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Federal DME Fraud Charges – What You Need to Know

Federal DME Fraud Charges – What You Need to Know

Federal agents just showed up at your medical equipment company. Or you received a target letter from the Department of Justice. Or a former employee told you that investigators have been asking questions about your brace orders and billing practices. Your first instinct might be to think this is some kind of misunderstanding – you shipped real products to real patients, your company is Medicare-enrolled. Here is the first thing you need to understand: durable medical equipment fraud prosecutions have become a federal enforcement priority. Peter Roussonicolos received 12 years in federal prison for a $61.5 million DME scheme. Operation Brace Yourself charged defendants for $1.2 billion in fraud – one of the largest healthcare fraud schemes ever prosecuted. These are not theoretical outcomes.

Welcome to Spodek Law Group. We handle federal healthcare fraud defense cases regularly, including cases where DME company owners first realize they are facing serious criminal exposure through exactly this kind of contact. The second thing you need to understand is this: DME fraud is now a primary target for the Health Care Fraud Strike Force. In the 2025 National Healthcare Fraud Takedown, 324 defendants were charged in connection with over $14.6 billion in alleged fraud. Operation Brace Yourself alone resulted in $1.9 billion in cost avoidance for Medicare – meaning the prosecution saved Medicare more than the fraud cost. Federal prosecutors view the DME industry as a fraud-prone sector – and the sentences are devastating.

Here is something most DME company owners do not realize about medical equipment fraud. The paradox is brutal. The braces worked perfectly. The wheelchairs functioned exactly as designed. The continuous glucose monitors measured blood sugar accurately. And the company owners still went to prison for decades. The crime is not shipping defective equipment. The crime is ordering equipment that patients did not need. The crime is paying kickbacks to get those orders. The crime is billing Medicare for medically unnecessary braces that were prescribed by telemedicine doctors who never examined the patients.

The Equipment That Creates Criminal Liability

Heres the uncomfortable truth about DME billing. Everything depends on medical necessity – and in the DME world, medical necessity is narrowly defined.

Braces and orthotics have specific Medicare coverage requirements. Back braces, knee braces, shoulder braces, wrist braces – Medicare covers these items only when theres a clinical indication and a treating physician orders them based on patient examination and history. The brace must be medically necessary for that specific patient. A blanket order for braces based on a phone call dosent meet that standard.

The billing looks identical whether the order was legitimate or fraudulent. A valid brace order and a fraudulent brace order generate the same claim form. The same CPT codes. The same reimbursement amounts. What seperates them is the medical necessity determination – and wheather the ordering physician actualy examined the patient.

Continuous glucose monitors and powered wheelchairs create similar exposure. Any DME item that Medicare reimburses at high rates becomes a target for fraud schemes. If your company bills for items that were ordered through telemedicine without proper patient relationships, every claim is potentially fraudulent regardless of wheather the equipment worked correctly.

Think about what that means for your DME company. Every order from a telemedicine platform is potential criminal liability. If the prescribing physician wasnt the patients’ treating doctor, the order may be fraudulent regardless of wheather the equipment was medically appropriate. If you paid for referrals, every connected claim is tainted by kickbacks. The equipment can be perfect while the billing is criminal.

The Pre-Filled Prescription Pipeline

Heres something about DME fraud that creates massive criminal exposure. The way orders enter your system reveals the fraudulent nature of the entire operation.

Pre-filled prescriptions are the signature of fraud schemes. Telemarketers call Medicare beneficiaries. They collect information about aches, pains, and mobility issues. They generate brace orders with diagnosis codes already filled in – selecting the highest-reimbursing items. Those orders go to telemedicine doctors who sign them without patient examinations. The DME companies ship the braces. Medicare gets billed. Everyone gets paid. Everyone goes to prison.

