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Former Hospital CEO to Pay $1M for Stark Violations

News  |  By HealthLeaders Media News  
   September 28, 2016

DOJ says its settlement with the ex-CEO at Tuomey Healthcare System demonstrates that individual decision makers will be held personally accountable for their involvement in their businesses' unlawful activities.

Former hospital executive Ralph J. Cox III will pay $1 million to settle Stark Law violations for orchestrating illegal "sweetheart deals" with referring physicians during his tenure as CEO of Tuomey Healthcare System in Sumter, SC, the Department of Justice said Tuesday.

As part of the settlement, Cox is banned for four years from participating in federal healthcare programs. Cox was fired as Tuomey's CEO in the fall of 2013.

Federal prosecutors said that Cox, fearing that Tuomey could lose lucrative outpatient procedure referrals to a new freestanding surgery center, entered into contracts with 19 specialist physicians that required the physicians to refer their outpatient procedures to Tuomey.

Risk and Red Flags Observed
In exchange, the hospital paid them compensation that far exceeded fair market value and included part of the money Tuomey received from Medicare for the referred procedures. During the trial against the hospital, the government argued that Cox ignored and suppressed warnings from one of Tuomey's attorneys that the physician contracts were "risky" and raised "red flags."

On May 8, 2013, after a month-long trial, a South Carolina jury determined that the contracts violated the Stark Law. The jury also concluded that Tuomey had filed more than 21,000 false claims with Medicare.

On Oct. 2, 2013, the trial court entered a judgment under the False Claims Act in favor of the United States for $237.4 million. The United States Court of Appeals for the Fourth Circuit affirmed the judgment on July 2, 2015.

On Oct. 16, 2015, DOJ resolved its judgment against Tuomey for payments totaling $72.4 million, and the hospital was sold to Columbia, SC-based Palmetto Health.

"Sweetheart deals between hospitals and referring physicians distort medical decision making and drive up the cost of healthcare for patients and insurers alike," said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department's Civil Division.

"Patients have a right to be confident that a physician who orders a procedure or test does so because that service is in the patient's best interest, and not because the physician stands to gain financially from the referral. Today's settlement demonstrates that the Justice Department and its law enforcement partners will hold individual decision makers accountable for their involvement in causing the companies and facilities they run to engage in unlawful activities."

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