Durable Medical Equipment Manufacturer and Orthotics Provider Agree to Pay $1.59 Million to Resolve False Claims Act Allegations
BOSTON – National durable medical equipment manufacturer Joint Active Systems, Inc. (JAS) has agreed to pay $1.5 million, and orthotics and prosthetics clinic chain New England Orthotics & Prosthetics, LLP (NEOPS) has agreed to pay $90,000, to resolve allegations that they violated the False Claims Act by improperly charging the government for custom fabricated orthotics. NEOPS, which has locations throughout New England and New York, filed for bankruptcy in 2017, and is now under new ownership.
“Joint Active Systems and New England Orthotics & Prosthetics engaged in multiple calculated schemes to enrich themselves by submitting false claims to government healthcare programs and overcharging the government for their devices,” said United States Attorney Andrew E. Lelling. “Today’s result is another example of this office’s commitment to take action against health care providers that defraud the government and American taxpayers.”
“Submitting claims to government health insurance programs for unnecessary devices drains resources from legitimate patient care,” said Phillip Coyne, Special Agent in Charge, Office of Inspector General of the U.S. Department of Health and Human Services. “We will continue to hold those accountable that seek to enrich themselves at the expense of these taxpayer-funded programs.”
“It is vitally important that we protect our government funded health care programs against fraud of any kind. Today’s settlement is the result of years of hard work by the FBI and our partners to make sure these companies are held accountable for trying to bilk taxpayers for custom fabricated orthotics that were not medically necessary, and not custom made,” said Joseph R. Bonavolonta, Special Agent in Charge of the FBI Boston Division. “The FBI will continue to aggressively pursue these cases to protect these important programs for those who really need them.”
The government contends that JAS recruited NEOPS to improperly bill state Medicaid programs in Connecticut, Massachusetts and Rhode Island for JAS devices when JAS did not have participation agreements with those programs. The federal government jointly finances those Medicaid programs. Under the arrangement, NEOPS billed those programs for JAS devices as custom-fabricated orthotics when the devices were neither orthotics nor custom-fabricated, and when custom-fabricated devices were not medically necessary. As part of the arrangement, NEOPS claimed to the Medicaid programs that it treated the patients receiving the JAS devices when, in fact, JAS-affiliated sales representatives measured, fitted and delivered the devices to the patients. The JAS-affiliated sales representatives lacked the training and certifications necessary to provide custom-fabricated orthotics under certain state regulations. After submitting false claims for the devices, NEOPS received reimbursement from the Massachusetts, Connecticut and Rhode Island Medicaid programs, and remitted a portion of that reimbursement back to JAS. Through this arrangement, NEOPS often made hundreds of dollars per patient, despite providing no treatment.
The government also contends that JAS billed the Medicare program for custom-fabricated orthotics when the devices which JAS billed to Medicare did not qualify as orthotics. JAS did this despite having received coding guidance from a Medicare contractor that the devices did not meet Medicare’s definition of “orthotic.”
Lastly, the government contends that JAS overcharged the Department of Veterans Affairs (VA) for its devices under the terms of a contract that it entered into with the VA. The contract required JAS to sell its devices to the VA at a substantially better price than JAS offered to any commercial customer. Despite the contract’s terms, JAS knowingly failed to provide the VA with discounts that JAS provided to other commercial customers. As a result, JAS charged VA medical centers nationwide more for its devices—300% more in many instances—than the contract required.
“Companies who overcharge VA despite their contractual obligation to the contrary undermine VA’s procurement processes,” said VA OIG Special Agent in Charge Christopher F. Algieri, Northeast Field Office. “This settlement underscores VA Office of Inspector General’s commitment to working with our law enforcement partners to safeguard the integrity of VA’s programs and operations.”
“Ensuring the integrity of TRICARE, the healthcare system for military members and their families, is a top priority for the Defense Criminal Investigative Service (DCIS),” stated Special Agent in Charge Patrick J. Hegarty, DCIS Northeast Field Office. “Today's settlement is the result of our commitment to work with the United States Attorney's Office and our law enforcement partners to investigate the submission of false claims.”
Two former NEOPS employees brought allegations against JAS and NEOPS as part of a whistleblower lawsuit. Under the qui tam provisions of the False Claims Act, private individuals, known as relators, can sue on the government’s behalf for false claims and share in any recovery. In connection with today’s announced settlement, the relators will receive 17 percent of the recovery.
U.S. Attorney Lelling, HHS OIG SAC Coyne, FBI Boston SAC Bonavolonta, VA OIG SAC Algieri and DCIS SAC Hegarty made the announcement today. This matter was handled by Assistant U.S. Attorneys Brian M. LaMacchia and Evan Panich of Lelling’s Affirmative Civil Enforcement Unit.