Durable Medical Equipment Fraud in VA Purchasing: The Discounts Went to Other Customers

VA medical equipment contract overcharging can hide in the discounts a supplier gives commercial customers but withholds from the government. The contract promises the Department of Veterans Affairs a better price, while the supplier’s commercial sales records show discounts that never reach the VA invoice. That was the government’s allegation against Joint Active Systems. If you work in pricing, sales, contracting or accounts receivable, you may know both sides of that transaction: what the company promised VA and what it actually charged.

What the Contract and Supplier Records Show

A VA purchasing case connects the supplier’s promise to the government’s bill. The contract identifies the price or discount obligation. Commercial sales records show the deals other customers received. VA invoices show whether the government received the price it was owed.

In its Joint Active Systems settlement announcement, the Justice Department described a contract requiring the manufacturer to sell devices to VA at a substantially better price than it offered any commercial customer. That makes the commercial discount history part of the VA pricing story. The government alleged that the company knew it was withholding discounts that the contract required.

We trace the connection from a salesperson’s discounted quote through a pricing approval to the invoice sent to a VA medical center, using the contract and purchase order. We match each price to its product, customer and date, then apply the comparison the contract calls for.

The internal decision matters too. Who approved the commercial discount? What did the team responsible for VA pricing know about it? Was the government’s price changed? Those questions connect a price difference to the people inside the business who understood the contract. A spreadsheet showing commercial discounts can explain something the VA invoice, standing alone, never would.

Joint Active Systems and the Discounts VA Did Not Receive

Commercial customer discounts not passed through under a DME VA contract were central to the government’s allegations against Joint Active Systems. In December 2020, the national durable medical equipment manufacturer agreed to pay $1.5 million to resolve False Claims Act allegations involving VA purchasing and Medicare and Medicaid billing.

The government alleged that Joint Active Systems charged Department of Veterans Affairs medical centers nationwide 300% more than the contract required in many instances. The alleged failure was specific: the manufacturer gave discounts to commercial customers and knowingly failed to give VA the benefit its agreement required. Taxpayers funding veterans’ health care paid the higher bills while commercial buyers got the discounts, according to the government’s account.

The same announcement described separate billing allegations involving New England Orthotics & Prosthetics, which agreed to pay $90,000. The government alleged that the clinic chain billed Medicaid for the manufacturer’s devices as custom-fabricated orthotics even though they were neither orthotics nor custom-fabricated. Sales representatives affiliated with the manufacturer allegedly measured, fitted and delivered the devices while the clinic chain claimed it had treated the patients.

The VA allegation turned on a different representation: the manufacturer’s contract price. That distinction matters to the employee holding the discount file. A pricing employee can see the commercial deal and the government’s bill even when the patient records sit elsewhere. The VA claim in this resolution followed what the company charged its customers and what it had promised the government.

Johnson & Johnson Medical and the Price Given to Negotiators

Inaccurate commercial-pricing disclosures can distort the deal before the first invoice. Johnson & Johnson Medical agreed to pay $3.9 million in a September 2001 civil settlement over allegations that it gave VA negotiators inaccurate pricing information for medical supplies, including catheters.

The company disclosed that its contracting personnel had failed to provide accurate information about its commercial pricing practices. The Department of Veterans Affairs Office of Inspector General investigated and confirmed that the government had been overcharged.

This gives the pricing employee another part of the transaction to recognize. Joint Active Systems concerned discounts allegedly withheld under a contract. The Johnson & Johnson Medical matter concerned the commercial-pricing information given to the people negotiating one. The sales records and the government’s negotiating file can tell different stories about the same supplier’s prices.

We examine what the company represented when it obtained the contract alongside what its commercial business was actually doing. An invoice comparison reaches further when the underlying pricing disclosure is part of it.

Handicare and the Parts Installed Above the Patient

A VA equipment contract can also turn on what the supplier installed. Handicare USA, doing business as Prism Medical Services, agreed to an $800,000 settlement announced in December 2020 over alleged violations involving ceiling-mounted patient lifts in VA hospitals.

According to the Justice Department’s announcement, a whistleblower’s tip led a VA inspector to examine lift systems at several hospitals. The government alleged that Handicare used inferior, cheaper parts made in China for the mounting systems securing the lifts to the ceilings. The contract issue concerned country-of-origin requirements under the Trade Agreements Act.

The part that mattered was holding the lift overhead. The installation itself gave the inspector something to compare with the supplier’s contractual obligations. For an employee who knows the purchasing or installation side, the component order and the installed part show what was bought and what was fitted above the patient.

This is why we connect the purchasing file to the actual equipment. The contract describes what VA agreed to buy. The supplier’s sourcing and installation records can show what it delivered.

VA Purchasing and Medicare Follow Different Money

VA procurement concerns what the government buys under a contract. A supplier’s billing to a health plan raises different questions from its promise to sell VA a device at a specified price.

The distinction appears inside the Joint Active Systems resolution itself. Alongside the VA contract allegation, the government alleged that the manufacturer billed Medicare for devices as custom-fabricated orthotics despite coding guidance saying they did not qualify as orthotics. The same manufacturer faced allegations about the device’s billing classification and its contract price. Each allegation depended on a different representation.

The Insider Who Knows the Customer Account

VA business can be a substantial part of a durable medical equipment supplier’s operations. Rotech disclosed in its September 2021 securities filing that VA contracts generated approximately 12.4% of its 2020 revenue across seven contracts.

For the employee managing a VA customer account, the pricing history reaches across the orders placed under that contract. We connect your knowledge of that relationship to the particular representation, payment and decision inside the supplier. Contract managers, commercial sales staff and billing employees may see different parts of it. We work with you to establish how those parts fit together.

Two former employees of the New England Orthotics & Prosthetics clinic chain brought the allegations behind its resolution with Joint Active Systems. The Justice Department announced that they would receive 17% of the recovery. A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

When You Know Which Discounts VA Missed

If you know why commercial customers received discounts that VA was owed, speak with our whistleblower experts about the pricing decisions. We work beside you to turn the contract, the actual sales and the decisions behind the bills into a VA purchasing whistleblower case. We bring in government procurement fraud whistleblower lawyers who understand medical-equipment pricing and stay with you through the case.