Raheel Naviwala purchased lists of Medicare patients’ names and phone numbers. He hired telemarketers to convince patients to accept orthotic braces. The telemarketers pre-filled prescriptions and selected the highest-paying braces. Naviwala then paid telemedicine doctors to sign the pre-filled prescriptions regardless of wheather patients needed or wanted braces. He was convicted on seven counts including conspiracy to commit health care fraud and Anti-Kickback Statute violations. His scheme caused $100 million in losses.

The payment chain reveals the kickback structure. In DME fraud schemes, everyone gets paid based on claims submitted. Telemarketers get paid per order. Telemedicine doctors get paid per signature. Marketing companies get paid percentages of reimbursements. Every one of those payments is potentialy a federal kickback charge.

Heres the irony that destroys DME companies. “Free medical equipment” sounds like patient benefit. “Marketing services” sounds like legitimate business. “Telehealth consultations” sounds like modern medicine. But prosecutors see the scheme clearly: mass telemarketing to collect Medicare beneficiary information, rubber-stamp orders from telemedicine doctors, and DME companies billing thousands per patient. The marketing that seemed legitimate was actualy fraud infrastructure.

Operation Brace Yourself

Heres something about DME fraud enforcement that company owners need to understand. The government has a coordinated operation specificaly targeting your industry.

Operation Brace Yourself charged 24 defendants for $1.2 billion. In April 2019, the Department of Justice announced charges against defendants associated with telemedicine companies, DME suppliers, and international call centers. It was one of the largest healthcare fraud schemes ever charged. The defendants allegedly paid kickbacks to obtain doctors’ orders, then submitted billions in fraudulent claims for back, shoulder, wrist, and knee braces.

The operation targeted the entire supply chain. International call centers in the Philippines and Latin America that recruited Medicare beneficiaries. Telemedicine companies that provided doctors’ signatures without patient examinations. DME companies that billed Medicare for unnecessary equipment. Everyone connected to the scheme faced federal charges.

Since Operation Brace Yourself, more then 300 persons have been charged. The initial 24 defendants were just the beginning. The investigation expanded to identify every DME company, every telemedicine provider, every marketer connected to the scheme. Each new arrest led to more cooperating witnesses who identified more targets.

Heres the consequence cascade. You contract with a marketing company to bring you orders. Years later, Operation Brace Yourself investigators trace that marketing company’s network. They identify every DME company that recieved orders. Your company is on the list. Now your a target. The enforcement action that started with someone else ends with federal charges against you.

The Hidden Ownership Trap

Heres something about DME fraud that catches owners who think there protected. Hidden ownership creates additional criminal exposure.

Peter Roussonicolos got 12 years for hiding his ownership. He owned and operated five DME companies as a “silent partner.” Why hide? Becuase he had felony convictions that made him ineligible to enroll with Medicare. So he recruited and paid co-conspirators to serve as “nominee owners” – people who appeared to own the companies on paper while he actualy controlled operations. His attempt to hide didnt protect him. It created the evidence that convicted him.

The nominee owner scheme adds charges. Fraud through DME billing is one set of charges. Concealing your involvement from Medicare is another. Using straw owners to circumvent enrollment requirements is another. What starts as DME fraud becomes conspiracy to defraud the United States.

Medicare knows who should be excluded. If youve been convicted of healthcare-related crimes, Medicare knows. If your excluded from federal programs, Medicare knows. Setting up nominee owners dosent hide anything from investigators – it proves consciousness of guilt.

Heres the uncomfortable truth about hidden ownership. The scheme that’s supposed to protect you becomes the evidence that destroys you. Roussonicolos didnt just get convicted for DME fraud. He got convicted for the elaborate structure he created to hide his involvement. The hiding was as criminal as the billing.

The Cases That Show What Happens

If you think DME fraud prosecutions are theoretical, look at what actualy happens to company owners and operators.

Andrew Chmiel received 9 years for a $100 million scheme. Evidence at trial revealed he controlled at least 10 DME companies across the United States. These companies submitted false claims to Medicare for medically unnecessary equipment. His sentence was nine years in federal prison. Nine years becuase he ran companies that shipped braces patients didnt need.

