April 30, 2021

For the past two years, telemedicine companies, durable medical equipment suppliers, pharmacies, and individuals and entities that market to such entities have been at the center of DOJ gunsights. In 2019, the Department announced Operation Brace Yourself, an operation that targeted an international fraud ring that purportedly bilked Medicare out of more than $1 billion for medically unnecessary devices. In 2020, the Department announced another series of telemedicine fraud prosecutions allegedly responsible for more than $1.5 billion in fraudulent billings to Medicare.  And in a sign that more is to come in this area, the Department announced last week another major telemedicine prosecution.  

On April 22, the Department’s Fraud Section, working jointly with the U.S. Attorney’s Office for the District of New Jersey, charged the owners of orthotic brace suppliers and several marketing companies in connection with a $65 million nationwide kickback and bribery conspiracy. In short, DOJ claims that the defendants set up marketing call centers to solicit customers that qualified for Medicare, Medicaid and Tricare and enticed customers to accept the braces even if they didn’t need them. Telemedicine companies were purportedly paid illegal kickbacks and bribes in exchange for doctors and other medical professions signing brace orders and falsely swearing to their medical necessity. 

The alleged scheme is nothing new: DOJ claims that the brace suppliers first hid their ownership interests in the supply companies themselves. The defendants then set up marketing companies to pay kickbacks to telemedicine companies under sham “marketing” agreements. The telemedicine companies, in turn, arranged for physician prescriptions of the braces, which were ultimately fulfilled by the brace suppliers and billed to the federal government.

Telemedicine—and medical devices prescribed under this practice—offers significant promise and has proven to be an effective health care tool in today’s COVID-conscious world. Compliance with the Anti-Kickback Statute can prove to be complex, and potential criminal and civil exposure often increase when it comes to relationships with marketing companies. This is not the first, nor will it be the last, of federal prosecutions of telemedicine providers, suppliers, and marketers. Polsinelli’s Government Investigations practice, comprised of former federal prosecutors, has deep experience working with individuals and entities working in the area of telemedicine, durable medical equipment, and those that market to such entities in fighting allegations of health care fraud lodged by the government.