Industry knew feds would bust 'obvious' fraud

WASHINGTON - HME industry stakeholders aren't surprised by a $1.2 billion fraud scheme involving medically unnecessary braces and they're glad to see “bad actors” punished.

The feds last week charged 24 defendants with an alleged scheme involving illegal kickbacks and bribes by DME companies in exchange for referrals of Medicare beneficiaries by medical professionals working with fraudulent telemedicine companies for back, shoulder, wrist and knee braces.

“Stakeholders have been warning that this is a bad thing and not to do it,” said Jeff Baird, chairman of the Health Care Group at Brown & Fortunato. “There's no gray area here. The DME pays a lead generation company, the lead generation company pays a telemedicine company, and the telemedicine company pays a doctor who writes the order that goes back to the DME. It's a clear kickback, black and white.”

In late March, before the indictments, the American Orthotic & Prosthetic Association even released a statement saying it “strongly opposed” lead-generation marketing for orthoses, a business practice that it says is responsible for an increase in fraud and abuse.

If stakeholders are surprised, it's that it took so long.

“The most flagrantly obvious fraud scheme was thrust upon America 24/7 and it took years for the (government) to catch the offenders?” said Craig Rae, owner of Penrod Medical Equipment in Salisbury, N.C. “They badgered millions of Americans with telemarketing calls, trying to qualify people for 'free' back and knee braces. How this could last a month without these bad actors being investigated defies the imagination.”

As the details of “Operation Brace Yourself” unfold, stakeholders worry about the industry being associated with the fraud scheme. AAHomecare's Tom Ryan said these “bad actors” shouldn't be associated with “the overwhelming majority of DME suppliers who furnish essential equipment and services to improve the lives of patients and their caregivers.”

“Our industry believes in the long established model where physicians provide referrals to DME providers—not one where lead generation companies connect patients to physicians,” said Ryan, president and CEO, in a statement.

Stakeholders also worry about possible repercussions. Already, CMS's Center for Program Integrity has subsequently taken adverse administrative action against 130 DME companies that submitted more than $1.7 billion in claims and were paid more than $900 million. The UPIC will likely instruct the DME MACs to suspend payments to these companies for six months, while it conducts an audit, Baird says.

“When you have no income for six months, that's usually the kiss of death,” he said.

Providers, at large, worry that additional requirements are coming in the wake of this, one of the largest healthcare fraud schemes.

“Legitimate DME suppliers will no doubt pay the price with increased administrative costs, as we do now with burdensome overregulation,” Rae said.