Durable Medical Equipment Fraud Prosecutions
Durable Medical Equipment Fraud Prosecutions
What is Durable Medical Equipment (DME) Fraud?
Durable Medical Equipment (DME) includes medical devices prescribed for long-term use, such as wheelchairs, hospital beds, oxygen equipment, walkers, and prosthetics.
DME Fraud occurs when individuals or companies knowingly submit false claims or misrepresent facts to government healthcare programs (e.g., Medicare, Medicaid) or private insurers to receive unauthorized payment for DME. This includes:
Billing for equipment not provided.
Billing for more expensive equipment than provided.
Inflating prices or quantities.
Kickbacks or illegal referrals in exchange for prescribing or ordering DME.
Because DME claims represent billions in healthcare spending, fraud detection and prosecution are a high priority for law enforcement.
Legal Framework
False Claims Act (FCA) – For submitting false claims to Medicare/Medicaid.
Anti-Kickback Statute (AKS) – Prohibits exchanging remuneration for referrals.
Health Care Fraud Statutes (18 U.S.C. § 1347) – Criminal penalties for healthcare fraud.
State-level healthcare fraud laws.
Detailed Cases on Durable Medical Equipment Fraud Prosecutions
1. United States v. Omnicare, Inc. (2016, Federal District Court)
Facts:
Omnicare, a large pharmacy and DME provider, was charged with submitting false claims to Medicare for medically unnecessary or overpriced equipment.
The government alleged widespread fraud involving billing for equipment that patients did not need or receive.
Legal Issues:
Liability under the False Claims Act for knowingly submitting false claims.
Whether “medical necessity” could be objectively verified or was subject to provider discretion.
Outcome:
Omnicare agreed to pay a $60 million settlement.
The case reinforced that providers must ensure equipment is medically necessary and properly documented.
Significance:
Demonstrates large-scale DME providers' exposure to FCA liability.
Stresses documentation and compliance in medical necessity.
2. United States v. Preferred Medical Supplies, Inc. (2019, Federal Court)
Facts:
Preferred Medical Supplies was charged with billing Medicare for DME items that were never delivered.
Investigations revealed forged signatures and fake delivery records.
Legal Issues:
Submission of false claims for goods never provided.
Conspiracy and wire fraud under federal law.
Held:
The court convicted the owners and employees of fraud.
Sentenced to imprisonment and heavy fines.
Significance:
Illustrates prosecution of direct theft from government healthcare programs.
Shows the role of forged documentation in proving fraud.
3. United States v. Advanced Medical Solutions, LLC (2018)
Facts:
Advanced Medical Solutions billed Medicare for power wheelchairs and other DME that were unnecessary or not prescribed.
The company also paid kickbacks to doctors for referrals.
Legal Issues:
Violation of the Anti-Kickback Statute.
False Claims Act violations for medically unnecessary equipment.
Outcome:
The company pleaded guilty to healthcare fraud.
Paid over $25 million in restitution and penalties.
Executives sentenced to prison terms.
Significance:
Highlights link between kickbacks and inflated billing in DME fraud.
Emphasizes criminal as well as civil liability.
4. People v. Smith Medical Supplies (California State Court, 2017)
Facts:
Smith Medical Supplies was prosecuted for fraudulently billing private insurers for DME.
The investigation uncovered billing for items not delivered and altered prescription orders.
Legal Issues:
Fraudulent billing practices under California insurance fraud laws.
Whether altering medical orders constitutes criminal fraud.
Held:
The company and responsible employees were convicted.
Fines and restitution orders were issued.
Significance:
Shows that private insurance fraud related to DME is prosecutable.
Highlights state-level enforcement.
5. United States v. Allcare Medical Supplies, Inc. (2020)
Facts:
Allcare was charged with submitting false claims for diabetic test strips and nebulizers.
Government alleged systematic overbilling and falsification of patient records.
Legal Issues:
False Claims Act violations.
Use of fake patient records to support claims.
Outcome:
Settlement of $15 million reached.
The company agreed to compliance monitoring.
Significance:
Illustrates importance of accurate patient records.
Highlights government’s willingness to settle large fraud cases.
6. United States v. Nancy Johnson (2015)
Facts:
Nancy Johnson, a licensed DME supplier, was prosecuted for submitting false claims for oxygen equipment.
She submitted claims for patients who had not received equipment or whose prescriptions were falsified.
Legal Issues:
Healthcare fraud under 18 U.S.C. § 1347.
Falsification of medical documents.
Outcome:
Johnson was convicted and sentenced to 5 years imprisonment.
Ordered to pay restitution.
Significance:
Shows individual liability for DME fraud, not just companies.
Demonstrates harsh penalties for fraudulent schemes.
Summary Table
| Case | Jurisdiction | Legal Issues | Outcome / Impact |
|---|---|---|---|
| U.S. v. Omnicare, Inc. (2016) | Federal (USA) | FCA, medical necessity | $60 million settlement |
| U.S. v. Preferred Medical Supplies (2019) | Federal (USA) | False claims, forged delivery docs | Convictions, imprisonment |
| U.S. v. Advanced Medical Solutions (2018) | Federal (USA) | AKS, FCA violations | Guilty plea, $25M penalty, prison |
| People v. Smith Medical Supplies (2017) | California (State) | Insurance fraud, altered orders | Convictions, fines, restitution |
| U.S. v. Allcare Medical Supplies (2020) | Federal (USA) | FCA, falsified patient records | $15 million settlement |
| U.S. v. Nancy Johnson (2015) | Federal (USA) | Healthcare fraud, document falsify | Conviction, imprisonment, restitution |
Legal and Enforcement Trends
Aggressive FCA enforcement against providers submitting false claims.
Use of data analytics and audits to detect overbilling or unnecessary DME.
Enforcement of Anti-Kickback Statute to prevent illegal referral schemes.
Prosecution of both corporate entities and individuals.
Increasing focus on documentation accuracy and patient consent.
Conclusion
DME fraud prosecutions serve as a critical tool to protect healthcare programs and patients from abuse. Courts impose severe penalties, including multi-million-dollar settlements and imprisonment, to deter fraudulent schemes. Accurate documentation, medical necessity, and compliance with anti-kickback laws are crucial for lawful DME provision.
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