“Pain Management Associates (PMA), is a specialty group, with locations in South Carolina, North Carolina and Tennessee.With our Board Certified Pain Physicians, we can offer patients a total solution for Pain Management.”
From the website.
On August 9, Oaktree Medical Centre – which does business as Pain Management Associates – confirmed all its locations will be closed and 380 employees laid off in a process to be completed by the end of August. That provides confirmation – if any was needed – that lenders , including Fidus Investment (FDUS), will not be getting any proceeds from their exposure to the chain, accused of multiple frauds by the Justice Department.
A group of local pain management clinics is being sued by the United States government for fraudulent claims among other issues.
In October , the FBI raided Pain Management Associates offices in Spartanburg, Easley, and Greenville. Newly unsealed court documents reveal the federal government has been investigating the practices, their parent company Oaktree Medical Centre and its owner, Dr. Daniel McCollum, for years. They’re accused of improperly billing federal programs, including Medicare and Medicaid.
The investigation began after former Oaktree Medical Centre employees filed whistleblower lawsuits. Three former employees sued jointly in 2015. The fourth filed a lawsuit in 2017. The U.S. Department of Justice picked up parts of their cases to sue on behalf of U.S. taxpayers, according to court records.
Pain Management Associates serves patients in Anderson, Easley, Greenville, and Spartanburg, as well as western North Carolina.
Former employees allege in lawsuits that practices set up schemes to pad doctors’ pockets and bill the federal government for benefits that weren’t always necessary.
BDC Credit Reporter View
8/10/2019: With the news that Oaktree Medical Centre is closing every location and laying off all its employees, there is no doubt this investment has been an unmitigated disaster for Fidus Investment (FDUS), which has written down its $13.8mn invested to zero. No recovery is likely and the Realized Loss is likely to be taken in the third or fourth quarter 2019. The fact that the BDC’s debt was principally in a first lien position has proven immaterial in this case and proves – yet again – that investors in the BDCs involved cannot take too much comfort from the seniority of the investment made, especially in unusual circumstances like these. This has obviously been a failure in underwriting by FDUS, which does not seem to have been aware or concerned about claims of the multiple frauds at the company and which date back to 2015. Since the end of 2014, FDUS actually doubled its exposure to the company, according to Advantage Data‘s quarterly records of BDC exposure. However, we will say that other BDC lenders have been caught in similar situations where frauds are alleged in medical situations. We can think of at least two in recent years, which underscores the limitations lenders have in monitoring their borrowers.
8/5/2019: With BDC earnings season, we learned a little more about the troubles of Oaktree Medical Centre, a pain management chain, which was sued by the Department of Justice back in March 2019 and was raided by the FBI as far back as October 2018. The only BDC lender with exposure is Fidus Management (FDUS), which carried its debt at par or above through September 2018. At the end of the IQ 2019, some of the debt was on PIK non accrual and written down (8%)-(22%). Now, with the IIQ results, FDUS has thrown in the towel, placed all the debt -$13.4mn at cost – on non accrual and written down the value to zero. Looking at the public record, the chances of any eventual recovery is slim if the fraud the company’s principals are accused of is proved, and even if not. As often in these situations, and with the benefit of hindsight, FDUS seems to have been slow to reflect in its valuation the scale of the threat to recovery. At the end of March, even as the IRS accused the company of massive fraud, some of the debt was barely discounted. Another reminder – if one was needed – that BDC investors need independent the BDC Credit Reporter’s independent assessment. From BDC Credit Reporter article.