Shapiro's, an authorized Medicaid vendor, did not have orthopedic shoes or orthopedic inserts on site or the equipment to fabricate the inserts, such as casting equipment and an oven, the state's investigation found.
"Customers come in with a prescription for an orthopedic shoe; they walk out with a basketball shoe," said Pete McAleer, a spokesman for the Comptroller's Office.
Shapiro's owner, Tammy Hahm, and her attorney, Paul Melletz, say the shoe doesn't fit. Melletz said officials were rushing to judgment.
"We follow the prescriptions given by the doctors," said Melletz, a Cherry Hill lawyer. "There was no intent to commit any kind of fraud or any kind of selling something that was improper."
He said Hahm, of Voorhees, believes she dispenses orthopedic shoes based on Medicaid guidelines and state law.
Hahm said Shapiro's carries prefabricated inserts. "If there is a mistake I made, I will fix it," she said.
McAleer said that the Centers for Medicare and Medicaid Services spells out the criteria for an orthopedic shoe and that Hahm received training for Medicaid vendors detailing the parameters.
Hahm, a first-time business owner who attended Philadelphia College of Pharmacy, said she bought the former Shapiro's Corrective Shoes from a previous owner in 2005.
As an example, state officials said, Hahm claimed that the Nike shoes the store dispensed were authorized orthopedic shoes. But Nike does not manufacture a high-top corrective basketball shoe and Shapiro's doesn't carry Nike's only corrective shoe, a walking shoe, officials said.
The fraud division said it had suspended further Medicaid payments to Shapiro's and referred the case to the Attorney General's Office.
Contact Darran Simon at 856-779-3829 or email@example.com, or follow on Twitter @darransimon.