Fraud in our industry – Prosthetics, Orthotics and DME

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The U.S. Department of Justice (DOJ) has announced multiple indictments and law enforcement actions related to one of the nation’s largest healthcare fraud schemes.

The announcement came Tuesday, April 9, and stems from an investigation that resulted in charges against 24 defendants, including the CEOs, COOs and others associated with five telemedicine companies, as well as owners of dozens of durable medical equipment (DME) companies and three licensed medical professionals, for their alleged participation in healthcare fraud schemes involving more than $1.2 billion in loss.

In addition, the Centers for Medicare & Medicaid Services (CMS), Center for Program Integrity (CMS/CPI) announced that it took action against 130 DME companies that had submitted over $1.7 billion in claims and were paid over $900 million.

The charges target an alleged scheme involving 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 are medically unnecessary, according to a DOJ news release. The defendants allegedly paid doctors to prescribe DME either without patient interaction or with a brief telephonic conversation with patients they had never met or seen. According to allegations in court documents, some of the defendants obtained patients for the scheme by using an international call center that advertised to Medicare beneficiaries and “up-sold” the beneficiaries to get them to accept numerous “free or low-cost” DME braces, regardless of medical necessity. The international call center allegedly paid illegal kickbacks and bribes to telemedicine companies to obtain DME orders for these Medicare beneficiaries.

The American Orthotic and Prosthetic Association (AOPA) released a statement on March 28 that criticized the use of lead generation marketing to deliver orthotic devices to patients covered by Medicare or other insurances. AOPA says it is encouraged by both the DOJ indictments and the administrative action taken by CMS. AOPA also says it is hopeful that this sweeping action will drive this criminally negligent activity out of the orthotic and prosthetic marketplace.

A more recent article claims millions of dollars in fraud by Richard Davidson, MD, as he pleaded guilty to conspiracy to commit healthcare fraud.

According to the plea agreement, in 2018, Davidson and his conspirators established a conglomerate of Durable Medical Equipment (DME) supply companies. During the creation of the companies, they lied to Medicare to secure billing privileges. The scheme involved placing the companies in the names of straw owners. By concealing their true ownership, the conspirators secretly gained control of multiple companies, which Medicare prohibits. This enabled the conspirators to submit high volumes of illegal DME claims while attempting to evade law enforcement scrutiny. In one year, through the conglomerate, Davidson and his conspirators submitted more than $20 million in illegal DME claims, resulting in more than $10 million in payments from Medicare and the Civilian Health and Medical Program of the Department of Veterans Affairs (CHAMPVA).

To attain such high volumes of claims, the conspirators used bribes and kickbacks. Specifically, Davidson and his conspirators illegally purchased thousands of signed doctors’ orders for DME braces from so-called “marketers.” The marketers, for their part, had generated the signed doctors’ orders under the guise of “telemedicine,” but no telemedicine had actually occurred. Instead, the “marketers” had bribed doctors to sign the DME brace orders that supported the illegal claims. Davidson and his conspirators paid millions to secure the illegal DME claims for submission to Medicare and CHAMPVA, according to the plea agreement.

Davidson faces a maximum penalty of 10 years in federal prison and has also agreed to forfeit $2.4 million to the United States, which represents the proceeds he obtained through the commission of the offense. A sentencing date has not yet been set.


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