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Anesthesia Company Model Arrangement Fuels $1.718 Million Dollar FCA Settlement by a Surgeon and a Separate Guilty Plea By Another Doctor Defendant – Medical Group Minute

In a recent set of go-rounds with the Department of Justice, the so-called company model of anesthesia services took a major hit: Jonathan Daitch, M.D., just agreed to a $1.718 million civil settlement and Michael Frey, M.D., plead guilty in a criminal prosecution.

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No Matter How Hard They Tri[Care], Another Compounded Medicine Scam Creams Out

It’s a story strangely reminiscent of that told in my 2016 blog post, Greasy Kickback Residue Is All That’s Left of Pain Cream Fraud.

Last week, the U.S. Department of Justice announced that nurse practitioner Candace Craven pleaded to a telemedicine health care fraud scheme that bilked TriCare out of more than $65 million in connection with “compounded pain creams” that appear to me to actually be illegally manufactured drugs.

Although she’s yet to be sentenced, Ms. Craven will probably head off to federal prison. In addition to being supervised by the guards, she’ll likely also be subject, in a manner of speaking, to physician supervision: two physicians involved in the same scam, Drs. Carl Lindblad and Susan Vergot, pleaded guilty earlier this year in connection with their involvement in the same scam and are awaiting sentencing.

Ms. Craven admitted to conducting sham “telemedicine” evaluations that resulted in the prescription of exorbitantly expensive compounded medications to patients that she never saw or examined in person.

According to her plea, a team worked to recruit and pay Marines, primarily from the San Diego area, and their dependents – all TriCare beneficiaries – to obtain compounded medications that would be paid for by the TriCare program, a federal healthcare program.

The so-called patients’ info was sent to Choice MD, the Tennessee medical clinic owned by Drs. Carl Lindblad and Susan Vergot, which was Ms. Craven’s employer.

Craven would then conduct phone calls with the TriCare beneficiaries, and recommended that they be prescribed compounded medications despite never examining the patients in person. These prescriptions were then signed by doctors employed by Choice MD, were not given to the beneficiaries, but sent directly to particular pharmacies controlled by co-conspirators, which filled the prescriptions and billed TriCare at exorbitant prices.

Just how exorbitant, you might ask? Well, according to the government’s allegations, between December 2014 and May 9, 2015 – the day that TriCare stopped reimbursing them for compounded medications – doctors working at Choice MD signed 4,442 total prescriptions for which their co-conspirators billed TriCare $65,679,512.

You might say that crime paid well, at least until it was time to pay for the crime.

Seven defendants were charged in the scheme. Ms. Craven is the fourth defendant to plead guilty. In addition to Drs. Lindblad and Vergot, last April, Josh Morgan, a former Marine from San Diego charged with recruiting TriCare beneficiaries, entered his guilty plea. The prosecution of the remaining three defendants continues.

The case raises several issues for you to consider.

  • Telemedicine is an evolving methodology and there are significant issues involved in the intersection between it and prescribing drugs.
  • Telemedicine also raises issues of state medical licensure. The patient’s location is the state in which licensure is required.
  • There’s a huge and extremely significant distinction between compounding and manufacturing drugs. Compounded medications are specialty medications mixed by a pharmacist to meet the specific medical needs of an individual patient. Compounded drugs are not approved by the FDA but they are properly prescribed when a physician determines that an FDA-approved medication does not meet the health needs of a particular patient. Compounded drugs are not “compounded,” they are manufactured, when mixed-up in large batches. Drug manufacturing is FDA regulated.
  • With lots of money at play, it’s not hard to see why the government is motivated to investigate and prosecute in order to obtain huge fines and restitution, in addition to sending defendants to federal prison.

And, as mentioned in Greasy Kickback Residue, with lots of money at play, it’s not hard to see how many who might otherwise have legitimate business and medical practice interests become attracted to fast and easy money. Of course, the money’s only easy until you get caught.

There are many legitimate ways for physicians to increase their practice income. They include, depending on state law, investments in compounding pharmacies and the direct dispensing of pharmaceuticals.

But any deal must be structured in compliance with the federal Anti-Kickback Statute, Stark, and various state law counterparts and other restrictions.

Yes, think entrepreneurially. But please be smart about it.

Comment or contact me if you’d like to discuss this post.

Mark F. Weiss

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