Common Fraud Schemes by Durable Medical Equipment (DME) Providers

In its semi-annual report to Congress, the Office of the Inspector General notes that the durable medical equipment (DME) industry has consistently suffered from fraudulent schemes. Federal health care programs are billed for equipment never delivered, higher-cost equipment than actually delivered, totally unnecessary equipment or supplies, and equipment delivered in a different state from that billed in order to obtain higher reimbursement.

Examples of Fraud Involving Durable Medicare Equipment Suppliers

♦ An operator of two DME companies was convicted of submitting false claims to Medicare for supplies not provided. At the time of his arrest, numerous items were seized--jewelry, artwork, a pool table, three vehicles, two grand pianos, over a thousand bottles of wine, approximately $17,000 in currency and an escrow account containing more than $120,000. Total value: an estimated $340,000. He got seventy-one months incarceration, three years supervised release, payment of $2.5 million in restitution, and a $2,200 special assessment

♦ An owner/operator of several DME companies billed Medicare over $6.5 million for wound care supplies; more than half of the billings were fraudulent. Previously, he had been convicted of defrauding the state Medicaid program and ordered to repay the program $1 million. To do so, he defrauded Medicare by funneling funds from his DME company to the state Medicaid program through another company he owned.

He was sentenced to five years probation, including two years home detention for mail fraud and conspiracy. He must also pay $800,000 in restitution before the end of his probation period and forward all proceeds from the sale of property before a specified date. In addition, he must comply with psychiatric treatment and, after completing home detention, serve 400 hours a year of community service.

♦ In a civil settlement, a DME company agreed to pay $900,000 for allegedly upcoding lymphedema pumps on over 350 Medicare claims in order to receive a higher rate of reimbursement. To support these inflated costs, the company improperly used "formula" language, rather than unique descriptions of patients' true conditions, on its certificates of medical necessity. As part of the settlement, the company must also implement a five-year corporate compliance program to ensure proper Medicare billing procedures.

♦ A DME company owner misrepresented the point of service code
on numerous claims he filed for pressure mattresses provided to Medicare beneficiaries in skilled nursing facilities. Medicare pays for pressure mattresses for beneficiaries who reside at home or in custodial care facilities, but not for those in skilled nursing facilities. The owner was sentenced to six months home detention, five years probation, 450 hours of community service, payment of $14,243 in restitution, and $1,600 in fines for presenting false claims to the government.