for cardiology, orthopedic, and spinal implants) sit at the intersection of UCC commercial law, FDA device regulation, and healthcare fraud-and-abuse rules. UCC §2-326 governs consignment sales: in most states, goods on consignment are subject to the consignee's creditors unless the consignor has filed a UCC-1 financing statement and the consignee is generally known to engage in selling goods on consignment. Many hospital bankruptcies (e.g., Hahnemann, Astria) have left consignors as unsecured creditors. FDA Unique Device Identifier requirements (21 CFR §830, §801.20) require traceable UDIs on consigned implants and lot tracking through the FDA GUDID database. Stark Law and AKS apply when consignment terms (consignment value, par-level adjustments, replacement guarantees) operate as a referral inducement; OIG 2008 advisory opinions establish that consignment is permissible only when terms reflect FMV. The 21st Century Cures Act and the FDA's Software as Medical Device guidance create additional compliance for connected devices. Justee analyzes medical consignment agreements against UCC §2-326, FDA UDI rules, and AKS/Stark.

How It Works

1

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2

AI Analysis

Our AI reviews your document for compliance issues

3

Review Findings

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What We Check

Verifies UCC-1 financing statement and §2-326 compliance

Tests FDA UDI and lot-tracking requirements

Reviews AKS / Stark inducement inferences

Validates par levels, replacement, and obsolescence terms

Flags bankruptcy and supplier-priority risks

Common Risks We Identify

No UCC-1 — consigned goods subject to hospital's creditors

UDI tracking absent — FDA noncompliance

Pricing below FMV — AKS inducement inference

Par-level adjustments tied to volume — referral inducement

Indefinite term with no obsolescence allocation

Hypothetical Case Study by Justee

Justee recently analyzed a consignment agreement without UCC-1 filing, with par-level adjustments tied to "expected utilization growth" for an orthopedic implant supplier consigning $1.4M of inventory to a regional hospital network.

Issue Found: Without UCC-1 perfection under §9-310 and §9-505, the consigned $1.4M inventory was subject to claims by the hospital's general creditors in bankruptcy. When the hospital filed Chapter 11 18 months later, the supplier was an unsecured creditor and recovered 14 cents on the dollar. The "expected utilization growth" par-level mechanism could be characterized as inducement under OIG advisory opinions. UDI tracking documentation was incomplete — three of the lots had been used in patients without GUDID confirmation.

Justee Recommendation: For all future consignments: (i) UCC-1 filed at execution against "consigned medical devices and inventory" with notice to existing secured creditors per §9-103, (ii) par levels tied to historical use only, with no "growth" mechanism, (iii) UDI confirmation procedure at par replenishment, and (iv) obsolescence allocation defined.

Volume-Tied Par-Level Adjustment

Problematic Language

"Consignor shall periodically adjust Par Levels based on expected utilization growth."

Recommended Language

"Consignor shall set Par Levels based on the trailing twelve-month historical utilization of consigned Devices at each Hospital Location. Par Level adjustments shall not be tied to (i) projected growth, (ii) referrals, (iii) prescription patterns, or (iv) any volume or value of business between the Parties, in order to maintain compliance with the federal Anti-Kickback Statute. Consignor shall provide a written FMV justification for each adjustment."

Why it matters: Volume-projected par adjustments raise inducement inferences. Historical-use-only adjustments are AKS-friendly.

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"Justee is redefining the legal document compliance process across all practice areas, transforming hours of work into minutes, while reducing stress and boosting accuracy."

Artem Dolukhanyan
Artem Dolukhanyan

Partner, Corporate Transactions at Grayver Law Group

AI Review vs. Manual Review

FeatureJustee AI ReviewManual Review
Review Time2-5 minutes2-4 hours
CostFree trial available$150-500+
Legal CitationsAutomaticVaries by reviewer
Clause SuggestionsIncludedExtra fee
Availability24/7 instantBusiness hours
* Comparison data represents estimates based on industry research and internal testing for typical contract types. Review times, costs, and accuracy percentages vary by document complexity, length, jurisdiction, and specific legal requirements. See full disclaimer below.

Official Resources

FDA UDI System 21 CFR 830

FDA Unique Device Identifier system

OIG Healthcare Fraud Resources

OIG compliance and AKS guidance

Cornell LII UCC §2-326

UCC §2-326 sale on consignment

Related Document Reviews

Pharmaceutical Services AgreementBusiness Associate Agreement ReviewMedical Liability Waiver ReviewEquipment Use Agreement Review
Important Legal Disclaimer

Not Legal Advice: The information and analysis provided by Justee AI is for general informational purposes only and does not constitute legal advice. While we strive to provide accurate and helpful information, our AI-powered service is not a substitute for professional legal counsel.

No Attorney-Client Relationship: Use of Justee AI does not create an attorney-client relationship. Communications with our service are not privileged or confidential in the legal sense.

Consult a Professional: For specific legal matters, we strongly recommend consulting with a qualified attorney licensed in your jurisdiction. Legal requirements vary by location and circumstances, and only a licensed attorney can provide advice tailored to your specific situation.

Performance Estimates (*): All statistics, metrics, and numerical claims on this page — including review times, cost comparisons, accuracy percentages, and database size — are estimates based on internal testing, industry research, and typical use cases. Actual results vary based on document type, complexity, length, jurisdiction, and other factors. Cost comparisons reference publicly available average attorney rates and are not guaranteed savings. "1M+ laws and regulations" refers to the breadth of Justee's reference database and does not imply that every provision is checked against every law for every document.

By using our service, you acknowledge that you have read and agree to our Terms of Use and understand the limitations of AI-powered legal analysis. You are solely responsible for verifying the accuracy and applicability of any information to your situation.

Medical Consignment Agreement Review FAQ

Yes — without it, your inventory is subject to the hospital's creditors in bankruptcy. Justee flags missing perfection.

UDI under 21 CFR §830 with GUDID confirmation. Justee verifies the agreement supports compliance.

Risky — raises AKS inducement inferences. Historical-use-only is safer. Justee suggests AKS-compliant adjustments.

Allocation should be defined: who eats the loss after FDA recall, model change, or expiration. Justee flags ambiguity.

No. Medical consignment requires specialized fraud-and-abuse and supply-chain counsel. Justee accelerates the first pass.

Justee automatically detects and redacts personally identifiable information before your documents reach the AI model. Protected types include:

Personal data:
  • Names, email addresses, and phone numbers
  • Social Security numbers and tax identifiers (ITIN)
  • Physical addresses and dates of birth
  • Credit card and bank account numbers
  • Driver's license and passport numbers
  • Medical provider identifiers (NPI) and case numbers
Corporate and business data:
  • Company and organization names
  • Business addresses and geographic locations
  • SWIFT/BIC codes, IBAN numbers, and bank routing numbers
  • Business license numbers and attorney bar IDs
  • Corporate tax identifiers (EIN)
Our system achieves 100% detection of standard PII types and approximately 97% overall coverage. Certain rare identifiers — such as cryptocurrency wallet addresses and MAC addresses — may not be detected automatically. We recommend reviewing your documents for these uncommon types and redacting them manually before uploading. See our Privacy Policy and Terms of Use for details and limitations.

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Last updated: May 13, 2026

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