Medicare DME Suppliers: What You Need to Know About Inadvertent Billing Fraud and False Claims Act Enforcement

The federal government has ramped up efforts to stamp out fraud, waste, and abuse. As a result, DME companies find themselves under the magnifying glass. We discuss how to prepare your DME business and remain compliant. 

DME Fraud

Despite the overwhelming but necessary emphasis on public health and COVID-19 protections, the government has not lost focus on its central healthcare delivery programs and their susceptibility to fraud. In a time where regulatory enforcement might easily lose the spotlight, the Office of the Inspector General (OIG) has shown that combating fraud and penalizing Medicare non-compliance remain priorities.  

Why DME Suppliers?

Durable medical equipment (DME) suppliers’ businesses have seen growth in recent years. With that growth, fraud and abuse enforcement also appears to be on the rise. Following President Trump’s October 2019 Executive Order instructing the Centers for Medicare and Medicaid Services (CMS) to undertake all appropriate efforts to “detect and prevent fraud, waste and abuse,” CMS reported a $1.29 billion decrease in “improper” reimbursements for DME-related claims between 2016 and 2019, the result of “a number of corrective actions” taken by the agency. 

Recently, DME suppliers made headlines for scams that harmed vulnerable patients in the process of billing Medicare for inaccurate claims, as well as schemes for circumventing legal billing channels to overcome a lack of claims submission registration.   

Common Types of DME Fraud

Certain fraudulent actions emerge as common themes in false claims act legislation. Therefore, DME suppliers should be aware of schemes that involve the semblance or actual commission of fraud. Examples include:

  • Up-coding: billing for a dollar amount that is higher than it should be for the service performed or product supplied;
  • Kickbacks:  illegal remuneration for referrals;
  • Billing for services never provided/products never supplied;
  • Providing  services or products never requested by patients;
  • Falsifying data, patient information, referrals, and other information; 
  • Falsely enrolling fictitious businesses or uninvolved parties in Medicare and/or other federal programs;
  • The provision of products that do not meet requirements or CMS coding criteria;
  • Abuse of telemedicine (especially now, when COVID-19 has loosened some telemedicine restrictions);
  • Failure to maintain or easily access medical necessity documentation to substantiate patient need;
  • Non-compliant and/or insufficient partnerships and collaborations;
  • Actions that show rapid sales growth, particularly within a short period.

The government seeks to enforce false claims violations without regard to any specific provider type, including physician practices, hospital systems, and, as we explore here, DME suppliers:

“We remain focused on investigating healthcare providers who seek to enrich themselves by engaging in illegal activities,” said Miranda L. Bennett, Special Agent in Charge for the Office of Inspector General of the U.S. Department of Health and Human Services. “We will continue working with our law enforcement partners to investigate these types of insidious schemes, which are designed to bypass important protections for Medicare beneficiaries.”

Recent Example: Shreveport Prosthetics

In early September 2020, The United States Attorney’s Office reached a 1.6 million-dollar civil settlement with Shreveport Prosthetics, Inc. (SPI). The settlement resolved allegations that while the Louisiana-based company had a deactivated durable medical equipment (DME) supplier number, it funneled its claims to Medicare through a supplier in Texas for services rendered by SPI in Louisiana. 

In addition, SPI routinely waived patient coinsurance amounts over a three-year period, overcharging Medicare for the billed services. A former SPI office administrator/billing specialist initiated the lawsuit under the qui tam, or whistleblower provisions, of the False Claims Act.  Under the False Claims Act, private citizens can bring suit on behalf of the United States and share in any recovery.

As part of the settlement, SPI agreed to a three-year Integrity Agreement (a very common “corrective action”) with the Office of Inspector General (OIG). The Integrity Agreement promotes compliance with the statutes, regulations, program requirements, and written directives of Medicare and all other federal healthcare programs.  Among other compliance obligations, the Integrity Agreement requires that SPI must establish and maintain a compliance program. SPI must also engage an Independent Review Organization to perform quarterly claims reviews, and routinely report on these obligations to OIG.

The U.S. Attorney’s Office is committed to investigating and aggressively pursuing healthcare providers who seek public funds through unlawful means. This settlement should send a message to all healthcare providers and suppliers . . . that violations of the False Claims Act will continue to receive this office’s full attention and resources.”

Alexander C. Van Hook, Acting U.S. Attorney.

Recent Example: “Broad Corruption”

According to allegations in 2019 court documents, defendants in a $1.2 billion DME scam lured patients through an international call center that targeted Medicare beneficiaries. The telemarketers  “up-sold” the beneficiaries to get them to accept numerous “free or low-cost” DME braces, regardless of medical necessity. The call center allegedly paid illegal kickbacks and bribes to telemedicine companies, doctors, or nurse practitioners, to obtain DME orders for these Medicare beneficiaries without ever speaking to them. Finally, they sold the orders to DME companies, who shipped out box after box of braces. The DME suppliers fraudulently billed Medicare or other insurance programs for every item. 

As a result, people across the US received boxes of braces they did not need or want. The recipients were often responsible for copayments on these items, owing hundreds or even thousands of dollars! Collectively, the CEOs, COOs, executives, business owners, and medical professionals involved in the conspiracy stand accused of causing over $1 billion in loss to Medicare.

The conspiracy described in this indictment was not perpetrated by one individual.  Rather, it details broad corruption, massive amounts of greed, and systemic flaws in our healthcare system that were exploited by the defendants.  We all suffer when schemes like this go undiscovered and I’m proud of the work our agents did in working with our partners to uncover this complex scheme.

United States Department of Justice, April 2019

How to Prepare Your Business and Remain Compliant

Preparing for that what may be a “likely eventuality” of a False Claims Act investigation is a daunting task. However, your business can implement several strategies to help ease the uncertainty and work towards avoiding violating the False Claims Act.  

Risk Assessments

First, conduct risk assessments using third-party resources to identify high-risk areas and potential threats to your business. It is integral to rely on disinterested third-party evaluations to avoid internal bias and potential missed areas of scrutiny.

Audits and Monitoring

Then, during and between risk assessments, your business should conduct informal and formal auditing and monitoring. These processes should include actively reviewing medical necessity documentation and federal program claims submissions. Remember, you are also responsible for both the content and bounty of your business relationships. Be sure to increase diligence on business partners.

Compliance Programs and Staff Education

Next, evaluate, update, and enhance compliance programs to ensure they operate effectively. Educate and update employees frequently about compliance obligations. Ultimately, even the best compliance program will fail if staff members don’t know procedures and/or fail to implement them. 

Internal Enforcement

Finally, increase internal enforcement. Employees must be held accountable for the results of risk assessments, compliance measures, and actions like those listed above that put the business on notice regarding potential fraudulent activity. Appropriate enforcement requires prompt corrective measures, including the termination of employees and business relationships for noncompliance. 

Confer With Experienced Professional Advisors

Seek legal advice from lawyers who know the DME industry and what the federal government looks for before and during its investigations. 

To speak to an experienced healthcare attorney, schedule a complimentary consultation with Jackson LLP by phone or through our online booking portal.

This blog is made for educational purposes and is not intended to be specific legal advice to any particular person. It does not create an attorney-client relationship between our firm and the reader and should not be used as a substitute for competent legal advice from a licensed attorney in your jurisdiction.

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