NAAOP Webcast: DOJ Dismantles DME Healthcare Fraud Scheme

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The National Association for the Advancement of Orthotics & Prosthetics (NAAOP) has released its latest webcast in which general counsel Peter Thomas, JD, comments on what the U.S. Department of Justice (DOJ) called "one of the largest healthcare fraud schemes in U.S. history," which occurred in the orthotics benefit of the Medicare program and was announced on April 9. The DOJ indicted 24 defendants and suspended Medicare payment privileges for 130 durable medical equipment (DME) companies for fraudulently billing $1.7 billion in Medicare orthotics.

The joint investigation involved the DOJ, the U.S. Department of Health and Human Services (HHS) Office of Inspector General, the Federal Bureau of Investigation, the Centers for Medicare & Medicaid Services (CMS) Center for Program Integrity, and the Internal Revenue Service. The alleged scheme involved the payment of illegal kickbacks and bribes by DME companies in exchange for the referral of Medicare beneficiaries by medical professionals working with fraudulent telemedicine companies for back, shoulder, wrist, and knee braces that were medically unnecessary, according to the DOJ statement. The defendants allegedly paid doctors to prescribe the orthoses, either without any patient interaction or with only a brief telephone conversation with patients they had never met, which were then shipped to the patient directly.

Thomas said that while this type of fraud potentially tarnishes the reputation of the O&P profession, NAAOP and the O&P Alliance partners have been warning CMS, Congress, Medicare Payment Advisory Commission (MedPAC), and anyone else who would listen of these types of arrangements for months.

NAAOP will continue to press CMS to move forward with implementing the Benefits Improvement and Protection Act of 2000 (BIPA) Section 427 to link Medicare payments for custom O&P care to accreditation and licensure status, said Thomas, which could help prevent similar incidents.

In addition, Thomas said the new version of the Medicare O&P Improvement Act, which will likely be called the Medicare O&P Patient-Centered Care Act upon introduction in the 116th Congress, is likely to directly prohibit the drop shipment of orthoses and prostheses to beneficiaries, with certain limited exceptions. This proposal to prohibit the shipment of orthoses and prostheses is expected to save the government money, which could be used to offset the cost of the proposal to restore Congressional intent by limiting the range of off-the-shelf orthotics subject to competitive bidding, said Thomas.

The latest webcast is posted on the NAAOP website and on NAAOP's YouTube channel as well as on It is also shared with members via email.