Hanger Facility Staffer Alleges Fraud

An employee of the Hanger Prosthetics & Orthotics Inc., West Hempstead, New York, office has alleged that the patient care center has forged prescriptions and billed Medicare and other payers for services to nonexistent patients. In an interview with WNBC Channel 4 news June 14, Kendall McDaniel described these alleged incidents and also said that blank Elmhurst Hospital prescription pads and official insurance company documents are kept at the office. She said that she has seen a manager fill them out.

In a statement June 14, the New York City Health and Hospitals Corporation said, "This matter appears to involve the theft and fraudulent use of hospital prescription pads without any knowledge of Elmhurst Hospital or the physicians whose names were used."

Hanger Chairman and CEO Ivan R. Sabel, CPO, told The O&P EDGE that the company's audit team is conducting a thorough investigation of the facility and stressed that the charges involve one facility out of the company's 608 and one employee out of about 3,200. Both McDaniel and the employee involved in the alleged fraud have been placed on administrative leave with pay until Hanger's internal investigation is complete.

NewsChannel 4 stated that a Hanger internal audit conducted last summer and obtained by the station "shows that all 15 files checked had problems complying with the law." The statement continued, "Issues ranged from no prescription to no justifying notes. Overall, the company's own auditor gave a failing grade-50 out of 100-with 80 considered compliance."

However, Sabel and Jason Owen, corporate treasurer, told The O&P EDGE that a follow-up audit was conducted within three and a half months-not the seven months reported by Channel 4-and revealed only administrative errors. In the follow-up audit, the audit team gave the center a compliance rate of 89, Owen said.

Sabel, Owen, and Chief Financial Officer George McHenry emphasized the thoroughness of Hanger's audit team. In a public statement, Sabel said, "Hanger Orthopedic Group has an active internal audit team that reports to the Audit Committee of its Board of Directors and is committed to maintaining the highest standards of integrity and compliance. We take this matter very seriously. We are expending all the necessary resources to bring this matter to an accurate and swift conclusion."

The televised allegations shook the company's stock prices. On June 15, Hanger stock price per share was reported to have dropped almost 9 percent to $13.18 in afternoon action. According to Michael Baron of CBS, CJS Securities issued a research note attributing the decline to an "extremely negative investigative report" that ran Monday night on New York television station WNBC. "At this point, there is no factual evidence to support these allegations," CJS said, as quoted by Baron. CJS added later in the note that there is also no evidence to suggest the presence of a systemic problem at Hanger, Baron pointed out.

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