DME Kickbacks Disguised as Marketing Fees: What the Supplier Actually Bought

DME kickbacks disguised as marketing fees hide payments for referrals or equipment orders behind an ordinary service description. The agreement describes a business service. The money follows a patient, a prescription or a brace. If you handle the contracts, invoices or order ledger, you may know what the supplier was actually buying, who supplied it and how it became a Medicare claim.

When Marketing Produces the Medical Order

The order itself can be the product a telemedicine company sells. The Department of Health and Human Services’ Office of Inspector General, in its July 2022 telemedicine fraud alert, describes companies selling prescriptions generated by practitioners to other businesses. It also describes clinician compensation presented as payment for a review, audit, consultation or assessment of medical charts. The alert describes compensation tied to the volume of federally reimbursable items or services ordered or prescribed.

That structure separates the person recruiting the patient, the person signing the order and the company submitting the claim. The durable medical equipment supplier may receive a completed prescription from a middleman. The clinician may receive payment through a staffing company.

The Justice Department’s March 2024 settlement announcement involving Jackson & Coker LocumTenens describes that separation. Both the physician and the staffing company settled. The government alleged that Nationwide Health Advocates used telemarketers to contact Medicare beneficiaries about equipment or laboratory tests at no cost. Information from those calls became physician orders and supporting documents that made it appear a physician was treating the beneficiary.

Nationwide allegedly sent the documents to a physician retained through the healthcare staffing company. He signed electronically, and the orders were billed to Medicare. The government alleged that Nationwide paid Jackson & Coker, which paid the physician for each order reviewed, nearly all of which he approved. The government said he never spoke to the beneficiaries or treated them. The clinical paperwork began with a sales call.

What the Contract Describes and the Payment Buys

Contracts can conceal the relationship behind a commission. In its complaint against Vision Quest Industries, the government alleged that the brace manufacturer and Results intentionally misstated the intermediary’s relationship with Osteo Relief clinics. They allegedly put an exclusive arrangement into separate documents to make it appear less like a kickback.

The complaint also alleged that the intermediary barred direct communications between the manufacturer and the clinics to keep the commissions hidden. That restriction reached the product itself: Vision Quest allegedly accepted poorer communication about custom braces, including the photographs used to manufacture them, to preserve the sales arrangement.

Invoices can supply another layer of concealment. In its Medicaid Fraud Control Units Fiscal Year 2014 Annual Report, published in April 2015, the Inspector General’s office described a West Virginia civil settlement involving back braces. The supplier allegedly billed Medicare and Medicaid for braces another company provided, kept half the reimbursement and passed the rest to that company, using false invoices to support the billing.

Who furnished the equipment, who billed the program and who kept the payment can be different companies.

A Lead, a Prescription and a Review Have Different Prices

A patient lead, a completed prescription and a clinician’s review are separate purchases. The documents in a kickback case can price each one differently. Calling them all marketing costs loses the transaction that matters.

AZ Diabetic Supply Bought Completed Prescriptions

The government’s complaint against AZ Diabetic Supply alleged that RealTime sold qualified leads to LPI for $150 each. LPI paid telemedicine doctors to turn those leads into prescriptions, then sold the completed prescriptions and the beneficiaries’ personal and medical information to suppliers. The complaint describes AZ Diabetic Supply’s purchase this way:

The lead had already passed through a paid clinical step before the supplier bought it.

In a separate arrangement described in the same complaint, AZ Diabetic Supply allegedly paid RealTime more for prescriptions covering more expensive braces. The government alleged that the supplier understood it was buying prescriptions, rather than just contact information. Those prescriptions arrived through Dropbox or other cloud services from middlemen instead of directly from treating providers.

The arrangement also had a replacement mechanism. According to the complaint, when Medicare denied a purchased prescription because the beneficiary had already received the same or similar equipment, the supplier requested and received a substitute prescription. The alleged commercial promise followed reimbursement all the way to the denied claim.

The civil case resulted in a judgment ordering AZ Diabetic Supply to pay $12,036,554 in damages and penalties.

