DME Manufacturer to Pay $500K in False Claims Settlement

RALEIGH, North Carolina—United States Attorney Michael Easley announced that Joint Active Systems, Inc. (JAS), a manufacturer of range-of-motion devices located in Effingham, Illinois, has agreed to pay $500,000 to settle civil claims under the federal and North Carolina False Claims Acts concerning allegations that JAS caused submission of false claims to the North Carolina Medicaid program for certain durable medical equipment (DME).

The settlement resolved civil allegations which did not go to trial; JAS denies the allegations.

The United States and the State of North Carolina alleged that from January 6, 2012 through January 29, 2021, JAS was unable to directly bill North Carolina Medicaid for its “EZ” range-of-motion devices because JAS did not meet North Carolina Medicaid requirements and/or lacked credentials necessary to do so. JAS allegedly bypassed those requirements by entering into arrangements with local North Carolina orthotics and prosthetics providers to bill EZ devices on its behalf. JAS allegedly directed the local North Carolina orthotics and prosthetics providers to improperly submit claims for JAS EZ devices as orthotics using “L-Codes” under the Healthcare Common Procedure Coding System (HCPCS), thereby bypassing the medical necessity reviews and/or authorization processes that may have otherwise taken place.

Prosecutors alleged that the JAS EZ devices did not qualify for reimbursement as “L-Code” orthotics under North Carolina Medicaid, and that the JAS EZ devices were not listed as reimbursable devices on the North Carolina Medicaid fee schedule.  Indeed, JAS received an official coding verification from the Centers for Medicare and Medicaid Services that designated one of JAS’s EZ devices as an “E-Code” (durable medical equipment) device, not as an “L-Code” (orthotic) device.  The government alleged that JAS nevertheless continued to use local North Carolina providers to bill its EZ devices as “L-Code” devices. In turn, JAS allegedly would pay the local orthotics and prosthetics providers by allowing them to retain a certain amount of the reimbursement.

“The Department of Justice is actively pursuing health care companies and medical device manufacturers who overcharge government health care programs,” said United States Attorney Michael Easley. “We cannot allow companies to bypass rules and regulations to enrich themselves, while depleting taxpayer funds set aside for legitimate patient care.”

The Federal and North Carolina False Claims Acts authorize the Governments to recover triple the money falsely obtained, plus substantial civil penalties for each false claim submitted.