Healthcare News & Insights

Tuomey hospital execs resign under shadow of lawsuit

You may have heard back in May that Tuomey Healthcare Systems in Sumter, SC, was found guilty of Stark Law violations for improperly compensating 19 specialty physicians, and illegally submitting a total of 21,730 Medicare claims worth $39 million. Well, Tuomey is making headlines again.

138173179 (1)This time it’s for the resignation of hospital executives Jay Cox, CEO, and Gregg Martin, VP. The announcement was made during a recent staff meeting that the board and its two top officials “have mutually agreed to negotiate a separation agreement.”

It’s speculated that this move was to open the way for a settlement with the federal government over the previously mentioned whistleblower lawsuit, which has the Department of Justice asking for $237 million in fines and penalties, in addition to the $39 million in Medicare false claims.

It was also announced that  Nexsen Pruet — the law firm representing Tuomey — also offered to withdraw from representing Tuomey.

Reason: The whistleblower lawsuit  — brought about by Dr. Michael Drakeford, a local orthopedic surgeon — was based off of contracts that Tuomey had with 19 doctors that required their exclusive services. These contracts, which the court deemed illegal, were signed under the advisement of Nexsen Pruet.

Placing blame

But the federal government blamed Tuomey’s legal problems on Cox and the board.  “It is Tuomey’s own management and board who are responsible for permitting the damages and penalties to amount to the level ultimately found by the jury. Tuomey’s executives and management decided to throw caution to the wind and refused to terminate the contracts until the first jury declared them illegal,” the federal government wrote in June as reported by TheState.com.

The resignations, according to Wolters Kluwer Law & Business,  follow the South Carolina Attorney General’s Office’s announcement that Tuomey’s Board can’t be protected by the hospital from possible fines and penalties if they’re found liable in a future lawsuit.

And while the resignations are official, Cox isn’t leaving until the end of the month, Martin isn’t leaving until the end of the year and Nexsen Pruet will depart company some time in the next 60 days.

Settlement possible

On Tuesday, Oct. 1, U.S. District Judge Margaret Seymour handed Tuomey a very unwelcome present when she ruled against the healthcare system and order Tuomey to pay $39.3 million in Stark penalties and $237.5 million in False Claims Act fines.

According to ModernHealthcare.com, the damage amount is believed to be the largest ever for a community hospital.

But Tuomey isn’t taking this lying down. The healthcare system immediately appealed on several points, including the ruling on the damages and Seymour’s decision to not grant Tuomey a new trial.

Seeing as there is new leadership taking over Tuomey, and the fact that the financial penalties imposed by the judge are more than Tuomey’s posted total revenue — $202 million — it’s very likely the hospital will reach a post-verdict settlement. But that’s up to the government whether it happens or not.

We’ll keep you posted.

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