A Clinician’s Review Was a Separate Payment

In an Iowa nurse practitioner’s civil case announced in April 2024, the government said she received $20 per patient reviewed and spent as little as nine seconds reviewing patient records. That was a payment to the clinician. The prescription purchases in the AZ Diabetic Supply complaint were payments by the supplier to middlemen.

For someone processing payments, the useful detail is the event that released the money: a patient reviewed, a prescription delivered or a brace purchased. That event connects an invoice to the order business.

DME Commission Based on Braces Per Medicare Beneficiary

The Vision Quest allegations tied commissions to each brace a clinic purchased. The government alleged that Vision Quest paid Results commissions of 20% to 35% on every brace, while the intermediary pressed clinics to provide braces to more patients, including braces for both knees.

Vision Quest later agreed to pay $2,250,000 to resolve allegations that its kickbacks caused the clinics to bill Medicare for knee braces.

The Telemedicine Revenue That Came Through Other Companies

Concealed payment routes can make an order business look like a patient-funded telemedicine service. In the guilty plea announced in September 2019, the owner of Video Doctor USA and Telemed Health Group, which operated as AffordADoc, admitted receiving kickbacks in exchange for arranging medically unnecessary brace orders.

According to the Justice Department’s account of his plea, international call centers recruited the beneficiaries, and the network paid healthcare providers to order braces. Many orders followed only a short telephone call with someone who had no prior doctor-patient relationship with the beneficiary. Suppliers used the orders to support more than $424 million in false Medicare claims.

The executive admitted routing kickbacks indirectly through companies and bank accounts opened in other names, in the United States and abroad. One route ran from PCS CC LLC in the United States through Droneza Consulting in the Dominican Republic and back to AffordADoc in the United States. The route concealed payments from brace suppliers for arranging the doctors’ orders.

He also admitted that the network falsely told investors its revenue came from beneficiaries paying for memberships and telemedicine consultations. The money actually came from kickbacks for brace orders.

The Order Can Look Complete While the Encounter Is Missing

A real clinician’s signature can sit on a form that falsely describes patient care. In a civil complaint against an Illinois physician, the government alleged that orders came prefilled from telemarketing calls. They falsely stated that the physician had evaluated the patient, discussed orthotics and instructed the patient about follow-up care.

In the Iowa nurse practitioner’s case, the government alleged that patients did not know her and had not needed or requested the braces. One prescription was for a left knee brace for a patient whose left leg had been amputated years earlier. The signed form and the person described by it told different stories.

Free Services Can Be the Referral Payment

A manufacturer can supply the value through services or financing. ResMed agreed to pay more than $37.5 million in January 2020 to resolve allegations involving benefits to durable medical equipment suppliers, sleep labs and other health care providers.

The government alleged that ResMed gave suppliers free call-center and patient-outreach services that helped them order resupplies for sleep-apnea patients. It also alleged free or below-cost masks and diagnostic machines for sleep labs, interest-free financing for equipment purchases and free home sleep-testing devices for physicians.

The alleged referral payment was a service the durable medical equipment supplier would otherwise have to arrange: patient outreach. A payment for referrals can arrive as something the recipient gets for free.

What Are Some Red Flags for Medicare Fraud?

Marketing fee arrangements in durable medical equipment can reveal a payment tied to the order: a service fee calculated by prescriptions, a clinician paid to approve marketer-created forms, or a supplier receiving completed prescriptions from a middleman. Our whistleblower experts connect the contract, payment schedule, call records and clinical documentation to build the case.

Someone handling vendor payments may know what caused a fee to become payable. Someone reviewing orders may know who supplied the form and whether the patient encounter it describes happened. Shipment records, delivery records and claims show what followed. Your knowledge of the business can explain the connection between those records.

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

You Know What the Fee Bought

If the marketing agreement and the payments tell different stories, speak to our whistleblower experts about what the fee really bought. We build your strongest durable medical equipment whistleblower case around your knowledge of the order business and bring in durable medical equipment fraud whistleblower lawyers who understand referral payments and Medicare claims. We stay beside you through the case, connecting what you saw inside the business to the decisions that put those claims into the system.