On December 20, 2018, the U.S. Attorney’s Office for the Middle District of Florida announced that a Fort Meyers-based pain doctor had agreed to settle a False Claims Act investigation. Dr. Jonathan Daitch agreed to pay over $1.7 million to resolve allegations that he violated the federal False Claims Act by receiving unlawful kickbacks associated with the provision of anesthesia services and by receiving reimbursement for medically unnecessary urine drug tests.

Dr. Daitch was an interventional pain management specialist and one of two owners of a Fort Meyers pain clinic. The government alleged that Dr. Daitch caused the submission of false claims to Medicare and Tricare by causing the submission of definitive urine drug testing in circumstances where such testing was not reasonable or medically necessary. The government’s press release noted that such testing “was financially lucrative for Dr. Daitch because the testing was performed [his practice]’s own in-house laboratory and was billed for by the practice.”

The settlement also resolved kickback allegations involving an anesthesia company that was owned by Dr. Daitch and his partner and that provided anesthesia services – through contracted CRNAs – on an exclusive basis for procedures performed at Dr. Daitch’s practice. According to the government, Dr. Daitch’s ownership interest in the anesthesia company, as well as the remuneration he received through that ownership interest, induced him to refer his patients to his anesthesia company.

In addition to the civil FCA settlement, CMS will continue to withhold Medicare payments from Dr. Daitch’s anesthesia company that it began to withhold in July 2018 as part of an administrative suspension, and Dr. Daitch and his practice will enter into a five-year Corporate Integrity Agreement (CIA) with the OIG.

In June 2018, Dr. Daitch’s former partner, Dr. Michael Frey, pleaded guilty to two counts of conspiracy to receive kickbacks, and agreed to a $2.8 million civil settlement to resolve his potential liability under the False Claims Act. The criminal plea agreement was based upon several kickback schemes, including Dr. Frey’s agreement with the owners of a local durable medical equipment (DME) provider, wherein Dr. Frey would receive compensation in exchange for DME referrals. According to the plea agreement, the DME company compensated Dr. Frey by making sham payments to his wife, creating the impression that Mrs. Frey was an employee of the DME company although she was not. In addition, Dr. Frey also admitted to receiving cash payments from a compounding pharmacy in exchange for writing pain cream prescriptions, and to receiving kickbacks in the form of speaker fees in connection with a “largely bogus” speaker event by drug company Insys Therapeutics in exchange for writing prescriptions for Insys’ fentanyl sublingual spray known as SUBSYS.

As of the date of this alert, Dr. Frey has not yet been sentenced, although the DME company owners both pled guilty and were sentenced to one year and nine months in prison, respectively.