The former CEO of the Sumter-based Tuomey Healthcare Systems, Ralph “Jay” Cox III, paid a $1 million fine and is banned from administering or managing any federal health care programs for four years, the Justice Department announced Tuesday.
Cox, who resigned after a jury verdict against Tuomey in 2013, had been the president and CEO since October 1990 after having served as a vice president of the healthcare company for nearly 5 years, The Sumter Item reported at the time of his resignation.
The judgment against Tuomey related to violations of the Stark Law, a federal statute that prohibits hospitals from billing Medicare for certain services, including inpatient and outpatient hospital care, that have been referred by physicians with whom the hospital has an improper financial relationship.
The Stark Law includes exceptions for many common hospital-physician arrangements but generally requires that any payments that a hospital makes to a referring physician be at fair market value for the physician’s actual services – and not take into account the volume or value of the physician’s referrals to the hospital.
“Secret, sweetheart deals between hospitals and physicians, like the ones in this case, undermine patient confidence and drive up healthcare costs for everybody, including the Medicare program and its beneficiaries,” principal deputy assistant attorney general Benjamin C. Mizer, head of the Justice Department’s Civil Division, said at the time.
The government argued in the case that Tuomey, fearing that it 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 and, in exchange, paid them compensation that far exceeded fair market value and included part of the money Tuomey received from Medicare for the referred procedures.
The government also argued that Tuomey ignored and suppressed warnings from one of its 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 more than $237 million.
The 4th Circuit U.S. Court of Appeals in Virginia affirmed the judgment on July 2, 2015.