On Thursday a Tennessee healthcare executive was sentenced to 42 months in prison for what the federal government said was a $4 million kickback scheme.
According to news release by the Department of Justice and the U.S. Attorney’s Office for the Middle District off Tennessee, 42-year-old John Davis of Franklin, the former CEO of Comprehensive Pain Specialists (CPS) of Gallatin, was convicted on one count of conspiracy to defraud the United States and violate the Anti-Kickback Statute as well as seven counts of violating the Anti-Kickback Statute in April 2019 after a seven-day trial.
Davis was sentenced to 42 months in prison followed by one year of supervised release on Thursday by U.S. District Judge William Campbell Jr., of the Middle District of Tennessee.
Judge Campbell also ordered Davis to forfeit $770,036.
The news release detailed the conviction that showed that Davis abused his position as CEO of CPS to arrange for referrals of Medicare durable medical equipment orders to his co-conspirator, Brenda Montgomery, and her company, CCC Medical.
The government also charged in its case that Davis operated a shell company called ProMed Solutions, which he had registered in the name of his wife.
The court determined that payments that were made to Davis' wife and ProMed were actually illegal kickbacks that totaled over $770,000.
Davis and Montgomery pocketed over $2.9 million dollars in improper reimbursements from Medicare, and Davis used company funds from CPS to pay bonuses to providers who ordered durable medical equipment for Medicare beneficiaries and referred those orders to CCC Medical.
The court determined that Davis received 60% of the Medicare profit from these referrals, while the company he ran lost the opportunity to bill for these services.
The news release also detailed how, in 2015, Davis grew concerned over the size of the kickback payments from CCC Medical, which led Davis and Montgomery engaged in a "sham sale" of ProMed, which had no assets, no employees, no equipment, no office space and no customers other than CPS.
The price of that sale was based on the average monthly kickbacks that Davis had been paid for the previous eight months, a "purchase price" that was reduced to $150,000 when the CPS referrals slowed.
When Davis received the last check for the sale, the DOJ said that he began cutting off referrals to CCC Medical.
On Jan. 7, 2019, Montgomery pleaded guilty to one count of conspiracy to defraud the United States and violate the Anti-Kickback Statute, and seven counts of violations of the Anti-Kickback Statute. She is currently serving a 42-month prison sentence.
The case was investigated by The Office of Inspector General for the United States Department of Health and Human Services, with the support of the Defense Criminal Investigative Service, the IRS-Criminal Investigation and the Tennessee Bureau of Investigation Medicaid Fraud Control Unit, having been brought as part of the Medicare Fraud Strike Force.
Trial Attorney Anthony Burba of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Taylor J. Phillips of the U.S. Attorney’s Office for the Middle District of Tennessee are prosecuting the case.