Rotech Raid Sparks Speculation, Concern

Orlando, Fla.

Agents from the Federal Bureau of Investigation April 30 raided Rotech’s headquarters in Orlando, as well as company offices in Maine, New York, Arkansas and Illinois, according to WFTV, an Orlando television station.

Approximately 50 agents took part in the Orlando raid, removing “boxes and boxes of documents,” WFTV reported.

One day later, Rotech released a statement confirming the raids and explaining that the company does not know the reason for the investigation. “The company is cooperating fully with the investigation,” the statement said. “However, [Rotech] has not been informed by the government of the subject matter of the inquiry.”

Federal investigations are not new for the HME giant. Last March, Rotech paid $17 million to settle allegations that, between 1995 and 2000, the company over-billed Medicare for respiratory equipment and services.

Then, in July 2002, Rotech told federal officials that an independent contractor had fabricated documentation for nonexistent sales of bulk medical equipment to the U.S. Department of Veterans Affairs, scamming the company out of more than $30 million in revenue. However, the VA scheme did not hurt the federal government, Rotech insisted. Nonetheless, Rotech has received “informal” requests from the U.S. Securities and Exchange Commission for more information about the VA scheme, the company said May 1.

Some industry experts have speculated that the current investigation is linked to the VA scheme. Rotech did not return phone calls, but Todd Christopher, chairman and chief executive officer of Beaumont, Texas-based Home Care Supply — the nation’s largest private supplier of HME and respiratory services — said speculation is premature. “Nobody knows what’s really going on,” he said “The federal government doesn’t have to tell you anything if they have a sealed subpoena.”

As it turns out, Rotech’s new owners may know less about the reason for the investigation than anyone, having taken control of the company only one year ago. Rotech’s management team is made up of bondholders who assumed ownership of the company last March, when Rotech emerged from bankruptcy as a stand-alone company no longer affiliated with Integrated Health Services.

The timing of this high-profile raid is not ideal for the HME industry, experts agree. Lawmakers on Capitol Hill now are drafting Medicare-reform legislation that could change the landscape of federal health care reimbursements forever.

However, one unfinished investigation is not enough to sway lawmakers’ votes on HME-provider-related issues, according to Christopher and Tom Connaughton, president of the Alexandria, Va.-based American Association for Homecare.

For breaking news, go to www.homecaremonday.com, the electronic news service of the home medical equipment industry.