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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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Breaking News: Former Tenet Hospital Executives Facing Criminal Trial for Kickbacks

As you may recall, back in April, 2018, in my post What’s The Downside Risk for Hospital Executives?, I wrote about the fact that Trevor Fetter, the former CEO of Tenet Healthcare, had no skin in the game: his strategy put the company into a nosedive. It lost hundreds of millions. But upon being pushed out, Fetter walked away with a $22.9 million severance package. I described it as Win if you win. Win if you lose.

But it appears as if mortals (those folks serving lower in the Tenet food chain) can have some serious skin in the game.

John Holland and William Moore, both former Tenet Healthcare hospital CEOs, are facing trial in a criminal case that alleges that they personally violated the federal Anti-Kickback Statute.

The case against Holland and Moore relates to criminal charges and an accompanying civil case brought years ago against Tenet itself. In that earlier case, Tenet settled, agreeing to pay $513 million to resolve both the civil and criminal allegations.

The issues underlying the Tenet corporate settlement arose from arrangements between Tenet hospitals (Holland and Moore were the facility CEOs) and a chain of clinics called Clinica de la Mama. The chain had contracts to provide translators, marketing and other services at Tenet hospitals.

However, prosecutors allege that the payments to Clinica de la Mama were, at least in part, to induce it to refer patients to the Tenet hospitals for births covered under Medicaid.

From press reports, it doesn’t appear as if either Holland or Moore personally benefited, at least in terms of cash, from any of the alleged happenings. However, that, in and of itself, is not dispositive.

The defendants also appear to be arguing that because the government was going to have to pay for the labor and delivery services anyway, whether at the Tenet hospitals or someplace else, the government suffered no loss. That, too, doesn’t seem to be a great argument. Setting aside fake cases, it could be argued that any case that is steered by reason of an alleged kickback caused no damage to the government because the case was going to be performed somewhere. But that’s not what underlies the AKS.

Instead, the AKS is aimed at making sure that referrals are made in the best interests of patients, not profits.

Of course, the facts underlying the particular prosecution of Holland and Moore are complex. Were the payments to Clinca de la Mama fair market value for what Tenet received in return? Or was some potion for the referral of patients? Or, due to the “one purpose rule,” were the payments indeed fair market value and no more for what was received in services in return, but also motivated by a purpose to receive referrals?

Holland and Moore certainly have skin in the game.

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

Mark F. Weiss

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Compliance | Kickback

Physician Behind Bars For Referrals: Kickbacks, Bribes, and Mail Fraud

Physician, well, former physician, Bernard Greenspan is whiling away his time in federal prison in Butner, NC. He’s part way into his 41 month sentence in connection with the Biodiagnostic Laboratory Services, LLC (“BLS”) scam that, at my last count, resulted in the conviction of 43 defendants, 29 of them of doctors.

Greenspan, a family medicine doctor, was convicted of multiple crimes, including violation of the federal Anti-Kickback Statue, in connection with receiving bribes totaling approximately $200,000 from BLS, its employees and associates in return for the referral of blood samples worth approximately $3 million in billings to BLS.

Interestingly, and frightening for those physicians, and others, who misunderstand the AKS and its place in the pantheon of prosecutorial weapons, Greenspan received the money from BLS and its affiliates through rental, services, and consulting agreements that were apparently vetted for “compliance” with the AKS’s space rental and personal services safe harbor.

After all, Greenspan’s attorney argued that the doctor had entered into legal agreements for rent and services and that there was no evidence that he ever made referrals in exchange for remuneration. So, how could the payments be kickbacks?

What You Need To Know

1.  Fitting a deal within one of the AKS safe harbors is not, never was, and never will be a guaranty that you are immune from AKS prosecution, because the safe harbors do not protect sham arrangements. Accordingly, Greenspan was indicted and convicted of violating the AKS, also known as 42 U.S. Code § 1320a–7b.

Unfortunately, too many deals that facially fit within a safe harbor are “ass backward” arrangements designed to cover up illegal arrangements: Lab owner Joe tells Dr. Sally that he’ll give her a little “taste” if she sends some patients his way. Sally feigns horror, but sees no problem with Joe’s comeback: Joe’s cousin Lou will rent space from Sally for $X pursuant to a lease that meets all of the check-the-box requirements of the space rental safe harbor. That includes the fact that the rent will be within the range of FMV. Sally will send her patients’ blood samples to Joe’s lab.

Like the old expression goes, you can put lipstick on a pig, but it’s still a pig. The lease was just the lipstick. The acceptance of $X, even if it is fair market value, was the pig, the crime.

2.  Even if compliance with a safe harbor is legit, compliance with it protects you from AKS prosecution only. There are many other laws that prohibit much of the same conduct and to which the AKS safe harbors have absolutely no relevance.

For example, in addition to the AKS violation, Dr. Greenspan was also indicted for, and found guilty of, violating:

  • 18 U.S. Code § 371 – Conspiracy to commit offense or to defraud United States: The conspiracy with BLS and its owners and managers to defraud Medicare.
  • 18 U.S. Code § 1343 – Fraud by wire, radio, or television: The Medicare payments sent by interstate bank wire (the electronic payments from the Medicare contractor to BLS’s bank account).
  • 18 U.S. Code § 1952 – Interstate and foreign travel or transportation in aid of racketeering enterprises (the “Travel Act”): Both (a) the payments by the Medicare contractor to BLS’s bank account by bank wire, and (b) the fact that the payments constituted commercial bribery under New Jersey state law, thus triggering violation of this federal law. (See my article Why Your Compliance Efforts May Be Worthless.)

3.  I’ve written many times that those you work with are potential witnesses against you. For example, people often turn employees into whistleblowers in respect of civil prosecution for violation of the False Claims Act.

As anyone who watches crime story movies or TV shows should know, the same situation, but on steroids, plays out in respect of criminal prosecution: Other participants in the scheme flip on you to reduce their charges or punishment.

In the case of Dr. Greenspan, the two brothers at the center of the BLS scheme, the company’s president, David Nicolls, and Scott Nicolls, testified that they entered into a conspiracy with Greenspan to get the blood samples in exchange for kickbacks.

What You Must Do

Every new, and every existing, financial relationship with anyone or any entity with which physicians and other healthcare providers do business must be vetted or re-vetted in light of today’s enforcement reality. Immediately. If they’re violative, they must be unwound.

As to Dr. Greenspan, at 80 years old, it’s conceivable that he’ll spend the rest of his life behind bars.

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

Mark F. Weiss

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