Kusserow’s Corner: The Tuomey Healthcare Saga Continues

On May 8, 2013, a jury found Tuomey Healthcare System guilty for violating the Stark Law and the False Claims Act by submitting tens of thousands of illegal bills to Medicare worth $39 million. Tuomey originally went to trial over whether they violated the Stark Law in their contracts with outside physicians to provide surgery exclusively in its facilities, and pay the physicians a bonus for productivity. There were actually two trials. In both, Tuomey was found guilty by a jury. The Department of Justice (DOJ) filed a motion requesting $237 million in fines and penalties on top of the $39 million already leveled. Last September, the United States District Court for the District of South Carolina ruled against Tuomey and in favor of the United States in the full amount requested by the DOJ.

The court’s decision followed an announcement that the Tuomey President/CEO Jay Cox and Executive Vice President/COO Gregg Martin were leaving the hospital’s administrative staff. This in turn followed the South Carolina Attorney General’s Office’s decision 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. On October 1, Tuomey filed an appeal.

Last week, Tuomey’s attorneys asked the Court to set aside the judgment until its appeal is heard stating that paying the entire judgment would be “a fiscal impossibility” that would cause the hospital to shut down. They further argued that placing upwards to $300 million in escrow while they pursue an appeal would have the same effect. As of this date, Tuomey has placed $50 million in escrow in relation to the case. Tuomey stated, however, that the most it could afford to remain committed in escrow was $30 million. The U.S. Attorney’s Office responded by stating that they had “no intention whatsoever to close Tuomey Hospital or to deprive the community of necessary hospital services,” and that recent financial statements evidence that the hospital can afford additional escrow. They noted that Tuomey was able to spend $5 million on construction in 2011 and pay its former CEO Jay Cox and Vice President Gregg Martin substantial separation agreement amounts that same year. However, the biggest expense by far cited by the government was $18 million for attorneys in this case.

The DOJ requested the court to have at least $70 million set aside in escrow, if Tuomey wants to continue the appeals process and that amount would not harm the delivery of health care services. If the court sides with the DOJ attorneys, Tuomey would not have to meet the near-$300 million figure, but would have to deposit at least an additional $20 million.

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 © 2014 Strategic Management Services, LLC. Published with permission.