DOJ Announces Massive Medicare DME Fraud Scheme

April 16, 2019

Calling it “one of the largest health care fraud schemes in U.S. history,” the Department of Justice (DOJ) recently indicted 24 defendants and suspended Medicare payment privileges for 130 durable medical equipment (DME) companies for fraudulently billing $1.7 billion in Medicare orthotics. The indictments included CEOs and others associated with 5 telemedicine companies, including 3 licensed physicians. The investigation involved more than 80 search warrants in 17 federal districts, with tentacles reaching internationally into the Philippines and throughout Latin America.

The joint investigation involved the DOJ, the Health and Human Services Office of the Inspector General, the Federal Bureau of Investigation, Center for Medicare and Medicaid Services’ Center for Program Integrity, and the Internal Revenue Service. The alleged scheme involved the payment of illegal kickbacks and bribes by DME companies in exchange for the referral of Medicare beneficiaries by medical professionals working with fraudulent telemedicine companies for back, shoulder, wrist, and knee braces that were medically unnecessary, according to the DOJ statement. The defendants allegedly paid doctors to prescribe these orthoses either without any patient interaction or with only a brief telephone conversation with patients they had never met, which were then shipped to the patient directly.

The Medicare Payment Advisory Commission (MedPAC) featured in its June 2018 report recent, dramatic increases in Medicare expenditures for Medicare off-the-shelf orthotics and legislation will soon be introduced in Congress to ban “drop-shipping” of orthotics directly to beneficiaries. This could have a potential upside for physicians, therapists, and orthotists who typically provide orthoses directly to patients as a part of their professional services. AAPM&R will continue to engage Congress on this issue and report to its membership as developments occur.