Fraud Allegations Play Role in Sending The Scooter Store Out of Business

The Scooter Store, which was at one time the largest seller of powered wheelchairs, scooters, other powered mobility devices in the United States, is going out of business at least in part as the result of fraud allegations.

The Scooter Store, which is based in New Braunfels, Texas, at one time employed almost 2,500 individuals.  The store employed fewer than 400 people as of last week when it announced it was shutting down operations, with around 200 employees at the New Braunfels headquarters and the remainder at over 50 distribution centers spread across the United States.

“The Scooter Store team worked long and diligently to develop a new path forward for the company,” noted company leadership in a prepared statement with the announcement.  “During these last months, our employees worked tirelessly to service existing patients and customers responsibly. Every effort has been made.”

The company had previously filed for Chapter 11 bankruptcy protection in an effort to reorganize its operations.  The company was also in an ongoing legal battle with the United States Department of Justice because of accusation the company had committed Medicaid and Medicare fraud.

Leadership of The Scooter Store received notification last week from the Centers for Medicare & Medicaid Services that they were eliminating The Scooter Store from competitive bidding to provide equipment in approximately 100 cities.

As Medicare- and Medicaid-related sales accounted for about 75 percent of The Scooter Store’s business, the board of directors determined that they had no choice but to close their doors for the final time.

According to the statement released by the company, had The Scooter Store been selected in the bidding process it “would have enabled [our company] to continue operating in critical geographic markets around the country,” the company said.

The notification from the Centers for Medicare & Medicaid Services, which provides services to over 100 million individuals, did not indicate if they eliminated The Scooter Store from the bidding process because of the fraud allegations or for other reasons.

Details of Fraud Allegations

Powered wheelchairs, scooters, and other powered mobility devices have historically proven to be an easy area for companies to commit Medicare fraud.  In 2012, an independent auditor identified as much as $85 million in overpayments made by Medicare to The Scooter Store alone.

The auditor’s findings in 2012 were at least the second time fraud allegations were levied against The Scooter Store.  In 2007, The Scooter Store agreed to approximately $17 million in Medicare repayments related to false Medicare claims.

As a result of the 2012 findings, the board of directors of The Scooter Store agreed to repay approximately $20 million under the threat the company would be excluded from consideration in future Medicare purchases.

Chapter 11 Liquidation

In its previous Chapter 11 filing, The Scooter Store had planned to reorganize its business operations, selling some of its assets to generate needed cash.  However, with the elimination of The Scooter Store from ongoing Medicare bidding, the board of directors determined the company does not have sufficient assets to recover.  Therefore, the company will liquidate its assets in an auction scheduled presently for September 24.

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Mark has been a contributor to legal web sites related to bankruptcy, tax, and criminal law since 2011. He has an Accounting degree from Texas A&M University.