DME Manufacturer And Orthotics Provider Agree to $1.59 Million Settlement In False Claims Case

F.J. Thomas

Boston, MA (WorkersCompensation.com) – The terms “orthotic” and “durable medical equipment” or DME, are commonly used interchangeably in the healthcare industry, and are often misunderstood. Additionally, there is frequently misinterpretation of the terms, “custom fitted,” “custom fabricated,” and “off the shelf” (OTS) in relation to orthotics in particular.

The definitions used by the Center For Medicare and Medicaid Services (CMS) are the determining factor in how states define the two terms. CMS defines DME as medical equipment that can withstand repeated use that is used for a medical purpose that is not useful in the absence of an illness or injury. The CMS definition of orthotic is “leg, arm, back, and neck braces, and artificial legs, arms, and eyes, including replacements if required because of a change in the patient’s physical condition.” To complicate matters even further, CMS has special criteria and regulations for what is custom fitted and custom fabricated.

In a recent Massachusetts legal case, the incorrect interpretation of these terms wound up causing a $1.59 million dollar settlement to resolved false claim allegations.

According to a press release from the Massachusetts Department of Justice (DOJ), National durable medical equipment manufacturer Joint Active Systems, Inc. (JAS) and New England Orthotics & Prosthetics, LLP (NEOPS) have agreed to a settlement to resolve allegations of violating the False Claims Act. JAS has agreed to pay out $1.5 million to resolve the accusations. NEOPS, which has multiple locations across the northeast, will pay out $90,000 to resolve allegations that they improperly billed for custom fabricated orthotics. The company filed bankruptcy in 2017 but is under new ownership.

According to the DOJ allegations, JAS that was not enrolled in Medicaid programs for Rhode Island, Connecticut, Massachusetts, recruited NEOPS to bill more expensive custom fabricated orthotics when the items did not meet orthotic or custom fabricated criteria, and were not medically necessary. According to the Commonwealth of Massachusetts MassHealth Provider Manual Series, the definition of custom fabricated is “an orthotic made for a specific patient from his/her individual measurements and/or pattern.”

In response to the allegations, NEOPS stated that they had treated the patient and that they had custom fitted them for the devices. According to the Massachusetts MassHealth Provider Manual, the definition of an orthotics fitter is “an individual who is educated and trained in the provision of certain prefabricated orthoses, including patient assessment, formulation of a treatment plan, implementation of the treatment plan, follow-up and practice management.” The DOJ alleges that instead of a trained fitter that met the state’s criteria, it was a JAS affiliated salesman that measured, fitted and delivered the devices to the patients.

The DOJ contends that despite having received coding guidance from a Medicare contractor, JAS continued to bill for items that did not meet the criteria as an orthotic. Additionally, the DOJ alleges that JAS substantially overcharged the Department of Veterans Affairs (VA) in the language and fee schedule of its contract with the VA. In some cases, the VA contract was over 300 percent more than the contracts JAS had with other commercial payers.

The case is the result of two NEOPS employees who brought forth the allegations against both JAS and NEOPS. The whistleblowers will receive 17 percent of the total proceeds.

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