Seven durable medical equipment companies billed Medicare for orthotic braces that many patients never requested and, in some cases, never needed. All seven answered to the same two Florida men, who were sentenced this month. Kenneth Charles Kessler III and Michael Andrew Gomez did not spread the fraud across seven corporate names simply to make it harder to trace. According to prosecutors, they used the multiple enrollments to keep billing alive each time Medicare moved to cut one of the companies off. The mechanism behind that evasion is written into federal regulation, and it explains how $34.8 million in false claims kept flowing for as long as it did.
How CMS Suspends Payments Once Fraud Looks Credible
Medicare’s fraud-fighting toolkit includes a blunt instrument: cutting off a supplier’s money before any case is proven in court. The government does not wait for a conviction, a settlement, or even a finished investigation to stop paying a supplier it suspects is defrauding the program.
A regulation at 42 CFR 405.371 lets the Centers for Medicare & Medicaid Services or its Medicare contractors suspend payments, in whole or in part, once CMS has consulted the HHS Office of Inspector General and, where appropriate, the Department of Justice, and determined that a credible allegation of fraud exists against a specific provider or supplier. The standard is deliberately low: an allegation qualifies once it carries what the rule calls “indicia of reliability,” not proof.
The tool also has built-in limits. Every 180 days, CMS must decide whether good cause still exists to keep withholding payment and get law enforcement to confirm the investigation remains active. Absent a request from prosecutors to extend it, the suspension is presumed to lift after 18 months if the matter has not resolved. Those limits keep a suspension from becoming an indefinite freeze on an unproven allegation. They also confirm what the suspension actually targets: one specific enrollment, not the people who control it.
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Why a Supplier With Seven Names Beats One Suspension
Kessler and Gomez owned and operated seven separate DME supply companies and shifted their billing among them specifically to dodge Medicare payment suspensions, according to the Justice Department’s account of the case. The regulation explains why that worked. A suspension under 405.371 attaches to “a provider or supplier,” meaning one specific Medicare enrollment tied to one legal business name and one tax identification number. It does not attach to the individuals who own or manage that enrollment.
CMS’s own enrollment-screening rule makes that boundary explicit. Under 42 CFR 424.518, when a payment suspension raises a supplier’s risk category, the heightened scrutiny follows “all other enrolled and prospective providers and suppliers that have the same legal business name and tax identification number” as the flagged supplier, not every other company its owners happen to control. Two people running seven differently named, separately incorporated suppliers can have one enrollment suspended while the other six keep billing normally, so long as each carries its own name and its own employer identification number. Shifting claims from a suspended company to a sister company was not a loophole anyone had to discover. It sits at the plain edge of where the suspension authority stops.
The High-Risk Screening Built for Companies Like These
Regulators did not leave DME suppliers unscreened at the start. CMS designates every newly enrolling durable medical equipment supplier as “high” categorical risk, which means a Medicare contractor must run the full stack of checks at enrollment: license and database verification, an on-site visit, and a fingerprint-based FBI background check on anyone holding a 5 percent or greater ownership stake. Getting there requires first naming that owner; the disclosure has to happen before the background check can attach to a person. That is a higher bar than most physician practices or hospitals face when they enroll.
The same rule also raises a supplier to high risk automatically if CMS suspended its payments at any point in the prior ten years, or if an owner was excluded by the inspector general or had billing privileges revoked. Federal rules also let CMS revoke a supplier’s billing privileges outright, including specifically when a required fingerprint submission is never made. But that escalation, like the suspension itself, is anchored to the enrollment record on file rather than a registry that follows an owner across every company that person later forms. A background check catches a criminal record or a prior exclusion. It does not, on its own, catch a first-time filer opening a sixth or seventh company under a name with no history yet attached to it.
HHS’s inspector general has flagged the gap. In a feature on durable medical equipment fraud, the office lists billing for equipment never delivered, using stolen Medicare numbers, and falsifying medical necessity among the most common DME schemes it investigates, and it says it has issued a white paper this year outlining further steps CMS could take to keep bad actors from exploiting the enrollment system.
What the Case Draws From, and What It Can Cost Later
The Justice Department put the scheme’s total false billing at $34.8 million. Durable medical equipment claims like these are paid out of Medicare Part B, financed through the Supplementary Medical Insurance Trust Fund, a pool built from beneficiary premiums and general federal revenue that CMS recalculates every year under the Social Security Act to match projected program costs, according to a CMS fact sheet describing how the premium is set. Every dollar paid on a claim that never should have been filed is a dollar drawn from that same pool before the next year’s costs are even estimated.
The damage does not stop at the trust fund’s ledger. In a nationwide alert about the exact scheme Kessler and Gomez ran, the inspector general’s office warned that a brace billed under a beneficiary’s Medicare number without that beneficiary’s knowledge or need can come back to hurt the beneficiary directly. “If a beneficiary has received unwanted or unneeded braces, and that equipment is billed to Medicare, then Medicare may deny a brace that the beneficiary needs in the future,” the alert states. A claim filed in someone else’s name does not just cost the program money. It can sit on that person’s Medicare record and stand between that person and equipment actually needed later.
This article was produced with the assistance of AI and reviewed by The Financial Wire editorial team.
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Warren Cohen is a finance writer based in Phoenix, Arizona, covering personal finance topics including credit, banking, and beginner investing. He earned his degree in business administration from Arizona State University and began his career working in consumer finance, where he gained direct experience with lending and credit systems. He now writes for personal finance websites and fintech platforms, focusing on clear, practical content that helps readers make informed financial decisions.
