Dynasplint: Nursing Facility Residents Represented as Living at Home

In the Dynasplint fraud case, the splint supplier and its founder and president agreed to pay approximately $10.3 million to resolve allegations that they sought separate Medicare payments by representing nursing home residents as living at home or elsewhere. The government said the splints already belonged in the facilities’ bundled payments. A former sales executive’s complaint described how the alleged scheme reached into ordinary work: where representatives fitted the splints, who wrote the medical-need forms, and what location appeared on the bill.

The Department of Justice announced the settlement with Maryland-based Dynasplint Systems Inc. on December 18, 2015. The former sales executive brought the case under the False Claims Act’s qui tam provisions, and the government joined it.

What the Dynasplint Fraud Case Alleged

The Dynasplint fraud case alleged a change in the patient’s location on paper. The complaint traced that change to a specific field on the supplier’s claim and to instructions given to its sales representatives.

The whistleblower’s complaint identified the place-of-service field on the HCFA Form 1500, specifically Question 24B. It alleged that Dynasplint coded the location as a custodial-care facility instead of a skilled nursing facility. That change allegedly allowed Dynasplint to bill Medicare Part B directly for orthotics supplied to patients in facilities being reimbursed under Medicare Part A or Medicaid.

The complaint described a regional manager’s instruction about where the sales executive should fit the splints:

The patient never left the nursing facility. The alleged workaround was to perform the fitting in a different room and treat that as a reason to bill a different way.

Sales Representatives Wrote the Medical-Need Forms

The complaint also alleged that Dynasplint managers and officers instructed sales representatives to fill out the Certificate of Medical Need forms instead of having physicians complete them. It described what that put in the sales representative’s hands:

Those forms allegedly generated the Medicare Part B bills. The sales instruction therefore reached both the location represented to Medicare and the diagnosis used to support reimbursement.

What Evidence Is Needed to Prove Fraud?

For the Dynasplint allegations, the evidence connects the patient’s actual setting, the medical-need form, the location on the claim and the payment sought. The complaint gives that connection a concrete starting point: the whistleblower alleged having seen patient Explanation of Benefit forms showing splints dispensed at custodial-care facilities when the patients were actually in skilled nursing facilities.

That observation ties the alleged location change to billing, beyond what someone said in a sales meeting. The medical-need form addresses who supplied the diagnosis and who signed it. The place-of-service field addresses what setting the supplier represented. The benefit statement shows how the splint was billed.

We examine those connections alongside the facility’s payment records and its arrangement with the supplier. The question is how a product included in the facility’s payment became a separate claim, and who directed that treatment. A sales employee may know the instructions and the fitting location. Someone handling facility accounts may know whether the supplier charged the nursing home. Those perspectives meet at the same bill.

Why the Skilled Nursing Facility Bundle Mattered

Skilled nursing facility consolidated billing makes the facility responsible for paying outside suppliers for services included in its Medicare Part A payment. The bundled rate covers room, board and medical services. Under the Medicare claims manual, Medicare pays the facility, and the facility’s contract determines payment to the supplier.

Medicare’s consolidated-billing rules bar a separate Medicare payment to an outside provider for a service included in the bundle. The payment question follows the resident’s status and the service, not simply the room where someone delivers it.

That explains the financial incentive alleged in the complaint. The whistleblower said direct Part B billing let nursing facilities avoid purchasing orthotics that they were supposed to provide within the daily rate. The supplier could seek payment from Medicare while the facility kept the cost out of its own budget. Taxpayers would bear a separate charge for something the facility’s payment already covered.

Medicare Suspended Payments Before the Settlement

The Centers for Medicare & Medicaid Services suspended payments to Dynasplint in August 2013 based on credible allegations of fraud. As part of the later settlement, the company and its president agreed to give up approximately $8.5 million held under that suspension.

The Justice Department also announced that the former sales executive would receive at least $1.98 million from the settlement. The whistleblower’s account connected sales instructions and patient fittings to the information submitted for payment.

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

The Pattern in Other Nursing Facility Supplier Cases

Other health care cases show why the supplier’s bill and the facility’s records need to be read together. The alleged mismatch can concern the patient’s location, the equipment delivered or which payer bears the cost.

In the Agility Health settlement, the government addressed allegations of improper therapy billing. The agreement also covered a disclosure of patient information to an outside durable medical equipment vendor that allegedly billed for unnecessary equipment, some of which patients never received.

Kan-Di-Ki, doing business as Diagnostic Laboratories and Radiology, allegedly gave nursing facilities below-cost rates for Part A business in exchange for Medicare Part B and Medi-Cal referrals. The alleged bargain made services cheap for the facility while sending separately reimbursed business to the supplier. The split between the facility’s budget and the supplier’s direct claims was the incentive.

The Supportive Care settlement addressed allegations that behavioral health companies billed telehealth facility fees belonging to nursing facilities and claimed psychological services for residents who were actually hospitalized. As in Dynasplint, the resident’s real location mattered to the supplier’s claim. Knowing where the patient was can expose a billing story that looks plausible on a form.

You Know Where the Patient Was

If you know the fitting instructions, the medical-need forms or the location used on a supplier’s Medicare claims, talk with our whistleblower experts about what you saw. We build your strongest Medicare whistleblower case around that inside knowledge, bring in healthcare whistleblower lawyers who understand skilled nursing facility and supplier billing, and stay beside you throughout the case.