DME Fraud Enforcement: Civil Settlements, Criminal Cases and Administrative Action

DME fraud penalties and settlements can involve a civil payment, a criminal case and action against a supplier’s ability to bill Medicare. A supplier employee may recognize the purchased prescription, the changed delivery ticket or the instruction to keep billing long before an enforcement announcement appears.

What Is the Penalty for Medicare Fraud for a Healthcare Company?

A healthcare company can face three times the government’s losses plus a civil penalty for each false claim under the False Claims Act. It can also lose its Medicare billing privileges.

Philips Respironics’ September 2022 settlement totaled $24.75 million, including $22.62 million for the United States. The Justice Department said the whistleblower would receive approximately $4.3 million from that federal settlement amount.

The whistleblower’s complaint alleged that Respironics gave durable medical equipment suppliers prescribing data to induce them to recommend its respiratory products. That data had a practical sales use: identifying physicians to approach for business. The alleged benefit went to the supplier choosing which manufacturer’s equipment to promote. A kickback can sit in a sales tool as readily as in a payment for a prescription.

What Is an Example of DME Fraud?

Rotech Healthcare admitted knowingly billing Medicare for portable oxygen contents that beneficiaries did not use or require, including billing regardless of whether the contents were delivered. Its 2018 settlement was $9,680,000. A former billing-department employee brought the whistleblower case.

Orbit’s Alleged Wheelchair Record Changes

Orbit Medical and Rehab Medical agreed to pay $7.5 million to resolve allegations involving false power-wheelchair documentation. The government alleged that Orbit sales representatives changed prescription dates, altered clinical records, forged physician signatures and added fax stamps to make documents appear to have come from physicians’ offices.

The paperwork allegedly supplied both the medical justification and a false account of where that justification originated. A supplier employee handling the chart could see a physician’s apparent approval while someone in sales knew who had actually produced it.

AZ Diabetic Supply’s Court-Ordered Payment

AZ Diabetic Supply’s case ended with a court order to pay $12,036,554 in False Claims Act damages and penalties. Medicare had paid over $600,000 for braces tied to prescriptions the company bought from marketing companies, paying a fee for each prescription.

The company’s owner separately settled for $10,000, while the company never appeared to answer the claims against it.

Diabetic Shoe Inserts Allegedly Sold as Custom-Fabricated

The product description can carry the false claim, too. Dia-Foot agreed to pay $5,538,338 to settle allegations that it sold diabetic shoe inserts as custom-fabricated when they did not meet Medicare’s standards for that work. For an employee familiar with how the inserts were made, the billed description and the production process were the comparison that mattered.

What a Criminal Case Reveals About the Orders

Criminal evidence can show who bought the patient information, who supplied the signatures and how the supplier obtained its orders. In the 2019 telemedicine and brace indictments, the government alleged that international call centers recruited beneficiaries with free or low-cost braces, paid telemedicine companies for orders and sold those orders to suppliers that billed Medicare. Doctors allegedly prescribed equipment after little or no patient interaction.

The alleged chain made the signed order a product for sale. The supplier bought the documentation it needed to submit the claim, while the patient contact could be almost absent. The alleged scheme spent taxpayers’ money on equipment ordered without regard to what beneficiaries needed.

A later Justice Department account of a New York operator’s criminal case describes evidence presented to the court after the operator pleaded guilty to conspiracy to commit health care fraud. He controlled at least eight durable medical equipment companies in Fort Pierce, Florida. The evidence showed purchases of beneficiaries’ identifying and health information from call centers, followed by payments to telemedicine companies for practitioner signatures regardless of medical need. He also owned a Greenville call center involved in obtaining patient information.

The companies used the signed orders to submit claims to Medicare and cause claims to CHAMPVA. Separately, the operator paid an $850,000 civil settlement resolving allegations of kickbacks and false claims. Whistleblowers had brought that civil case.

Criminal Admissions Beside Civil Settlements

At O’Connor Medical Supply in Iowa, the operator’s guilty plea concerned a false document supplied during a civil False Claims Act investigation. The matter also had a separate civil resolution of nearly $900,000.

