Former Hospital Exec Pays $1M to Settle Medicare Fraud Case
A former hospital executive at Tuomey Healthcare System reached a $1-million settlement with the federal government over allegations of Medicare fraud.
By - The former chief executive officer of a South Carolina-based healthcare system agreed to pay $1 million and be excluded from federal healthcare programs for four years to resolve a 2013 Medicare fraud case, according to the Department of Justice (DoJ).
The recent settlement agreement stems from a healthcare fraud accusation that placed Ralph J. Cox III at the center of a potential Stark law violation. Cox allegedly caused Tuomey Healthcare System to enter into illegal payment agreements with 19 specialist physicians that required the providers to refer outpatient procedures to the healthcare system in exchange for payments beyond fair market value. The inappropriate payments also included a portion of the Medicare reimbursements for the services.
“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 DoJ’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,” Mizer added.
DoJ explained that the Stark Law prohibits hospitals from billing Medicare for services that have been referred by other providers with whom the hospital has an inappropriate financial agreement. The statute mandates that any healthcare payments that a hospital provides to a referring provider must be at fair market value for the actual services provided. Payments cannot account for the volume or value of the provider’s referrals to the hospital.
In Cox’s situation, however, the government accused the former chief executive officer of initiating improper financial relationships with specialists to prevent a new freestanding surgery center from taking away referrals for outpatient services. Cox was also accused of ignoring warnings from the healthcare system’s attorneys that identified the contracts as “risky.”
In May 2013, a South Carolina jury found that the referral contracts violated the Stark Law and caused Tuomey Healthcare System to bill Medicare for over 21,000 false claims.
By October 2013, a trial court decided in favor of the government for $237.4 million under the False Claims Act and an appeals court upheld the decision in July 2015. The government resolved the Medicare fraud case in October 2015 and decided that Tuomey Healthcare System falsely billed Medicare for payments totaling $72.4 million.
As a result, Cox was terminated as the healthcare system’s chief executive officer.
The Medicare fraud settlement agreement is an example of the government’s commitment to stamping out healthcare fraud, especially through the Healthcare Fraud Prevention and Enforcement Action Team (HEAT) initiative, stated DoJ. HEAT, established in 2009, brings together the Attorney General and the Department of Health and Human Services (HHS) to reduce and prevent Medicaid and Medicare fraud schemes.
The False Claims Act also plays a key role in the government’s effort to eliminate healthcare fraud, the department remarked. Through the False Claims Act, DoJ has recovered more than $30.7 billion since 2009 with over $18.5 million stemming from healthcare fraud cases.
“Individuals and entities that defraud federal healthcare programs face exclusion from those programs by the Department of Health and Human Services Office of Inspector General (OIG),” said Gregory E. Demske, chief counsel to the HHS Inspector General. “OIG is committed to protecting the programs and patients from healthcare executives who, like Mr. Cox, lead or participate in schemes to defraud Medicare or Medicaid. Entities engage in fraud because of actions by individuals and OIG will continue to identify and take administrative enforcement actions against such individuals.”
Earlier this month, seven senators penned a letter to CMS urging the federal agency focus on preventing Medicare fraud rather than using a “pay and chase” approach. The senators called on CMS to provide them with more information by Sept. 26 on how the agency identifies healthcare fraud, how the Fraud Prevention System stops improper payments, and how the agency tracks the efficiency of fraud prevention tools.
“[W]e remain concerned that in spite of the steps taken, CMS still relies too heavily on investigating claims after the payments have been made rather than preventing them in the first place,” wrote the senators.
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