Federal agencies charge 24 in $1.2B Medicare telemedicine fraud scheme

One of the five telemedicine companies involved produced a YouTube video explaining how doctors could make up to $15,000 a month while performing consultations from home, over the phone and Internet. (HHS-OIG)

The U.S. Department of Justice has announced the culmination of a massive investigation into an international network of telemedicine companies, device makers and healthcare providers, claiming they sold medically unnecessary orthotic braces to patients and sent the bills on to Medicare, totaling over $1.2 billion in fraudulent claims.

The scheme of illegal kickbacks and bribes could amount to one of the largest healthcare fraud cases ever seen by the FBI and the Department of Health and Human Services' inspector general’s office, according to the agencies.

Arrests were made Tuesday, and two dozen people have been charged—including the CEOs and executives of five telemedicine companies, the owners of dozens of durable medical equipment manufacturers and three licensed physicians—alongside the execution of over 80 search warrants spanning 17 federal districts, in what was dubbed “Operation Brace Yourself.”

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“These defendants—who range from corporate executives to medical professionals—allegedly participated in an expansive and sophisticated fraud to exploit telemedicine technology meant for patients otherwise unable to access health care,” Brian Benczkowski, assistant attorney general for the DOJ’s criminal division, said in a statement.

“This Department of Justice will not tolerate medical professionals and executives who look to line their pockets by cheating our health care programs,” Benczkowski added.

According to the HHS inspector general, the scheme worked like this: The owners of a call center would air commercials or make telemarketing calls up-selling “free or low-cost” back, shoulder, wrist or knee braces for beneficiaries, paid for by Medicare, to lure in hundreds of thousands of elderly or disabled patients.  

The centers, based in the Philippines and Latin America, would then transfer the Medicare beneficiaries to a telemedicine firm for a doctor’s consultation, while paying the firm and doctors to prescribe medically unnecessary braces.

Next, those prescriptions would be collected and sold directly by the call centers to a range of medical equipment companies—who would then bill Medicare between $500 and $900 for the braces, and kick back almost $300 for each brace sold back up the chain to the other conspirators.

One of the five telemedicine companies involved, AffordADoc—named alongside Video Doctor USA, Web Doctors Plus, Integrated Support Plus and First Care MD—produced a YouTube video explaining how doctors in its network could supplement their income by $15,000 a month while performing consultations from home or over the phone and internet.  

According to the DOJ, doctors prescribed medical devices without any patient interaction, or with only brief telephone conversations—while the proceeds were laundered through an elaborate network of international shell corporations to purchase “exotic automobiles, yachts and luxury real estate” in the U.S. and abroad.

“The breadth of this nationwide conspiracy should be frightening to all who rely on some form of healthcare,” said Don Fort, chief of the IRS’ criminal investigation unit.

“The conspiracy described in this indictment was not perpetrated by one individual. Rather, it details broad corruption, massive amounts of greed, and systemic flaws in our healthcare system that were exploited by the defendants,” Fort said. “We all suffer when schemes like this go undiscovered and I’m proud of the work our agents did in working with our partners to uncover this complex scheme.”

In addition, the Centers for Medicare & Medicaid Services suspended payments to another 130 equipment providers the agency says could prevent billions in additional losses. Those companies had submitted more than $1.7 billion in claims, and were already paid over $900 million.

“The mammoth coordination and cooperation demonstrated among the various offices, districts, and agencies involved in this case leaves no doubt. We will leverage the full weight of our resources to combat fraud and abuse, wherever it is found,” said Chapa Lopez, U.S. attorney for the Middle District of Florida.

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