Joint Active Systems: Orthotics Coding, Medicaid Pass-Through Billing and VA Prices

The Joint Active Systems false claims settlement announced in 2020 required the manufacturer to pay $1.5 million over alleged Medicaid pass-through billing, Medicare orthotics misclassification and Department of Veterans Affairs overcharges. The government alleged that a clinic billed for treatment that sales representatives provided, while the manufacturer billed devices as orthotics despite contrary coding guidance. The Veterans Affairs allegation followed the discounts commercial customers allegedly received and the government did not.

Joint Active Systems, known as JAS, makes range-of-motion devices and is based in Effingham, Illinois. In the December 4, 2020 settlement announcement, the Justice Department also reported a separate $90,000 payment agreement with New England Orthotics & Prosthetics, the clinic chain known as NEOPS. JAS supplied the devices. NEOPS allegedly supplied the route into Medicaid programs the manufacturer could not bill itself.

Medicaid Pass-Through Billing Put the Clinic on the Claim

The government alleged that JAS recruited NEOPS to bill Medicaid in Connecticut, Massachusetts and Rhode Island because JAS lacked participation agreements with those programs. The arrangement put the clinic chain between the manufacturer and the government payer, with part of the reimbursement flowing back to JAS.

The Justice Department alleged that NEOPS billed the devices as custom-fabricated orthotics even though they were neither orthotics nor custom-fabricated, and that custom-fabricated devices were not medically necessary.

The claim also told Medicaid who had treated the patient. The government alleged that NEOPS claimed to have provided the treatment while JAS-affiliated sales representatives measured, fitted and delivered the devices. In that account, the representatives lacked the training and certifications required to provide custom-fabricated orthotics under certain state rules.

After Medicaid paid, NEOPS allegedly kept some of the reimbursement and sent a portion to JAS. The government alleged that the clinic often made hundreds of dollars per patient from taxpayer-funded health care programs despite providing no treatment.

For someone inside the business, the connection runs from the manufacturer’s arrangement with the clinic to the patient encounter, the submitted claim and the money sent back. A fitting record describes who saw the patient. A claim describes who told Medicaid it had treated that patient.

That is why the manufacturer’s role matters even when another company’s name appears on the claim. The alleged arrangement began with JAS recruiting the billing provider and ended with JAS receiving part of the payment. Looking only at the clinic’s bill would leave out both ends of the transaction.

Why the Orthotics Classification Mattered

Custom-fabricated orthotics carry a claim about how an item was made for a particular patient. Medicare’s custom-fabrication provisions describe items individually fabricated over a positive model of the patient and requiring education, training and experience to make. The physical work is part of what the category describes.

Off-the-shelf orthotics occupy a different category. The off-the-shelf definition describes items requiring minimal self-adjustment, without expertise in trimming, bending, molding, assembling or customizing them to fit. Calling the item custom-fabricated puts the manufacturing process into the billing description.

The Contractor Coding Guidance Allegation

The JAS settlement included allegations that contractor coding guidance had told the manufacturer its devices did not qualify as orthotics, yet JAS billed Medicare for custom-fabricated orthotics. The government said the devices did not meet Medicare’s definition of an orthotic.

The warning matters because it connects the manufacturer’s billing to information it had already received. According to the Justice Department, the company had guidance from a Medicare contractor and nevertheless billed the devices in the disputed category. For an insider familiar with product coding, the relevant comparison is the device described in that guidance and the device described on the claim.

The Medicaid and Medicare allegations described different routes to payment. NEOPS submitted the Medicaid bills, while the government alleged that JAS itself billed Medicare.

The Veterans Affairs Pricing Allegation

The Veterans Affairs pricing allegation concerned a contract requiring JAS to sell its devices to the Department of Veterans Affairs at a substantially better price than it offered any commercial customer. The government alleged that JAS knowingly failed to give Veterans Affairs discounts it gave commercial buyers.

The Justice Department alleged that JAS charged Veterans Affairs medical centers nationwide 300% more in many instances than the contract required.

This part of the case follows a sales transaction: the commercial customer, the discount offered, the contract’s pricing promise and the Veterans Affairs invoice. A manufacturer employee working with customer prices could recognize the discrepancy without knowing how Medicaid claims were submitted or which orthotics code was used.

Under the alleged arrangement, taxpayers picked up the higher bill while commercial buyers received the discounts.

The Separate North Carolina Medicaid Settlement

On February 1, 2023, the Justice Department announced a separate agreement for JAS to pay $500,000 over North Carolina Medicaid claims for its EZ range-of-motion devices. JAS denied the allegations.

The federal and state governments alleged that JAS could not bill North Carolina Medicaid directly because it did not meet the program’s requirements or lacked the necessary credentials. JAS allegedly arranged for local orthotics and prosthetics providers to bill on its behalf and retain part of the reimbursement.

The governments alleged that JAS directed those providers to bill EZ devices as orthotics using L-codes under the Healthcare Common Procedure Coding System, bypassing medical-necessity reviews or authorization processes that might otherwise have taken place. They said the devices did not qualify as L-code orthotics and were not listed as reimbursable on the state fee schedule. They alleged that JAS continued the L-code billing despite a Centers for Medicare and Medicaid Services coding verification classifying one EZ device as E-code durable medical equipment.

What the Case Shows a Manufacturer Insider

Two former NEOPS employees brought the allegations against JAS and NEOPS through a whistleblower case. The Justice Department announced that they would receive 17% of the recovery. Their jobs were at the clinic chain, yet their case reached the manufacturer too. A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

The JAS allegations show why product knowledge, healthcare billing knowledge and sales knowledge can each matter. Someone who knows the device can explain its fabrication and classification. Someone who knows the patient encounters can explain who measured, fitted and delivered it. Someone who knows commercial discounts can explain how a government customer’s price compared with the contract’s promise.

Our work with a manufacturer insider connects those observations to the particular claims or sales they concern.

You Know the Device and the Bill

If you know how a device was coded, who did the fitting or which customers received the discounts, talk with our whistleblower experts about what you saw. We work alongside you to build the manufacturer case and bring in medical device fraud whistleblower lawyers with the billing or government-contract expertise it needs. From your first account through the pursuit of a recovery, we stay on your side of the table.