The Department of Justice’s recent settlement with a healthcare system executive indicates a continued focus on pursuing individuals in enforcement actions. On September 27, 2016, the DOJ announced it reached a $1 million settlement with Ralph J. Cox, the former CEO of Tuomey Healthcare System (Tuomey) – a South Carolina-based hospital involved in illegal Medicare and Medicaid billings of services that were referred by physicians with which Tuomey had improper financial relationships.
Deputy Attorney General Sally Quillian Yates released a memo in September 2015 (the Yates Memo) noting that “[o]ne of the most effective ways to combat corporate misconduct is by seeking accountability from the individuals who perpetrated the wrongdoing” and indicating the DOJ intended to strengthen its pursuit of individual corporate wrongdoing. The Yates Memo stated that “criminal and civil corporate investigations should focus on individuals from the inception of the investigation” and “absent extraordinary circumstances or approved departmental policy, the Department will not release culpable individuals from civil or criminal liability when resolving a matter with a corporation.”
The Tuomey investigation began as a whistle-blower lawsuit, United States ex rel. Drakeford v. Tuomey Healthcare System Inc., Case No. 3:05-cv-2858 (MBS) (D.S.C.), that alleged Tuomey had agreements with specialist physicians to perform all outpatient procedures at Tuomey in return for bonuses based on generated referrals. A jury determined that Tuomey violated the Stark Law and False Claims Act, and the trial court entered a $237 million judgment against the hospital. The DOJ resolved the judgment in October 2015, announcing a $72.4 million settlement with Tuomey.
The DOJ’s settlement with Cox nearly a year later follows the directives of the Yates Memo. In addition to the monetary terms, the settlement also prohibits Cox from participating in federal health care programs for four years. This includes providing management or administrative services paid for by federal health care programs.
Principal Deputy Assistant Attorney General Benjamin C. Mizer stated in the DOJ’s release, “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.”