The Regency announcement in February 2021 similarly placed a $20.3 million civil settlement beside the owner’s guilty plea to health care fraud conspiracy.

Buying an Existing Supplier’s Billing Privileges

The Operation Gold Rush indictment described in June 2025 alleged a different route into Medicare. The organization allegedly purchased durable medical equipment companies already able to submit claims, installed nominee owners and created corporate records disguising who controlled them. It then allegedly used stolen identities to submit false claims.

For an insider in that business, ownership records and access to the billing system sit beside the patient files. The alleged scheme bought access to Medicare through companies that already had it.

Administrative Action Reaches the Right to Bill

The Centers for Medicare & Medicaid Services can suspend payments and revoke Medicare billing privileges. The HHS Office of Inspector General can exclude a supplier or an individual from federal health care programs. A corporate integrity agreement can impose continuing oversight of the business.

In announcing Arriva Medical’s settlement, the government alleged false claims for deceased beneficiaries and reported that Medicare revoked the company’s supplier number for that conduct. The administrative action reached the company’s ability to keep billing.

The April 2019 brace enforcement announcement described CMS action against 130 durable medical equipment companies. Those companies had submitted over $1.7 billion in claims and received over $900 million. CMS said it suspended payments.

AZ Diabetic Supply’s owner agreed to a three-year voluntary exclusion alongside the civil settlement. Respironics entered a five-year corporate integrity agreement requiring an independent monitor selected by the inspector general. One removed a participant from the programs. The other placed the company’s conduct under continuing scrutiny.

The Records Between the Sales Lead and the Paid Claim

The durable medical equipment business separates work that a paid claim can make look seamless. A marketer captures the lead. A practitioner produces the order. A supplier handles fulfillment and billing. The inspector general’s telemedicine fraud alert describes arrangements involving call centers, staffing companies, practitioners, marketers and brokers, with payments described as reviews, audits, consultations or chart assessments.

That division of work explains why a signature alone tells so little about how an order was produced. The contact with the patient, the clinical assessment and the payment for the order can sit with different businesses. The supplier’s file is where those pieces meet the claim.

A whistleblower’s complaint against Numotion alleged that an internal concern report identified 263 Medicare-paid orders for wheelchairs and parts that remained undelivered in a California warehouse. The complaint then described the broader delivery problem:

The alleged contradiction was physical: Medicare had paid, the claim indicated delivery, and the equipment was still on a shelf. The complaint also alleged that a branch manager falsified a delivery ticket and order notes so an undelivered wheelchair could be billed by month-end. Warehouse staff, billing staff and compliance staff could encounter different pieces of the same problem.

That is the connection we examine with an insider: what happened to the equipment, what the claim said happened, and who supplied the explanation inside the file. Orbit’s alleged fax stamps, Rotech’s admitted oxygen billing and the Numotion delivery allegations each make that connection visible.

Durable Medical Equipment Suppliers in Medicaid Fraud Recoveries

Medicaid Fraud Control Units reported 60 civil settlements and judgments involving suppliers of durable medical equipment, prosthetics, orthotics and supplies, with $24,617,316 in civil recoveries, in fiscal year 2023. The figures appear in the inspector general’s Medicaid Fraud Control Units Fiscal Year 2023 Annual Report, published in 2024. The report found that medical-device manufacturers and durable medical equipment suppliers accounted for more civil settlements and judgments than other provider types.

The civil work reaches both the companies selling the equipment and the suppliers billing for it. Insiders in either part of that chain can hold the explanation for a false claim or an inducement concealed inside an ordinary commercial relationship.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

When You Know How the Claim Was Made

If you know who bought the orders, changed the delivery records or kept the billing running, speak with our whistleblower experts about the decisions behind those claims. We work beside you to build your strongest durable medical equipment whistleblower case and bring in health care fraud whistleblower lawyers who understand supplier billing and referral arrangements. From the first conversation through the case, we stay on your side of the table.