Sleep Study and CPAP Fraud

Companies providing diagnostic tests, such as sleep labs, and durable medical equipment, like a CPAP, have been accused of fraudulent billing of government healthcare programs, including Medicare, through lawsuits under the False Claims Act.  Whistleblowers with evidence of improper billing of Medicare can file a qui tam lawsuit and may be eligible for a reward of between 15 and 30 percent of the government’s recovery under the law.

Our whistleblower attorneys will evaluate evidence of unlicensed technicians, unnecessary services or kickbacks involving sleep clinics.  We provide a free, confidential initial consultation to discuss the False Claims Act and your evidence.

Medicare Spending on Sleep Clinics

Sleep testing isn’t cheap.  From 2001 to 2009, Medicare payments for sleep studies increased from $62 million to $235 million.  Prices in the sleep industry have been skyrocketing since then, with annual increases of approximately 8-9 percent.  Overall, sleep apnea is a $30+ billion industry.  This makes it an area where fraud can slip through the cracks.

Potential Violations of the False Claims Act

Medicare covers diagnostic testing of patients for sleep disorders, such as obstructive sleep apnea, performed in sleep labs. Medicare will also cover the rental of CPAP equipment, which is considered durable medical equipment, to treat the condition. However, there are a number of laws and conditions on coverage which providers and suppliers must follow. Some examples of potential violations include:

Improper Billing

In 2013, the Office of Inspector General performed a study on polysomnography services following an increase in Medicare spending of 39 percent from 2005 to 2011.  OIG examined claims for reimbursement from hospital outpatient departments, physician owned sleep laboratories and independent diagnostic testing facilities.  OIG identified $17 million in claims that failed to meet one or more of the Medicare requirements for payment.  This included some providers submitting two claims in one day, which is impossible since the process requires an overnight stay.  Other examples of questionable billing included unbundling split-night services and multiple titration studies.


Arrangements between sleep labs and DME manufacturers or physicians may potentially violate the Anti-Kickback Statute (AKS) or the Stark Law.  In 2011, the OIG expressed concern about an arrangement between a durable medical equipment (DME) supplier of CPAP machines and an independent diagnostic testing facility under the AKS.

Unlicensed Employees

Sleep studies must be conducted by licensed or certified technicians in order to be eligible for reimbursement by Medicare.  The qualifications are met through a state or national body offering the required credentials.  If the sleep lab submits claims for reimbursement of polysomnographic (PSG) sleep studies performed by ineligible employees, it violates the False Claims Act.

Unapproved Facilities

A 2016 settlement in the Northern District of California against a sleep clinic included allegations that the sleep clinic was performing testing at a location unapproved by Medicare and submitting claims as if it was performed at a Medicare-approved facility.

Medical Device Sales

Medicare rules and regulations prohibit sleep testing providers from supplying durable medical equipment or sharing their location with a DME provider.  If a facility is billing Medicare for testing and providing CPAP machines to Medicare customers, it is in violation of Medicare rules.

The Benefits of Reporting

The Right Thing to Do

Whistleblowers have become an increasingly important tool for law enforcement agencies.  Without tips from individuals with non-public information, a company’s violation of the Medicare rules might cost the government tens or hundreds of millions.

Whistleblower Rewards

The U.S. Government pays out hundreds of millions of dollars every year to whistleblowers under the False Claims Act.  The law permits the filing of qui tam lawsuits by relators on behalf of the government.  The Department of Justice investigates the information in the lawsuit.  If there is a recovery for the U.S. Government and the relator is eligible, a reward of between 15 and 30 percent of the total amount may be awarded to the whistleblower.

Retaliation Protections

Section 3730(h) of the False Claims Act protects a whistleblower from retaliation by their employer.  It allows individuals to sue their employer for compensation including back pay, reinstatement, attorneys’ fees and other relief to make the individual whole.

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