NEW BRAUNFELS, Texas - A Texas-based company that sells wheelchairs and motorized scooters to people with limited mobility announced Friday that it's shutting down for good, following federal scrutiny over its advertising and billing.
The Scooter Store, which filed for bankruptcy protection earlier this year, plans to phase out operations and furlough its remaining 370 employees and managers, the San Antonio Express-News (http://bit.ly/19QnyuK) reported, citing a company statement. About 200 of those jobs are in the company's headquarters in New Braunfels, with the rest at 55 distribution centres around the nation.
The decision came from the company's board of directors, according to the statement.
A message left with the company by The Associated Press was not immediately returned Friday night. The company website bears only a statement that the company was undergoing "a business revitalization intended to sharpen its focus on meeting its customer's most critical needs, efficiently and in partnership with government and mobility industry expectations.
The company's announcement comes after the U.S. Centers for Medicare and Medicaid Services notified The Scooter Store that it would lose federal contract for reimbursement of the sale of its products, effective Oct. 26. The federal decision "effectively eliminates" its ability to sell its assets in a Chapter 11 reorganization, so it will liquidate, the company said in its statement to the Express-News.
The Scooter Store was one of the industry's leading companies, with TV ads promising freedom and independence to people with limited liability. But critics say the ads convince some seniors that they need a scooter to get around when many don't.
Some members of Congress say the ads lead to hundreds of millions of dollars in unnecessary spending by Medicare, which is only supposed to pay for scooters as a medical necessity when seniors are unable to use a cane, walker or regular wheelchair. According to congressional testimony, Medicare accounted for about 75 per cent of The Scooter Store's revenue.
Allegations of Medicare fraud within the industry go back nearly a decade.
The U.S. Justice Department sued The Scooter Store in 2005, alleging its advertising enticed seniors to obtain power scooters paid for by Medicare, and the company then sold patients more expensive scooters that they did not want or need. The Scooter Store settled that case in 2007 for $4 million.
As part of the settlement, The Scooter Store was subject to periodic government reviews. In 2011, the latest review available, government auditors estimated that The Scooter Store received between $47 million and $88 million in improper payments for scooters. The company said the government's estimate was flawed and that it was willing to repay $19.5 million in overpayments.
In February of this year, dozens of law officers raided the company's headquarters in New Braunfels.
That city later sued The Scooter Store to get back more than $2.6 million in job-creation incentives awarded to the company.
Finally, in April, The Scooter Store filed for Chapter 11 bankruptcy protection.
Information from: San Antonio Express-News, http://www.mysanantonio.com