In The News

Diabetic Medical Equipment Companies Agree to Pay $12.2 Million to Settle False Claims Act Allegations

Two medical companies made some very expensive cold calls as the government announced last week that U.S. Healthcare Supply LLC and Oxford Diabetic Supply Inc. and the two owners/presidents of those companies agreed to pay the government more than $12.2 million to settle allegations that they violated the False Claims Act. The companies and their owner/presidents are accused of creating a fictitious entity to make cold calls to Medicare beneficiaries in order to sell them durable medical equipment. U.S. Healthcare Supply LLC has agreed to pay $5 million and its owner/president, John P. Letko, has agreed to pay more than $1 million. Oxford Diabetic Supply Inc. has agreed to pay $6 million plus interest.

“We will continue to hold health care providers accountable for attempting to circumvent Medicare statutes and regulations that help prevent the submission of claims for medically unnecessary services and supplies,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “Arrangements which clearly disregard program requirements in order to enhance the financial interests of health care providers will not be tolerated.”

The government specifically alleges that the companies named in the settlement set up and controlled an entity they named Diabetic Experts Inc., and used said company to make unsolicited calls to Medical beneficiaries with the intent of selling them durable medical equipment. The companies are then said to have submitted clams to Medicare for durable equipment they sold based on these cold calls. Such activity is a violation of the Medicare Anti-Solicitation Statute [42 U.S.C. § 1395m(a)(17)]. The statute in part prohibits suppliers from contacting Medicare beneficiaries by telephone regarding covered items unless:

  • Beneficiary has given supplier written permission
  • Supplier has previously provided the covered item to the beneficiary and contact relates to such covered item
  • Supplier has furnished a covered item to beneficiary in last 15 months, and then contact may relate to any covered item.

The settlement is an example of the government’s emphasis on fighting health care fraud which has been accomplished, in part, by its Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009. Since then several agencies along with the Attorney General and Secretary of Health and Human services, have joined forces in an effort to reduce and prevent Medicare and Medicaid fraud. As an example of its success, the Justice Department has recovered more than $30.5 billion through the False Claims Acts. A valuable tool that has been used in this effort is the Whistleblower (or qui tam) provisions of this act. It allows private citizens to sue on behalf of the government and to recover a portion of any recovery. If you know of fraud that is or has been committed against the government, you are encouraged to contact a qui tam law firm. A qui tam attorney will help you understand your rights.