(Reuters) – U.S. authorities on Tuesday said they have broken up a $1.2 billion Medicare fraud in which doctors, telemarketers and owners of medical equipment companies peddled medically unnecessary orthotic braces to hundreds of thousands of elderly and disabled patients.

Authorities called the case one of the largest health care frauds ever prosecuted in the United States.

Prosecutors accused so-called durable medical equipment (DME) companies of paying kickbacks and bribes in exchange for referrals by doctors working with fraudulent telemedicine companies for back, knee, shoulder and wrist braces that patients did not need.

The scheme allegedly involved the use of call centres in the Philippines and throughout Latin America, with proceeds laundered through offshore shell companies and used to buy exotic cars, yachts and luxury real estate.

Medicare’s anti-fraud unit said it was taking action against 130 medical equipment companies that had submitted more than $1.7 billion of claims, and been paid more than $900 million.

Charges against various defendants were brought in California, Florida, New Jersey, Pennsylvania, South Carolina and Texas.

They were announced in a joint statement from several U.S. attorneys, the FBI, the Department of Health and Human Services’ (HHS) Office of Inspector General and the Internal Revenue Service.

“The breadth of this nationwide conspiracy should be frightening to all who rely on some form of healthcare,” IRS Criminal Investigation Chief Don Fort said in a statement. “It details broad corruption, massive amounts of greed, and systemic flaws in our healthcare system that were exploited.”

Authorities identified the largest alleged individual scheme as a $454 million fraud run by Florida residents Creaghan Harry, Lester Stockett and Elliot Loewenstern, respectively the owner, chief executive and marketing vice president of call centres and telemedicine companies.

That case is being overseen by U.S. Attorney Craig Carpenito in New Jersey.

Carpenito also announced charges against New Jersey residents Neal Williamsky and Nadia Levit, who own approximately 25 DME companies, over their alleged roles in a separate $150 million scheme.

Lawyers for Williamsky and Levit lawyers did not immediately respond to requests for comment. Lawyers for Harry, Loewenstern and Stockett could not immediately be located, and attempts to reach those defendants by phone were unsuccessful.

HHS issued a consumer alert warning Medicare beneficiaries about scammers who might offer braces through television or radio ads, or by calling them directly.(here)

It said Medicare might deny needed braces to beneficiaries who receive unwanted or unneeded braces that are billed to Medicare now.