Dozens Charged in Massive DME Fraud Scheme Worth More than $1 Billion

(April 9, 2019)—The owners of dozens of durable medical equipment (DME) companies, along with executives at five telemedicine companies and three licensed medical professionals, have been charged in what is being called one of the largest health care fraud schemes in United States history, the U.S. Department of Justice announced today. 

The defendants allegedly participated in health care fraud schemes involving more than $1.2 billion in loss. The Center for Medicare Services’ Center for Program Integrity also announced today that it took administrative action against 130 DME companies that had submitted more than $1.7 billion in claims, netting more than $900 million in payments.

The FBI and U.S. Department of Health and Human Services (HHS) Office of the Inspector General investigated the cases, which were prosecuted by the U.S. Department of Justice. Indictments were unsealed today in several judicial districts, including South Carolina, New Jersey and Florida.

They outline an alleged scheme in which DME companies paid illegal kickbacks and bribes in exchange for referring Medicare beneficiaries by medical professionals working with fraudulent telemedicine companies for back, shoulder, wrist and knee braces that are medically unnecessary.

Some of the defendants allegedly controlled an international telemarketing network that lured hundreds of thousands of elderly and disabled people into their scheme. According to the charges, they paid doctors to prescribe DME either over the phone or with no contact at all.

“These defendants—who range from corporate executives to medical professionals—allegedly participated in an expansive and sophisticated fraud to exploit telemedicine technology meant for patients otherwise unable to access health care,” Assistant Attorney General Benczkowski said in a news release issued by the DOJ. “This Department of Justice will not tolerate medical professionals and executives who look to line their pockets by cheating our health care programs.”

According to court documents outlined in the DOJ report, the scheme allegedly worked this way:

• First, the international call center advertised to Medicare beneficiaries, urging them to accept numerous free orthopedic braces, whether they needed them or not.
• The call center then allegedly paid illegal kickbacks or bribes to telemedicine companies in exchange for DME orders for the patients.
• The telemedicine companies then paid physicians to write medically unnecessary DME orders.
• Finally, the call center sold the DME orders to DME companies that fraudulently billed Medicare.

U.S. Attorney Craig Carpenito called the scheme “complex” and “multilayered” in the news release.

“The defendants took advantage of unwitting patients who were simply trying to get relief from their health concerns,” he said.

HHS issued a fraud warning today, urging consumers to be wary of this scheme and to report it if contacted.

Said Tom Ryan, president and CEO of AAHomecare, “Today’s action against individuals involved in schemes to defraud patients and taxpayers is welcome news to AAHomecare and the home medical equipment community. We appreciate the effective work by federal law enforcement agencies and the Dept. of Health & Human Services to identify and prosecute these two dozen individuals associated with DME companies, lead generation services and physician practices who are taking advantage of the Medicare reimbursement system.”

“We remain committed to working with our partners at HHS and CMS to enact policies that keep these bad actors away from Medicare beneficiaries and anyone else who needs home medical equipment. There should be no tolerance for fraud in DME or anywhere else in our health care infrastructure.”

The case was brought as part of the Medicare Fraud Strike Force, which maintains 14 strike forces operating in 23 districts. Since its inception in March 2007, the force has charged nearly 4,000 defendants who have collectively billed the Medicare program for more than $14 billion.