DME Medicare Fraud: Combating Durable Medical Equipment Fraud With the False Claims Act

Fraud in durable medical equipment (DME) supply has been identified by CMS and the Department of Justice as a pervasive and rapidly growing problem. According to a 2005 report by the Government Accountability Office, fraudulent payments accounted for over $900 million of the $8.8 billion spent by the United States on durable medical devices in 2004. Medicare and Medicaid cover at least part of the cost of medically necessary equipment. In order to qualify for Medicare reimbursement a patient must have a physician-signed Certificate of Medical Necessity and must meet any applicable Medicare clinical guidelines for medical necessity of certain equipment (such as home oxygen or insulin pumps).

Many DME suppliers act merely as "middle-men," purchasing equipment from DME manufacturers, shipping it to patients, and billing insurance, including Medicare and Medicaid. As such, regulation is difficult and patients are at risk of fraud. Common fraudulent schemes developed and perpetrated by DME fraudsters, and identified and prosecuted by the DOJ and qui tam whistleblowers, include:

(a) shipping DME to patients prior to obtaining a physician's order, a Certificate of Medical Necessity, or a patient Assignment of Benefits;

(b) billing Medicare for duplicate orders of DME, or deliberately "overshipping" DME that is never ordered and exceeds utilization guidelines and lifespan of the DME;

(c) "unbundling" items of DME purchased from manufacturers and billing the United States multiple times for the component parts;

(d) "upcoding" DME: billing the United States for more expensive items than those actually shipped;

(e) failing to credit Medicare for DME that is returned by the patient;

(f) misrepresenting the payment obligations of patients for DME or waiving co-payments or deductibles owed by patients;

Such fraudulent schemes are on the rise throughout the country and have even become emerging markets for organized crime and gangs. In order to combat criminal entrepreneurs from abusing the system, the Inspector General for the Department of Health and Human Services has teamed with the United States Attorney General to create task forces, dubbed HEAT teams (Health Care Fraud Prevention and Enforcement Action Team).

The most damaging DME frauds to our nation's healthcare system, however, continue to be perpetrated by larger, seemingly respectable companies. Veiled by corporate structure, such companies often affect a large geographic patient population, yet their false claims to Medicare and Medicaid can be even more difficult to detect than the smaller, blatantly criminal street-level operations. Moreover, it can be extremely difficult to prove that such companies and the executives that run them have the criminal intent to defraud the Medicare and Medicaid systems. Therefore, civil statutory tools, such as the federal False Claims Act are better equipped to combat such large-scale corporate DME false billing schemes. More importantly, the False Claims Act contains a qui tam (or whistleblower) provision that encourages insiders to report the fraud.

Under the federal and some state false claims acts, whistleblowers can file suit against fraudulent DME companies under seal and may share in as much as 25% (and in some circumstances 30%) of the award. Blowing the whistle on corporate fraud takes courage, however, and the law rewards that courage with certain protections. The False Claims Act provides for a whistleblower's case to be filed under seal and for the identity of the whistleblower to be protected during the course of the government's investigation.

Further, federal laws protect against retaliation by mandating the reinstatement of wrongfully fired employees at the same seniority level, and an award of double back pay, interest, and attorneys' fees. More than $22 billion of taxpayer funds have been recovered under the False Claims Act over the past two decades. Despite all of the efforts and success by government and private attorneys policing the Medicare and Medicaid programs under the False Claims Act, the only way that such fraud can be fought effectively is for people with knowledge to blow the whistle.

? 2011 James F. Barger, Jr.

Jim Barger, Jr. is a nationally recognized trial lawyer who handles complex federal litigation, particularly qui tam cases under the False Claims Act. Jim achieved his first seven-figure civil result within two years of practice and his first eight-figure civil result within five years of practice. One of the most often cited legal scholars on qui tam and False Claims Act litigation, Jim's writing in some cases has actually shaped the law itself. He has been cited by state legislators in adopting state False Claims Acts, by other attorneys in court pleadings litigating False Claims Act cases, and by scholars in legal treatises and law reviews such as Alabama Law Review, Boston University Law Review, Cardozo Law Review, Columbia Law Review, and others. In 2009, Jim Barger represented nurse whistleblower Nancy Romeo in the largest Medicare Hospice case in U.S. history resulting in a record return of nearly $25 million.

Frohsin & Barger, LLC, One Highland Place, 2151 Highland Avenue, Suite 310, Birmingham, Alabama 35205
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This article is not intended to be legal advice. ? 2010 James F. Barger, Jr.