Durable Medical Equipment (DME): Attorney Commentary On Adult Diaper Fraud Case

On February 13, 2009, a 10-count indictment was unsealed against the owner and operator of a Houston area durable medical equipment company (DME) in an adult diaper fraud case, and charging him with 10 counts of health care fraud. An indictment is merely a charge and defendants are presumed innocent until proven guilty.

A Houston federal grand jury indicted Ene Etim (“Ernest”) Hogan, the owner and operator of Shanet Medical Source, and accuses him of routinely billing Medicaid for adult urinary incontinence supplies he did not deliver to Medicaid beneficiaries, for supplies in excess of the amount actually provided to the beneficiary and for supplies provided to Medicaid beneficiaries without a proper prescription or who did not need the supplies. Adult incontinence supplies includes adult diapers, underpads, wipes and pull-up briefs.

The indictment alleges Hogan executed the scheme to defraud beginning in June 2004 with the last alleged false claim filed in March 2006. Hogan allegedly billed Medicaid for claims totaling approximately more than $1 million and received payments for those claims totaling approximately $683,360. The case is pending in the Southern District of Texas.

Commentary: We have a few comments about this case. First, in health care, the regulatory system that hospitals and honest providers follow are meant to preclude this type of alleged fraud. For the honest providers, it is useful to look at these extreme cases to understand the rules and what is happening in the “dirty” side of health care. When investigators come to your office, they may have their fraud glasses on and are somewhat jaded due to their work on all these extreme fraud cases.

Second, this case is a reminder for all DME providers, pharmacies, physicians and others to keep good records regarding the provision of services to beneficiaries and patients. Sign-in sheets are a good back-up for offices, have patients sign for products they receive and keep log sheets of any deliveries. These records are critical in an audit or in proving that services were provided.

Third, there are waves or patterns of fraud. In Los Angeles, the adult diaper fraud was common more than 5 years ago and there were many prosecutions. It has still yet to be eliminated. It is complex, however, and we see in our practice that if honest Board Certified physicians prescribe incontinence supplies for their geriatric patients – they may be red-flagged for it and subjected them to an audit even though they do not receive any benefit in prescribing the supplies. Thus, if you are prescribing or providing incontinence supplies realize that you will be subjected to great scrutiny and ensure that you are documenting medical necessity and following all program rules.

For example, there may be a determination of no medical necessity if you have not performed a focused medical history and targeted physical examination to identify possible reversible factors and initiated treatment to manage the incontinence (for example, behavioral, pharmacologic, or surgical intervention). It may be appropriate to refer the case to a urologist or other specialist to treat the underlying medical condition. Realize also that some low-income patients may claim to be incontinent because they are receiving kickbacks from DMEs or are selling the supplies.

Fourth, the claims here go back more than 5 years and the last claim was almost 3 years ago. These indictments are based on past history so if you have any exposure from old claims do your best to address them and be proactive.

Any questions or comments should be directed to: tgreen@greenassoc.com. Tracy Green is a principal at Green and Associates in Los Angeles, California. They focus their practice on the representation of individuals, businesses and professionals, with an emphasis on health care professionals and providers.