Medical Equipment Supplier Criminal Fraud Defense Attorney: 18 U.S.C. § 1347 (DME Fraud)
Durable medical equipment companies sit near the top of every federal healthcare fraud task force's target list, and the scale of recent enforcement proves it.
In June 2025, Operation Gold Rush, part of a $14.6 billion National Health Care Fraud Takedown, resulted in the largest loss amount ever charged in a healthcare fraud case brought by the DOJ.
A transnational criminal organization used foreign straw owners to acquire dozens of Medicare-enrolled medical supply companies and submitted $10.6 billion in fraudulent claims for urinary catheters and other DME, using the stolen identities of over one million Americans.
Nineteen defendants were charged across five federal districts. That is the regulatory climate any DME supplier is operating in right now.
For owners, billing managers, and referring physicians connected to a DME operation, 18 U.S.C. § 1347 is the primary statute prosecutors use to build these cases, and the penalties attached to it are not theoretical.
What Does 18 U.S.C. § 1347 Require the Government to Prove?
Section 1347 makes it a federal crime to knowingly and willfully execute, or attempt to execute, a scheme to defraud any healthcare benefit program, or to obtain money or property owned by or under the custody of a healthcare benefit program through false or fraudulent pretenses, in connection with the delivery of or payment for healthcare benefits, items, or services.
Notably, the statute does not require the government to prove the defendant had actual knowledge of the statute itself or specific intent to violate this particular section.
In the DME context, that broad language captures a specific set of recurring conduct. DME fraud often includes billing for non-delivered equipment, billing for more expensive equipment than what was actually provided, and providing patients with equipment they do not need before billing Medicare or receiving illegal payments in exchange for patient referrals for specific DME.
What are the Penalties and the Scale of Recent Sentences?
Healthcare fraud under 18 U.S.C. § 1347 carries up to ten years of imprisonment per count. Wire fraud, frequently charged alongside it, carries up to twenty years per count, as does money laundering.
Anti-Kickback Statute violations carry up to ten years per violation. Beyond incarceration, defendants face substantial fines, restitution orders, forfeiture of assets, and mandatory exclusion from Medicare, Medicaid, and other federal healthcare programs upon conviction.
The sentences actually imposed in recent DME cases reflect how seriously courts treat this conduct.
A Florida DME owner was sentenced to 12 years in federal prison and ordered to pay over $21 million in restitution after his companies submitted approximately $61.5 million in false claims for medically unnecessary DME, with $26.7 million actually paid by Medicare.
A Texas DME owner was sentenced to 90 months for a $59.9 million kickback and false claims conspiracy, in which doctors' orders for orthotic braces were issued without any physician examining or treating the patients.
Recent DME fraud sentences include 15 years for a healthcare software CEO connected to a DME billing scheme.
Has the Regulatory Climate Tightened Further?
Recently, CMS imposed a six-month nationwide moratorium on new Medicare enrollment for DMEPOS medical supply companies, published in the Federal Register and applicable to all new supplier enrollments nationwide.
That moratorium signals heightened federal scrutiny of the entire DME enrollment pipeline, and existing suppliers should expect increased audit activity as CMS and DOJ examine the broader landscape that produced schemes like Operation Gold Rush.
How Does a DME Investigation Typically Begin?
DME fraud cases frequently begin in one of two ways.
A significant number of federal DME fraud investigations originate from qui tam whistleblower lawsuits filed under the False Claims Act.
Current or former employees file sealed complaints alleging the DME supplier submitted false claims to Medicare, and the DOJ investigates while the complaint remains under seal.
If DOJ intervenes, the case is unsealed, and the supplier faces both civil FCA liability and potential criminal prosecution, with the whistleblower receiving 15 to 25 percent of any recovery.
The other common starting point is data analytics. CMS and HHS-OIG monitor billing patterns for DME suppliers whose claims volume, equipment mix, or referral relationships deviate from regional norms.
Most civil cases begin with a subpoena from the OIG requesting patient files, corporate documents, and financial information.
When that civil inquiry uncovers evidence of knowing fraud rather than billing error, the matter is referred for criminal prosecution.
A more invasive tool has also become standard in these cases. Federal agents obtain cloud account warrants under 18 U.S.C. § 2703 of the Stored Communications Act and serve them directly on providers like Apple and Google.
The target of the warrant may not learn of its existence until well after the government has already obtained and reviewed the contents.
A DME company owner can be the subject of an active federal investigation, with email and cloud data already in the government's possession, long before any subpoena or knock at the door alerts them to the inquiry.
