Breaking News: Update on the Toumey Healthcare System Case

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On September 26th, Tuomey Healthcare System in Sumter, S.C. announced that President/CEO Jay Cox and Executive Vice President/COO Gregg Martin will be leaving the hospital’s administrative staff.  Earlier this year, for the second time, a jury found Tuomey guilty for violating the Stark Law and the False Claims Act by submitting tens of thousands of illegal bills to Medicare worth $39 million.  The DOJ filed a motion with the Court requesting $237 million in fines and penalties on top of the $39 million already leveled. The total was calculated as the minimum of treble of the $39 million plus the minimum of $5,500 per claim. The Court is considering responses to motions by both the DOJ and Tuomey.  The hospital went to trial over whether they violated the Stark Law in their contracts with outside physicians to provide surgery exclusively in its facilities and pays them a bonus for productivity.  This case sent shock waves to the hospital sector.

Both Cox and Martin and the hospital’s board of trustees reported they are arriving at an agreement for separation agreements.  Cox has been CEO of the hospital in 2005 when the hospital signed a number of doctors to part-time contracts, designed to induce the flow of business to the hospital that the federal government found as violating the Stark Laws and creating Medicare fraud.

These resignations follow the South Carolina Attorney General’s Office stating that the Board of Trustees members and officers of Tuomey cannot be protected by the hospital from possible fines and penalties should they be found liable in a future lawsuit.  They made it clear there is no current reason to protect its officials against the current federal enforcement actions at the hospital.  What this means is that Tuomey may not indemnify these individuals.

What remains in this case is to see what final action the Court will take on imposing the penalties on Tuomey as result of the guilty conviction and whether any actions may be taken with regards to senior officials and members of the Board of Trustees at Tuomey.

Earlier coverage by Wolters Kluwer and Richard Kusserow on the Toumey case can be found here.

Richard P. Kusserow served as DHHS Inspector General for 11 years. He currently is CEO of Strategic Management Services, LLC (SM), a firm that has assisted more than 3,000 organizations and entities with compliance related matters. The SM sister company, CRC, provides a wide range of compliance tools including sanction-screening.

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Copyright © 2013 Strategic Management Services, LLC. Published with permission.