A New York insurer is accusing a DME supplier of orchestrating a multimillion-dollar scheme using false no-fault claims and inflated billing practices.
American Transit Insurance Company filed a complaint on July 16 in the Eastern District of New York, naming Advanced Recovery Equipment and Supplies LLC and four individuals it identifies as the company’s principals. The insurer claims it was defrauded of more than $1.5 million through a system of padded claims and is asking the court to relieve it of any obligation to pay a further $1.7 million in outstanding bills.
In the complaint, American Transit lays out what it describes as a years-long scheme that began as early as 2012. At the heart of the alleged fraud is the claim that Advanced Recovery worked hand-in-hand with no-fault medical clinics in and around New York City. These clinics, according to the insurer, routinely prescribed medical equipment like continuous passive motion (CPM) machines, cold therapy units, and orthopedic braces based not on medical need but on pre-arranged treatment plans designed to maximize reimbursement.
The clinics, which are not named as defendants, are said to have received financial incentives in return. The prescriptions they issued were, according to the complaint, intentionally generic – often lacking enough detail to assess whether the equipment was necessary or properly billed. American Transit says those prescriptions were then funneled directly to Advanced Recovery, sidestepping any choice by the patient.
The insurer also alleges that patients were asked to sign delivery receipts before receiving any equipment – or, in some cases, without receiving it at all. Those receipts were then used to support billing submissions to the insurer. American Transit claims that in many instances, equipment billed under high-cost codes was either never provided or substituted with lower-grade items.
The billing, it says, frequently disregarded New York’s regulatory limits. Under state insurance law and related regulations, reimbursements for durable medical equipment must follow a published fee schedule. If no listed price exists, insurers are required to pay the lesser of two amounts: the provider’s acquisition cost plus 50%, or its usual retail price.
According to American Transit, Advanced Recovery ignored those guidelines and submitted charges that exceeded both thresholds. The complaint notes that updated rules adopted in February 2023 under the Department of Financial Services’ 36th Amendment to Regulation 83 reinforced this pricing standard – known as the “Lesser of Standard” – but alleges that the defendants continued to bill improperly.
The company is asking the court for declaratory relief, saying it should not be required to pay pending claims submitted under what it calls a fraudulent arrangement. It is also seeking damages under federal racketeering laws and New York common law, citing mail fraud and systematic misrepresentation.
The complaint also references two earlier federal lawsuits filed by other insurers: one by Allstate in 2022 and another by Liberty Insurance in 2024. Both cases named Advanced Recovery and several of the same individuals, raising similar claims of improper DME billing tied to no-fault treatments. American Transit says this history underscores a deliberate and recurring pattern.
Whether the court agrees remains to be seen. But the allegations speak to broader concerns in the industry – how insurers handle DME claims, monitor vendor relationships, and enforce compliance in high-volume no-fault environments. For carriers operating in New York, the case may prompt a closer look at how durable medical equipment vendors are managed and reimbursed under state fee schedules.
