Englewood, Colorado-based medical device company Zynex Inc. Has entered into a non-prosecution agreement with the U.S. Department of Justice, resolving allegations of a long-running healthcare fraud scheme. The agreement, reached on Tuesday, requires Zynex to pay between $5 million and $12.5 million in penalties, with the final amount dependent on the company’s future earnings, and to forfeit millions in unpaid claims. This resolution marks a significant development in a case involving allegations of widespread overbilling and fraudulent practices related to pain management and rehabilitation devices.
The Department of Justice alleges that Zynex engaged in a conspiracy to commit healthcare fraud, securities fraud, and mail fraud, among other violations. The core of the scheme involved billing patients and insurers for medically unnecessary supplies, often in excessive quantities. Investigators estimate that the vast majority – over $600 million – of the $873 million Zynex collected for its products and supplies was the result of fraudulent activity, according to the U.S. Attorney’s Office for the District of Rhode Island. Details of the investigation were released this week.
The settlement comes on the heels of a federal grand jury indictment last month charging two former top executives of Zynex – Thomas Sandgaard and Anna Lucsok – with spearheading the alleged scheme. Former employees have come forward alleging they witnessed improper billing practices and were pressured to prioritize profits over patient needs. These employees reported instances of patients receiving unsolicited shipments of supplies and being billed for amounts far exceeding their insurance coverage, sometimes reaching thousands of dollars for items they didn’t require.
Zynex acknowledged shipping and billing for these unnecessary supplies and misleading investors about its billing practices. The company has stated that it has overhauled its billing and supply replenishment procedures, and implemented latest marketing policies to ensure compliance with U.S. Food and Drug Administration regulations. According to a company statement, the resolution “represents the fulfillment of the commitments we made as a new management team when we arrived in August 2025: to break from the past, rebuild the company as compliant-by-design and create a new future for the company, its customers and employees.”
Federal Investigation Uncovers Years of Fraudulent Billing
The investigation revealed a pattern of systematic overbilling and the shipment of excessive quantities of medical supplies, primarily electrodes and batteries used with Zynex’s pain management devices. Former employees described a culture where concerns about improper billing were dismissed, and those who raised objections were often terminated. One former employee, Anthony Drayton, recounted feeling pressured to prioritize profit over patient well-being, noting that patients were often given misleading information about out-of-pocket costs.
The Department of Justice is also pursuing the forfeiture of assets from Sandgaard and Lucsok, including luxury vehicles, a private jet, and properties in Colorado and Florida, according to reports. The government is seeking to recover funds obtained through the fraudulent scheme and ensure accountability for those involved.
Compliance Reforms and Ongoing Investigations
As part of the agreement with the DOJ, Zynex has committed to implementing enhanced compliance and corporate governance reforms designed to prevent future misconduct. The company will also cooperate fully with the government’s ongoing investigations. U.S. Attorney Charles C. Calenda stated that the resolution “addresses the seriousness of the fraud committed by Zynex while recognizing the substantial turnaround in conduct implemented under new management.”
The case highlights the critical importance of oversight and accountability within the medical device industry. Healthcare fraud not only results in financial losses for insurers and patients but also erodes trust in the healthcare system. The Department of Justice’s continued investigation and Zynex’s commitment to reform are steps towards addressing these issues and protecting patients from fraudulent practices.
The outcome of the cases against the former executives, Sandgaard and Lucsok, remains to be seen. Their indictments on charges including conspiracy to commit healthcare fraud, mail fraud, and securities fraud signal the DOJ’s intent to pursue individual accountability for the alleged wrongdoing. The legal proceedings will likely shed further light on the extent of the fraudulent scheme and the roles played by those involved.
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