Why DME Fraud Is Still a Gaping Hole in Medicare Integrity

The sentencing of Michael G.V. Comino to 22 months in prison for conspiracy to pay and receive healthcare kickbacks underscores a stubborn truth in U.S. healthcare: durable medical equipment (DME) fraud remains a persistent and lucrative conduit for siphoning federal dollars from Medicare.

The Wisconsin case, announced by the U.S. Attorney’s Office for the Eastern District, revealed a scheme in which Comino, through his ownership in Kestrel Medical LLC, paid for signed doctors’ orders that were then used to generate over $2 million in illegitimate Medicare claims. In exchange, Comino’s companies were funneled kickback payments masked as marketing invoices. The case is hardly novel, but the structural weaknesses it exploits are as active as ever.

DME Fraud is a Well-Worn Playbook with High ROI

The method used in the Kestrel scheme is straight from a known fraud playbook. Fraudsters purchase physicians’ orders or patient leads through intermediaries, often telemarketers or third-party call centers. These leads are then matched to DME claims—braces, orthotics, power wheelchairs, and more—submitted to Medicare. Once payment is issued, the proceeds are split among the conspirators, frequently routed through shell companies or masked as consulting or marketing payments.

This has been a problem for years. A 2021 report from the Office of Inspector General at HHS found that over 25 percent of sampled DME claims were unsupported by medical necessity documentation (OIG Report). Even after prior crackdowns, oversight remains reactive and fragmented, allowing small operators to slip through the cracks until millions have already been disbursed.

In 2019 alone, Medicare spent more than $6 billion on durable medical equipment. While the volume is relatively small compared to total Medicare spending, the DME category is disproportionately vulnerable to fraud because of its reliance on third-party suppliers, a weak auditing infrastructure, and inconsistent enforcement of the Anti-Kickback Statute.

Enforcement Is Still Fragmented and Underfunded

While federal enforcement actions have increased, largely through the Medicare Fraud Strike Force and the Health Care Fraud and Abuse Control Program, these efforts are often outmatched by the scale and speed of fraudulent billing. According to the most recent HCFAC Annual Report, the Department of Justice and HHS recovered $1.9 billion in healthcare fraud judgments and settlements in 2022. However, estimates of total Medicare fraud losses range from $60 to $90 billion annually, depending on the methodology.

The sentence handed to Comino may seem stiff, but it reflects only a single case in a nationwide pattern. The Government Accountability Office has long criticized CMS for inadequate post-payment review processes and outdated provider enrollment screening mechanisms (GAO analysis). Fraudsters can enroll quickly, bill heavily, and exit the system before enforcement catches up.

Policy Gaps Keep the Door Open

CMS has taken steps in recent years to tighten controls on DME providers, including expanding the prior authorization requirement for certain orthotic braces and other high-volume items. But these efforts remain limited in scope and geographic reach. Additionally, telehealth’s post-pandemic expansion has complicated efforts to verify patient-provider interactions and equipment necessity, opening new vulnerabilities for abuse.

Efforts to increase the transparency of DME billing and procurement, such as competitive bidding programs, have also yielded mixed results. The National Association for Medical Direction of Respiratory Care (NAMDRC) and others have warned that overly aggressive cuts or provider restrictions can reduce access to needed supplies for legitimate patients while failing to deter fraud rings.

The Industry Must Take On Shared Risk

For hospitals, health systems, and legitimate DME providers, the challenge now is to balance compliance with efficiency. While the Anti-Kickback Statute creates clear legal lines, the gray zones around marketing partnerships, telehealth platforms, and referral incentives remain fertile ground for misuse.

Provider groups must also consider the reputational and operational risks of inadvertently engaging in networks tied to fraudulent billing. Health systems that integrate third-party DME services should be conducting regular audits, supply chain vetting, and compliance monitoring—not only to avoid liability, but to reduce systemic vulnerabilities.

A Small Case with Systemic Implications

The Comino case may seem like an isolated fraud involving braces and fake invoices, but it reveals deeper questions about how federal health dollars are monitored, how quickly fraud is detected, and whether the industry is incentivized to self-police before damage is done.

Kickbacks are not victimless. They erode public trust, inflate Medicare spending, and divert resources from medically necessary care. Until there is a coordinated and forward-looking strategy to modernize DME oversight and close enforcement gaps, cases like this will continue to be prosecuted piecemeal, after taxpayers have already footed the bill.