Metro DME Supply owners received 151 months. Thats over 12 years in federal prison. They hid bribes and kickbacks as “marketing” and “business process outsourcing” expenses. They billed more then $59 million in false claims. They were ordered to pay $27 million in restitution. The “marketing expenses” they thought protected them were actualy kickback evidence that convicted them.

A physician in Eastern Washington signed 2,800+ fraudulent orders. Including orders for orthotic braces for patients whose limbs had already been amputated. Braces for limbs that didnt exist. Orders signed without any examination, without any patient contact, without any medical necessity determination. The physician is now a federal defendant. Every DME company that filled those orders is a target.

Kelly Wolfe faces 13 years for a $400 million scheme. Her company, Regency Inc., allegedly submitted over $400 million in fraudulent DME claims to Medicare and CHAMPVA. She agreed to plead guilty to criminal healthcare fraud and pay $20.3 million in civil False Claims Act settlement. Four hundred million in claims. Thirteen years in prison.

These arnt unusual cases. They represent standard enforcement outcomes. The prison sentences reach decades. The restitution orders are in the tens of millions. The consequences are catastrophic.

How DME Investigations Begin

Heres something about how these cases develop that should concern every DME company owner. Investigations often begin long before anyone contacts you.

Medicare data analytics identify suspicious billing patterns. Your claims are compared against statistical norms. If your company bills significantly more brace orders then similar DME suppliers, thats flagged. If your orders come primarily from telemedicine providers, thats flagged. If certain prescribers generate unusual volumes, thats flagged. The investigation starts with data – before anyone visits your facility.

Telemarketers and telemedicine companies become cooperating witnesses. When the government investigates a telemarketing operation, that operation identifies every DME company they sent orders to. When they investigate telemedicine companies, those companies identify every DME supplier that recieved their prescriptions. You may become a target becuase someone in your referral chain was investigated first.

One prescriber can expose dozens of DME companies. That Eastern Washington physician signed 2,800+ fraudulent orders. Every one of those orders went to a DME company. Every one of those DME companies is now under scrutiny. One bad prescriber creates exposure for every company connected to them.

Whistleblowers have massive financial incentive to report. Under the False Claims Act qui tam provisions, whistleblowers can recieve 15-30% of government recoveries. Your billing staff, your compliance officer, your salespeople – anyone who sees something questionable has powerful financial motivation to report it. A single employee could recieve millions.

Heres the consequence cascade. A telemedicine company is investigated. They cooperate and provide records of every DME company they sent orders to. Your company is on the list. The government analyzes your billing patterns. They identify claims connected to that telemedicine company. Federal agents show up at your facility.

What You Cannot Do When Investigated

Heres what DME company owners do when they learn about investigations. They panic. They try to fix things. They make decisions that create additional criminal exposure.

Do NOT destroy or alter documentation. Order records, billing files, contracts with marketers, payment records. Destroying any of this is obstruction of justice. The government probly already has copies through Medicare claims data and records seized from telemarketers and telemedicine companies. Destruction proves consciousness of guilt while accomplishing nothing.

Do NOT contact telemarketers, telemedicine companies, or marketers to coordinate stories. If you paid kickbacks or recieved orders through problematic channels, your natural instinct is to talk to others involved. Dont. Coordinating testimony is witness tampering. They may already be cooperating with the government. Your conversation could be recorded.

Do NOT continue questionable referral arrangements. If your recieving orders through marketing relationships that might be kickbacks, stop. But dont try to “clean up” by restructuring contracts or creating backdated documentation. Thats additional fraud.

Do NOT assume cooperation will protect you. DME company owners often think full cooperation will result in leniency. Cooperation might help at sentencing if your convicted. But it dosent prevent prosecution. Peter Roussonicolos still got 12 years. Everything you say to investigators can be used against you. You need an attorney before you say anything.

