Feds Dismantle $1.2B Healthcare Fraud Scheme Involving DME

April 10, 2019 - Federal authorities recently took down a massive international healthcare fraud scheme involving telemedicine and durable medical equipment (DME) companies, the Department of Justice (DoJ) announced on Tuesday.

The federal agency recently charged 24 individuals for their alleged participation in a scheme that defrauded Medicare of more than $1.2 billion by billing the program for medically unnecessary back, shoulder, wrist and knee braces.

“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 healthcare,” Assistant Attorney General Brian A. Benczkowski stated in the announcement. “This Department of Justice will not tolerate medical professionals and executives who look to line their pockets by cheating our healthcare programs.”

The individuals charged include executives of five telemedicine companies, owners of dozens of DME companies, and three licensed medical professionals.

The charges allege that the medical equipment companies paid a firm in the Philippines with an international telemarketing network to recruit elderly and/or disabled patients who may or may not have needed various braces. The firm reportedly “up-sold” the Medicare beneficiaries to get them to accept “free or low-cost” DME braces, the DoJ reported.

The international telemarketing network then allegedly paid illegal kickbacks and bribes to telemedicine companies in order to get the companies to obtain DME prescriptions for the Medicare beneficiaries.

In a long chain of healthcare fraud, the telemedicine companies reportedly paid physicians to write DME orders for patients they had never seen or met. Some physicians had only had a “brief telephonic conversation” with the patients, the DoJ added.

“The defendants took advantage of unwitting patients who were simply trying to get relief from their health concerns,” stated US Attorney Craig Carpenito of the District of New Jersey. “Instead, the defendants preyed upon their weakened state and pushed millions of dollars’ worth of unnecessary medical devices, which Medicare paid for, and then set up an elaborate system for laundering their ill-gotten proceeds.”

The defendants reportedly laundered the proceeds from the healthcare fraud scheme through international shell companies and used the money to buy exotic cars, yachts, and real estate around the world, the DoJ reported.

Federal prosecutors charged individuals in several states, including New Jersey, Florida, Texas, North Carolina, South Carolina, New York, and California.

In light of the healthcare fraud takedown, the CMS Center for Program Integrity also announced that it took “adverse administrative action” against 130 DME companies. The companies submitted over $1.7 billion in Medicare claims and received over $900 million.

Healthcare fraud costs the federal government and taxpayers billions of dollars each year. And new technologies like telemedicine may be contributing to the problem.

Last October, law enforcement officials in Tennessee charged four individuals and seven companies involved in a $1 billion healthcare fraud scheme involving telemedicine. The defendants developed an “elaborate telemedicine scheme” in which HealthRight LLC fraudulently solicited insurance coverage information and prescriptions from consumers.

CMS is hoping to prevent healthcare fraud schemes like these. Traditionally, the agency has employed a “pay-and-chase” approach in which Medicare pays for claims and attempts to recoup reimbursement stemming from fraudulent bills.

However, CMS is now focusing on prevention efforts that stop the payment from being made in the first place.

For example, a predictive analytics tool launched by Medicare in 2011 has identified physicians engaging in illegal or questionable billing practices and stopped payments from going to the doctors. The tool saved Medicare $1.5 billion in 2016 by detecting fraudulent claims and improper payments prior to reimbursement.

CMS also launched several initiatives in summer 2018 aimed at reducing fraud and waste in Medicaid, including audits of state programs to ensure Medicaid beneficiaries are enrolled in the correct eligibility tiers.