Frequently Asked Questions (FAQs)
What are the criminal penalties for a conviction under 18 U.S.C. § 1347?
A conviction carries up to 10 years in prison per count. Related charges, such as wire fraud or money laundering, can carry a maximum of 20 years per count. Convictions also carry multi-million dollar fines, restitution, and mandatory exclusion from Medicare.
Can I be convicted of DME fraud if I didn't know I was breaking a specific law?
Yes. The government does not need to prove you knew the specific statute. Prosecutors only need to prove you knowingly and willfully engaged in a scheme to defraud a healthcare program or obtain money through false pretenses.
How does the DOJ use data analytics to start federal DME investigations?
CMS and HHS-OIG use algorithms to monitor billing trends. Investigations trigger when a supplier's claims volume, equipment mix, or referral networks deviate from regional norms, flagging potential kickbacks or unnecessary billing.
What is a cloud account warrant under 18 U.S.C. § 2703?
It is a federal warrant served directly to providers like Google or Apple to seize digital data. Crucially, the target is rarely notified, allowing agents to review your emails and files long before a subpoena is issued.
Can a minority owner be held criminally liable for fraud committed by a partner?
Yes, but liability can be isolated. An effective defense can show a clear separation between financial ownership and billing control, using corporate records to prove you lacked knowledge of the underlying scheme.
What should a DME supplier do if they receive an OIG subpoena or CMS audit?
Retain federal criminal defense counsel immediately. Audits and subpoenas often indicate a broader, sealed investigation is already underway. Early intervention allows counsel to engage prosecutors before indictments are filed.
Defense Strategies for DME Suppliers
Challenging the Intent Element
Convicting a defendant of DME fraud requires proof of intent: that the defendant knowingly committed the actions with the purpose of defrauding insurers or government programs.
A common defense strategy is demonstrating that billing errors were unintentional, resulting from clerical mistakes, miscommunications, or software malfunctions rather than deliberate fraud.
DME billing systems are complex, and genuine documentation gaps are common in legitimate operations. The defense reviews the entire billing infrastructure to separate negligence from knowing fraud.
Building a Good Faith Compliance Record
Demonstrating efforts to comply with legal and regulatory standards, including regular staff training, internal compliance programs, and legal advice sought to ensure billing procedures aligned with federal law, can weaken the prosecution's claims of purposeful misconduct.
That record has to exist before the investigation starts; it cannot be manufactured after the fact, which is why proactive compliance documentation matters even for suppliers who investigators have not yet contacted.
Isolating Ownership and Operational Knowledge
Fraud cases are often complex, involving multiple stakeholders in a healthcare operation, and when fraud occurred without an owner's knowledge or involvement, a defense attorney can argue that the party was not responsible for the wrongful actions of employees, suppliers, or third parties who acted without the provider's awareness.
This defense matters most for minority owners, billing managers, and referring physicians swept into multi-defendant indictments where the central operators concealed the true scope of the scheme.
Engaging Counsel Before the Investigation Goes Public
Because so many DME cases originate from sealed qui tam complaints or cloud account warrants executed without notice, the supplier's awareness that an investigation exists often lags far behind the government's actual progress.
Retaining counsel at the first sign of trouble, whether a CMS audit letter, a subpoena, or an employee departure under unusual circumstances, gives the defense the best chance to engage with prosecutors before charging decisions harden.
Minority Owner Cleared in Multi-Defendant DME Indictment
A physical therapist held a 15 percent ownership interest in a regional DME supply company, contributed startup capital, and received quarterly distributions, but had no role in day-to-day billing operations.
The majority owner and operations manager were later indicted for submitting claims for back braces and knee braces that were never delivered to patients, part of a scheme that generated $9 million in fraudulent Medicare reimbursements.
Defense counsel was retained when the minority owner received a target letter naming her in the same investigation.
Counsel obtained the company's organizational documents, distribution records, and email correspondence, which showed:
- The minority owner had no access to the billing system,
- Had not signed any claims submissions, and
- Had asked pointed questions about unusually high revenue growth in an email the operations manager never answered.
Counsel presented this evidence to the assigned DOJ Fraud Section attorney before any indictment was returned, along with a forensic accounting analysis showing the minority owner's distributions were consistent with her stated ownership percentage and not tied to specific fraudulent claims.
The government declined to charge the minority owner, who was instead treated as a fact witness in the prosecution of the majority owner and operations manager.
The outcome turned on documentary evidence that existed before the investigation began, evidence that demonstrated genuine separation between ownership and operational control over the conduct the government alleged.
To learn more about how Eisner Gorin LLP can help, contact our offices today for a confidential consultation.