U.S. investigates alleged Medicare fraud scheme estimated at $2 billion

Flooded by dozens of complaints, the boutique launched a webpage in September to explain that its leaders were dumbfounded, too.

“We have reported the calls we are receiving to Medicare, and we have been working with callers to try to figure out exactly who is filing these claims,” Pretty in Pink’s website reads, asserting that another company by the same name was submitting the claims, and offering instructions on how to report the fraud to federal officials and insurance companies. “FRAUDULENT CLAIMS ARE BAD FOR ALL OF US, AND WE ARE ON YOUR SIDE.”

The complaints that ensnared the Tennessee cancer-care business are just one piece of an alleged fraud scheme whose scale has little precedent in the history of Medicare, experts said: an estimated $2 billion.

The months-long episode allegedly involves fraudulent insurance claims submitted by seven companies to the taxpayer-funded health insurance program for older Americans, according to health-care groups that have analyzed Medicare billing data. Federal officials investigating the alleged fraudulent billing for catheters are looking into several of the companies that may be involved, according to three officials who spoke on the condition of anonymity to discuss the probe and three people who said the FBI approached them. The probe’s existence has not been previously reported.

Over two years, one health-care group found, the companies collectively went from billing just 14 patients for catheters to nearly 406,000.

Urinary catheters made an appealing target for potential scammers because orders for the low-cost products — small tubes often made with latex or silicone — could escape some of the scrutiny that accompanies billing for expensive equipment, surgeries and other high-cost claims, fraud experts said.

The FBI’s public affairs office said it could not confirm or deny the existence of an investigation, citing the bureau’s standard practice. Officials at the Centers for Medicare and Medicaid Services also said they could not discuss the allegations, specific suppliers or the existence of a federal probe.

“I can’t confirm that any investigation is occurring,” Dara Corrigan, who leads Medicare’s center dedicated to fighting fraud, waste and abuse in the program, said in an interview Thursday. “I can’t compromise the integrity of any catheter investigation.”

The alleged scheme was uncovered by the National Association of ACOs — known as NAACOS — a health-care nonprofit that represents hundreds of medical groups and hospitals across the nation. The nonprofit’s members concluded that seven companies allegedly operating out of Connecticut, Florida, Kentucky, New York and Texas were behind a surge of bills submitted to Medicare across the last two years for intermittent urinary catheters — tubes that patients insert several times a day to drain their bladders and treat incontinence. While the companies used real patients’ information to submit the bills, NAACOS and its members found no evidence that any of their patients wanted the catheters or even received them.

All seven companies had become accredited with Medicare, allowing them to bill the health insurance program, although in some cases the accreditation was linked to a person who said they no longer worked at the company and had sold it last year.

“We’ve just never seen anything like this nationally,” said Clif Gaus, CEO of NAACOS, who said his organizations first spotted and reported the billings to federal officials last fall. Gaus’s team estimates that Medicare was wrongly billed about $2 billion for the catheters in 2022 and 2023.

Despite the relatively low reimbursement rates for each catheter — Medicare pays out about $8 per curved tip and sterile kit catheter — ample profits can be made when the products are ordered in bulk. The health department’s own watchdog warned that Medicare’s payment rates for the products were too high and should be lowered.

“Reducing Medicare’s payment rates can save Medicare and beneficiaries millions of dollars annually,” the Department of Health and Human Services inspector general concluded in a report in August 2022.

The spike in urinary catheter claims began weeks later, a trickle that would turn into a flood of bills in 2023.

Erika Tavarez said she has had a front-row seat to the alleged fraudulent activity: She…