The Kickback Math That Destroys DME Companies

Heres something about DME fraud that exponentialy increases legal exposure. Every order creates False Claims Act liability – and DME items are billed at hundreds to thousands of dollars each.

How the kickback multiplier works. You pay a telemarketer $35 per order. That payment is a kickback under the Anti-Kickback Statute. Every claim submitted based on orders from that telemarketer becomes a false claim. Each false claim carries penalties of up to $27,894 (as of 2024). Plus treble damages – three times the governments loss. A company processing 1,000 brace orders at $500 each creates $500,000 in billing – and potentialy tens of millions in False Claims Act exposure.

The exposure compounds with order volume. Operation Brace Yourself involved $1.2 billion in claims. The False Claims Act exposure on that volume is astronomical. Individual defendants face restitution orders in the tens of millions.

Each order is a seperate claim. If your company processed 10,000 DME orders through problematic referral arrangements, you face 10,000 potential false claims. At $27,894 per claim in penalties alone, thats over $278 million in exposure before treble damages.

Heres the uncomfortable truth about False Claims Act exposure. Individual kickbacks to marketers might seem managable. Thirty-five dollars per order. A few hundred dollars to a telemedicine doctor. But the False Claims Act transforms every connected order into seperate liability. What seems like limited exposure becomes financial devastation that follows you for the rest of your life.

The Exclusion That Ends Everything

Heres something about DME fraud convictions that company owners need to understand. Federal conviction triggers mandatory exclusion from Medicare, Medicaid, and all federal healthcare programs.

Exclusion means your company cannot bill federal programs. You cannot supply equipment to Medicare or Medicaid patients. In the DME industry, were federal programs represent a huge portion of revenue for many companies, exclusion effectivly closes your business.

Individual exclusion follows you personally. Even if you close the company, you cannot work for any entity that bills federal healthcare programs. You cannot start a new DME company. You cannot work for another supplier. Your career in healthcare is effectivly over.

The punishment extends far beyond the prison sentence. You serve your time. You pay your fines. But you still cant work in medical equipment becuase your excluded. Peter Roussonicolos will be excluded for life – assuming he survives his 12-year sentence.

What You Should Do Right Now

If federal investigators have contacted your DME company, or if you have referral arrangements that might trigger scrutiny, heres exactly what you should do:

Contact a federal healthcare fraud defense attorney immediatly. Not a general business lawyer. Not your regulatory consultant. Someone who specificaly handles federal healthcare fraud cases and understands Operation Brace Yourself and Strike Force prosecutions.

Do NOT speak to investigators without counsel. Federal agents may approach you or your staff for “voluntary” interviews. There is nothing voluntary about it. Anything said can be used to build the case against you. Politely decline and contact an attorney immediatly.

Preserve all documentation exactly as it is. Order records, billing files, contracts with marketers, telemedicine agreements, payment records. Do not alter, destroy, or organize anything. Document preservation is critical.

Identify all potentially problematic referral sources. Marketing relationships. Telemarketing arrangements. Telemedicine companies that provided orders. Your attorney needs to understand the full scope.

Do NOT discuss the investigation with staff, marketers, or referral sources. Anyone you talk to can be compelled to testify. They may already be cooperating with the government. Only attorney-client communications are protected.

Todd Spodek tells every DME company owner in this situation the same thing: federal DME fraud investigations are serious criminal matters. Peter Roussonicolos got 12 years. Andrew Chmiel got 9 years. Metro DME Supply owners got over 12 years. Your response in the next few days could determine wheather this becomes a matter that resolves favorably – or federal charges that destroy your business and your freedom.

Call Spodek Law Group at 212-300-5196. Before you speak to investigators. Before you make decisions that create additional exposure. Before a marketing arrangement becomes a federal prosecution.

DME fraud is a federal enforcement priority. Operation Brace Yourself charged defendants for $1.2 billion. What you do next matters enormosly.