FBI sting operation nabs two in tube scam

Friday, October 31, 2003

EAST ST. LOUIS, Ill. - A federal investigation recently indicted two individuals for Medicare fraud in connection to a feeding tube scam, the second such scam uncovered by the investigation this year.

The indictment by the U.S. District Court in southern Illinois alleges that Jo Ann Carroll and Brian Denny defrauded the government by persuading customers to sign long-term contracts for feeding tubes and formula to be used by Medicare recipients.

The pair won the contracts by providing customers with free feeding tubes and false documents that misrepresented the actual price of the tubes, according to the indictment.

Carroll and Denny were caught in the alleged scheme when they attempted to do business with Southern Medical Distributors, which, in reality, is the cover for an FBI sting operation that is looking in to health care fraud.

The sting, dubbed Operation Headwaters, is the FBI’s largest undercover healthcare fraud sting in U.S. history. It began in February 2000 and so far has resulted in three indictments.

Enteral feeding is a profitable business with Medicare expenditures exceeding $500 million annually for kits, tubes and formulas.

Abbott Laboratories and a subsidiary pleaded guilty earlier this year to obstructing a criminal investigation of health care offenses after an Operation Headwaters probe of the company’s sales and marketing practices revealed some questionable activities associated with enteral feeding.

The company sold products in bundled packages, which made it difficult for Medicare to figure out the true cost of the product. It also offered up-front payments to customers as an incentive to encourage them to buy its products.

Abbott agreed to pay a $200 million fine and a $400 million civil settlement to resolve claims involving the federal Medicare and Medicaid programs.