Feds Break Up $1.2B Orthopedic Medical Brace Scheme
WASHINGTON, DC — Federal authorities said Tuesday they’ve broken up a $1.2 billion health-care fraud scheme peddling orthopedic braces and to hundreds of thousands of senior citizens via foreign call centers. Charges have been filed against 24 people, including executives of telemedicine and durable medical equipment companies and doctors who wrote bogus prescriptions for unnecessary orthopedic braces, the Justice Department said.
Seventeen U.S. attorneys were involved in the crackdown on the fraud scheme, which the Justice Department said was one of the largest in U.S. history. The Centers for Medicare and Medicaid Services’ anti-fraud unit also said Tuesday that it had taken administrative action against 130 durable medical equipment companies that submitted $1.7 billion in claims and were paid more than $900 million.
“The telemedicine we are talking about is basically a tele-scam,” said Gary Cantrell, who oversees fraud investigations for the Department of Health and Human Services inspector general’s office. “We are not talking about the use of advanced technology to provide better access to care.”
Charges are being brought against defendants in California, Florida, New Jersey, Pennsylvania, South Carolina and Texas.
“The breadth of this nationwide conspiracy should be frightening to all who rely on some form of health care,” IRS criminal investigations chief Don Fort said in a statement. “The conspiracy…details broad corruption, massive amounts of greed and systemic flaws in our health care system that were exploited by the defendants.”
Under the scheme, telemarketers reached out to senior citizens with offers for “free” orthopedic braces, and those who seemed interested were patched through to an “international telemarketing network” with call centers in the Philippines and throughout Latin America. After their Medicare coverage was verified, the seniors were transferred to telemedicine companies for consultations with doctors, who then wrote prescriptions.
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Those prescriptions were then sold to medical equipment companies, which would ship the braces to patients and bill Medicare. The medical companies got Medicare payments of $500 to $900 per brace from Medicare, and would pay kickbacks of nearly $300 per brace.
The proceeds of the fraudulent scheme were laundered through international shell corporations and were used to purchase luxury automobiles, yachts and real estate in the United States and abroad, the government said.
The Medicare Fraud Strike Force began investigating the scheme last summer after multiple complaints from senior citizens began pouring into the fraud hotline.
The true extent of the alleged scheme is unknown, and some cases involve gray areas of complex payment policies.
Experts say part of the problem is that Medicare is required to pay medical bills promptly, which means money often goes out before potential frauds get flagged. Investigators call that “pay and chase.”
In recent years, Medicare has tried to adapt techniques used by credit card companies to head off fraud. Law enforcement coordination has grown, with strike forces of federal prosecutors and agents, along with state counterparts, specializing in health care investigations.
The Medicare beneficiaries drawn into the orthopedic braces scam didn’t have to pay anything up front, but Cantrell said they have been harmed as well: A beneficiary’s private information, once in the hands of fraudsters, can be resold for many illegal purposes.
Additionally, if a beneficiary whose information was misused ever does need an orthopedic brace, he or she may encounter waiting periods from Medicare. The program limits how often it pays for certain supplies and equipment.
“It can be very attractive to receive equipment,” Cantrell said. “But after giving out your identifying information, it could be compromised to perpetuate additional fraud. There is no fraud without the ID number of a Medicare beneficiary.”
The Associated Press contributed reporting.