A 65-year-old woman was sentenced to 24 months of imprisonment, 13 months of home detention, and two years of supervised release in connection with a scheme to submit fraudulent claims for incontinence products to Medicaid, announced United States Attorney Dan Bishop of the Middle District of North Carolina (MDNC) on January 29, 2026. The court also ordered her to pay restitution totaling $2,483,855.72.
According to court documents, the defendant co-owned a medical supply company located in Winston-Salem, North Carolina. The company had contracts with approximately 50 assisted living facilities (ALFs) across the state to supply incontinence products, such as adult diapers, and other items for residents. Between approximately 2018 and January 2024, the company, at the defendant’s direction, consistently and fraudulently submitted claims to Medicaid for the maximum number of incontinence products per resident that Medicaid would reimburse.
When employees of the company went to ALFs to deliver supplies, they would count existing inventory and restock shelves. For example, if there were already 100 diapers on the shelf, the company would deliver 100 more to reach 200—the maximum quantity Medicaid would reimburse per beneficiary each month. However, at the defendant’s direction, the company consistently submitted claims to Medicaid for 200 diapers, or the maximum allowable amount, regardless of how many diapers were actually delivered. Over the course of the scheme, Medicaid reimbursed the company approximately $2.5 million to which it was not entitled.
Compliance Perspective
Issue
Healthcare providers that order, receive, and bill for medical supplies reimbursed by Medicare or Medicaid are responsible for ensuring that claims accurately reflect items actually delivered and used for resident care. Inadequate oversight of vendors or insufficient reconciliation between inventory and billing data may expose providers to fraud, waste, and abuse risk, even when services are furnished through third-party suppliers. Facilities must maintain effective compliance programs that include clear policies, staff training, and ongoing monitoring to ensure supply utilization and billing practices align with regulatory requirements.
Discussion Points
- Review facility policies and procedures governing the ordering, receipt, storage, and use of medical supplies billed to federal healthcare programs. Policies should clearly define staff responsibilities for verifying deliveries, monitoring inventory levels, and escalating discrepancies between supplies received and quantities billed. Facilities may benefit from periodic policy reviews conducted in collaboration with an external compliance or regulatory consultant to ensure internal controls align with current CMS expectations and industry best practices.
- Ensure staff involved in ordering, receiving, documenting, or billing medical supplies receive initial and ongoing education on compliance requirements related to medical necessity, accurate documentation, and fraud, waste, and abuse prevention. Training should reinforce the importance of reporting concerns related to supply discrepancies or billing irregularities through appropriate channels, including supervisors, compliance officers, or the anonymous hotline. Med‑Net Academy offers the course Fraud Series Module 10 – Vendor Contracts and Services, which helps staff understand proper vendor contracting practices, key points of Medicare Part B consolidated billing, and federal government contracting requirements.
- Implement routine audits to reconcile medical supply inventory with billing records and claims submitted to Medicare or Medicaid. Audits should focus on high-volume or high-cost items and assess whether internal processes effectively detect overutilization or inconsistencies. Periodic independent reviews or mock audits conducted by an experienced consultant can help identify gaps, validate corrective actions, and strengthen compliance efforts.
*This news alert has been prepared by Med-Net Concepts, Inc. for informational purposes only and is not intended to provide legal advice.*