The Scooter Store announced Tuesday that it will move to “transform its business model” through the sale of substantially all of its assets under section 363 of the United States Bankruptcy Code.
As part of these efforts, the company has entered into a voluntary chapter 11 case in the United States Bankruptcy Court for the District of Delaware.
The announcement follows allegations that the company engaged in Medicare fraud, stemming from a government audit that revealed about 80% of Medicare reimbursements for power wheelchairs (aka scooters) are made in error, with a majority going to people who don’t actually need them or can’t prove their need, according to a recent CBS This Morning investigation.
A report from the Department of Health and Human Services Inspector General found The Scooter Store overbilled Medicare by as much as $108 million between 2009 and 2012.
The Scooter Store did agree to repay nearly $20 million for chairs it admitted Medicare should not have reimbursed them for after the HHS Inspector General threatened to suspend it from federal health programs, according to CBS.
The company reportedly “disputes the government’s audits, [which] found the company owes as much as four times what it’s agreed to repay.”
Those allegations may have contributed to The Scooter Store’s bankruptcy filing, although the company’s CEO said they plan to continue offering power chairs following a restructure.
“Unfortunately, historical overhangs coupled with an increasingly complex regulatory environment and mounting economic pressure in the healthcare sector have significantly impacted the company’s ability to operate under its current model,” said CEO Martin Landon.
The company said that it is adjusting to new market conditions and strengthening its business model to maximize value, compliance, profitability and the quality of customer service.
A new model will help The Scooter Store maintain its core product offering within a network of high value, local distribution center businesses, the company said.
“The Company is using the chapter 11 vehicle to seek to create a new, financially healthy provider that operates in strict accordance with all legal, contractual and regulatory requirements,” continued Landon, “which would help the company complete the business turnaround that we were brought in to do.”
The Scooter Store expects to continue operating with its current workforce level throughout its restructuring phase. Additionally, the company said it has also filed a variety of motions seeking approval to pay employee wages, and honor customer warranties and program.
The company also said that its suppliers should expect to be paid for goods and services delivered after the filing, and that the company also intends to meet all contract, quality and supplier standards associated with existing payer agreements.
Written by Jason Oliva