DME Fraud Case Underscores Regulatory Vulnerability in Medicare Advantage

A new federal complaint against a Middletown, Connecticut resident reveals just how quickly durable medical equipment (DME) fraud can metastasize in Medicare Advantage. Between February and June of this year, a company with no physical patients, no in-state activity, and a business address at a shared office space submitted over $680,000 in claims for orthotics never provided to any beneficiary.

At the center of the scheme is 29-year-old Habroon Habib, who federal prosecutors allege founded Around the World Solutions LLC solely to submit fraudulent DME claims through the Medicare Advantage program. Within four months, the company billed various plan sponsors for hundreds of fabricated orthotics shipments to beneficiaries spread across the country, none of whom had requested, received, or verified the equipment.

According to the criminal complaint, this was not a passive billing error. The operation involved international wire transfers, shell financial infrastructure, and a one-way flight to Pakistan booked shortly after federal agents made contact. While the investigation is ongoing, the case reflects a broader structural problem in the oversight of DME billing, particularly within the distributed networks of Medicare Advantage.

Geographic Mismatch, Systemic Gap

One of the most revealing aspects of the case is geographic dissonance. The company was registered in Connecticut. None of the alleged patients lived in the state. Claims were filed nationally across a patchwork of Advantage plan sponsors. Payments flowed into a Middletown bank account, then overseas to financial institutions in Pakistan.

That dispersion is not incidental. It exploits a regulatory architecture where Advantage plans, despite being federally subsidized, are administered through private insurers operating with considerable autonomy. Unlike traditional Medicare Part B, which involves centralized claims review, Advantage plan billing flows through disparate entities with varying fraud detection resources.

A 2024 OIG report noted that plan sponsors often lack visibility into cross-plan patterns of abuse, especially when providers operate entirely outside the geographic scope of the plan’s contracted network. In this case, the absence of any local beneficiaries should have triggered scrutiny much earlier.

But with no unified claims adjudication system and limited real-time analytics for cross-plan anomalies, fraud schemes like Habib’s remain plausible. The critical insight here is that Advantage decentralization is both its strength and its risk exposure.

DME: A Persistent Weak Point in Fraud Enforcement

Durable medical equipment remains one of the most fraud-prone verticals in federal healthcare programs. In part, this is due to the relative ease with which DME companies can be formed, credentialed, and reimbursed, with fewer regulatory hurdles than clinical providers.

The OIG has long warned that unscrupulous actors can set up DME companies, obtain National Provider Identifiers (NPIs), and begin billing plans with limited up-front verification of clinical legitimacy. Once the claims are paid, funds can be moved quickly, leaving investigators chasing documentation that often doesn’t exist.

In this case, Around the World Solutions deposited nearly $680,000 in just eight weeks. Over $425,000 was subsequently wired abroad. According to the U.S. Department of Justice, those funds are directly linked to fraudulent activity. Habib has been charged with multiple financial crimes, including operating an unlicensed money transmission business.

For health plan administrators and Medicare contractors, this highlights an urgent need to reassess credentialing workflows for DME providers and impose tighter payment validation for entities with no clinical footprint, limited prior billing history, and no direct patient interaction.

The Role of Shared Office Space in Healthcare Fraud

Another notable vector in this case is the use of a co-working address. The Middletown location was listed as the company’s operational site, but there is no evidence that any clinical services, or product distribution, occurred there. The address functioned purely as an administrative façade.

Shared office addresses are increasingly used by fraudulent operators seeking to meet regulatory documentation requirements without incurring the cost or visibility of a true clinical setting. While not illegal in itself, this tactic makes due diligence harder and obfuscates real patterns of care delivery.

A 2023 policy brief from HIMSS emphasized that digital health and DME vendors using virtual addresses or shared workspaces should be flagged for additional credentialing steps, including in-person inspections, financial validation, and proof of distribution capacity.

As remote service models expand, regulators and payers must balance operational flexibility with safeguards against these shell operations. The answer is not to block virtual business, but to ensure it is verifiably tied to legitimate activity.

Advantage Plan Sponsors Face a Decision Point

The sheer scale and speed of this scheme—nearly $700,000 paid out in 60 days, should prompt reevaluation among Medicare Advantage sponsors. While CMS retains ultimate regulatory authority, the day-to-day approval of claims often rests with plan administrators, who vary widely in their technological sophistication, audit frequency, and claims review protocols.

Without better coordination between CMS and private plan sponsors, these enforcement gaps will persist. Fraud monitoring tools must be more than retrospective. They need to be anticipatory. That means identifying provider patterns that don’t match clinical norms: out-of-state providers with no beneficiary interaction, billing spikes from new vendors, or international wire transfers from newly formed companies.

This also places a renewed burden on internal compliance teams. Pre-payment review, credentialing audits, and anomaly detection should no longer be episodic or post-crisis. They must be systematized.

From Case Study to Compliance Imperative

As the federal investigation into Habib’s activities continues, the key takeaway for healthcare leaders is not the particulars of the scheme—but the conditions that allowed it to thrive.

This was not sophisticated fraud. It was fraud born of systemic gaps: a lack of integrated oversight, inadequate pre-payment controls, and a decentralized architecture that enables suspicious billing to fly under the radar until well after disbursement.

For CIOs, compliance officers, and Advantage plan executives, the message is clear: DME billing remains a high-risk domain, especially when credentialing systems are fragmented and oversight is reactive.

Real reform will require more than enforcement after the fact. It will demand new expectations around transparency, inter-plan data sharing, and clinical validation, particularly for high-risk vendors operating across jurisdictional lines.