Kinex Medical to Pay $7 Million Penalty for False Medicare Claims

Wisconsin Medical Equipment Company Pays Nearly $7 Million to Settle False Claims Allegations

A Waukesha-based medical equipment distributor has agreed to pay $6,925,000 to resolve allegations that it violated federal law by billing government health care programs for unnecessary medical equipment, according to the U.S. Attorney’s Office for the Eastern District of Wisconsin.

U.S. Attorney Brad D. Schimel announced the settlement with Kinex Medical Company, LLC, following an investigation that began with information from a whistleblower. The company, which sells and distributes durable medical equipment including knee, shoulder and hip braces nationwide, allegedly submitted false claims to Medicare, TRICARE, the Federal Employees Health Benefits Program, and the Department of Labor’s Office of Workers’ Compensation Programs.

Federal investigators claim that between 2019 and 2024, Kinex provided braces to patients covered by these programs even when the equipment was not medically necessary. To encourage patients to accept the equipment, the company allegedly waived certain out-of-pocket costs such as co-payments and provided additional equipment at no charge.

“Medicare, TRICARE, and other federal programs only pay for medical equipment that patients actually need,” said Schimel. “Kinex, however, induced patients to receive braces that neither the patients nor their doctors thought they needed, all in an effort to receive taxpayer money. This settlement imposes a significant penalty on Kinex and will make taxpayers whole for the company’s wrongdoing.”

The settlement reflects a growing focus by federal authorities on fraud involving durable medical equipment, an industry that has faced increased scrutiny in recent years. The Centers for Medicare and Medicaid Services has estimated that improper payments for durable medical equipment amount to billions of dollars annually, with unnecessary equipment being a significant contributing factor.

As part of the resolution, Kinex has entered into a Corporate Integrity Agreement with the U.S. Department of Health and Human Services Office of Inspector General. This agreement requires the company to implement enhanced compliance measures designed to prevent future violations of federal health care regulations.

Mario M. Pinto, special agent in charge of HHS-OIG, emphasized the broader impact of such schemes on the health care system. “Billing taxpayers for medically unnecessary equipment and undermining program safeguards through improper waivers of patient cost sharing can distort medical decision making and erode trust in our healthcare system,” Pinto said. “Our agency will continue to work closely with our law enforcement partners to hold suppliers accountable when they place profits ahead of patient need.”

The FBI, which participated in the investigation, also highlighted the financial impact on taxpayers. “Kinex engaged in a scheme to defraud the American taxpayers. The agreement by Kinex to settle this matter and repay over $6.9 million demonstrates the breadth of their fraudulent activity,” said FBI Milwaukee Special Agent in Charge Alan Karr.

The case originated from a whistleblower lawsuit filed under the qui tam provisions of the False Claims Act, which allows private citizens to file lawsuits on behalf of the government and share in any recovery. The whistleblower, identified as Geboy in court documents, will receive a portion of the settlement amount, though the exact figure was not disclosed.

The lawsuit, United States ex rel. Geboy v. Kinex Medical Company, LLC, remains pending in the U.S. District Court for the Eastern District of Wisconsin. Officials noted that the settlement resolves the allegations only, and Kinex does not admit liability as part of the agreement.

This case represents one of several significant settlements involving durable medical equipment providers in recent years, highlighting federal authorities’ continued focus on combating health care fraud that impacts government programs and, ultimately, taxpayers.