Scooter Store Announces Close of Business

NEW BRAUNFELS, Texas (Sept. 13, 2013)—As reported by the San Antonio Express-News, The Scooter Store, which has billed itself as the leading supplier of power-mobility equipment, is going out of business. The New Braunfels company said in a Sept. 13 statement that it will begin winding down operations in the coming weeks.

The company, which has been mired in bankruptcy and in a Justice Department investigation believed to be related to Medicare and Medicaid fraud, said it was furloughing management and staff of about 370 people. In its prime, the Scooter Store employed more than 2,400 people and was New Braunfels’ largest private employer. As of the 13th, it had about 200 employees at its headquarters and about 170 spread over 55 distribution centers around the country.

No one from the company was available for comment. However, a statement issued by the company stated, “The Scooter Store team worked long and diligently to develop a new path forward for the company.  During these last months, our employees worked tirelessly to service existing patients and customers responsibly. Every effort has been made.” The Scooter Store’s board of directors made the decision to essentially liquidate the business after it received notice it was being cut off from Medicare business.

Medicare has accounted for about three-quarters of the Scooter Store’s business, a company representative told a U.S. Senate committee last year. In its statement, the Scooter Store said it received two letters from CMS on Thursday. In one, CMS informed the company it was being terminated from the competitive bidding program, taking effect Oct. 26. In the second letter, the Scooter Store learned CMS would not execute contracts with the company for the second round of competitive bidding. Inclusion in the second round, “would have enabled (the Scooter Store) to continue operating in critical geographic markets around the country,” the company said. The Scooter Store statement didn’t say whether CMS gave any reasons for its actions.

An independent auditor last year found The Scooter Store had received between $46.8 million and $87.7 million in Medicare overpayments. The company agreed to repay $19.5 million after the Office of Inspector General of the U.S. Department of Health and Human Services threatened to exclude it from federal health care programs.

The OIG found the Scooter Store’s failure to refund the overpayments breached the terms of a 2007 “corporate integrity agreement” the company entered into to settle charges that it made false Medicare claims and defrauded the government. The company denied breaching the agreement.
Nevertheless, as part of the agreement, the Scooter Store said it would pay the government $4 million and forgo $13 million in Medicare payments. The five-year corporate integrity agreement ended in May 2012, but the OIG continues to evaluate the Scooter Store’s compliance during the agreement’s final year, an OIG spokesman said Friday.

A CMS spokesman had no immediate comment on the Scooter Store’s closure.
It couldn’t be determined whether the most recent overpayments to the Scooter Store factored into CMS’s decision not to allow the company to participate in the competitive bidding programs. In its statement, the Scooter Store said CMS’s action “effectively eliminates” the company’s ability to achieve a sale of its assets in a Chapter 11 reorganization. The company intends to conduct a Chapter 11 liquidation.

An auction for substantially all of the company’s assets still is scheduled for Sept. 24, a company spokesman said. The deadline for bids is Thursday afternoon. It couldn’t be determined what will be sold at the auction, however. Announcement of the Scooter Store’s imminent liquidation came the same day furniture, fixtures and other equipment were auctioned off at the company’s former headquarters.

A spokesman for private-equity firm Sun Capital Partners, Inc., a major investor in the Scooter Store, declined to comment. Sun Capital loaned $40 million to the Scooter Store, but Sun also owned equity and warrants to purchase about 2 million shares of Scooter Store stock, representing ownership interest of 67 percent.