In a dramatic move viewed as possibly clearing the way for a settlement in the federal lawsuit facing the local hospital, Tuomey Healthcare System’s CEO Jay Cox, Vice President Gregg Martin and Nexsen Pruet — the law firm representing Tuomey — all announced their departures from the hospital Thursday morning.
Both Cox and Martin officially announced they were leaving the hospital during a staff meeting Thursday morning. Shortly after the meeting started, hospital officials released a statement saying Tuomey’s board of directors and its top two officials “have mutually agreed to negotiate a separation agreement.”
A few hours before the hospital staff meeting, John Sowards, chairman of Nexsen Pruet, also released a statement saying his law firm had “offered to withdraw from representation of Tuomey in the hope that it will help Tuomey in resolving the pending federal whistleblower case.”
The departures of the hospital’s top two officials and its legal counsel come some four months after a federal jury found Tuomey guilty of violating Stark Law and the False Claims Act and collecting more than $39.3 million in fraudulent Medicare claims between 2005 and 2009.
U.S. District Judge Margaret Seymour, the judge that oversaw the four-week retrial of the case stemming from complaints in 2005, is still weighing several motions from both Tuomey and federal district attorneys before issuing a ruling. This includes the initial motion after the guilty verdict in which the U.S. Department of Justice seeks more than $237.4 million in damages from Tuomey.
The lawsuit, first brought to the federal government by local orthopedic surgeon Dr. Michael Drakeford, stemmed from lucrative part-time contracts that Tuomey signed 19 local doctors to in exchange for those doctors’ exclusive services. It was these contracts, during the trial Tuomey argued were offered based on the advice the hospital received from Nexsen Pruet, that the jury ultimately found were illegal and therefore caused the Medicare fraud.
In a motion filed after the trial, however, the federal government pointed the blame of Tuomey’s legal woes squarely at Cox and the hospital 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,” the federal government wrote in June. “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.”
More recently, an opinion from the South Carolina Attorney General’s office says the board members and officers of Tuomey Healthcare System cannot be protected by the hospital from possible fines and penalties should these people be found liable in a future lawsuit.
The personnel departures announced Thursday are not immediate.
Cox — who has been the president and CEO of Tuomey since October 1990, having served as the hospital’s senior vice president for nearly five years before that — is expected to leave at the end of October, while Martin will depart from the hospital sometime between November and the end of the year. Meanwhile, Nexsen Pruet and Tuomey are expected to sever ties sometime in the next 60 days.
According to Tuomey Board of Directors Chairman John Brabham, the board plans to have a search committee in place sometime next week to begin the process of finding replacements for the hospital’s top two officials. Still, the announcements do not come as a surprise.
“We have talked with Jay and Gregg recently about it at length,” said Brabham. “It was a difficult decision for both parties. And it was a mutually agreed upon decision.”
Brabham, who only became chairman of the Tuomey board in July, said the search will be an exhaustive one that will not be confined to the short timeframe Cox and Martin will remain with the hospital. “We’re not going to name someone just to name someone,” Brabham said. “We’ve got the people in place that can run the day-to-day operations of the hospital.”
Brabham also said he could not comment on the ramifications the change in leadership could have on the current federal lawsuit and how it might influence a potential settlement between the hospital and the government.
Neither could U.S. Attorney Norman Acker, the lead prosecutor for the federal government during the recent trial. However, Acker would say the possibility of a settlement remains on the table.
“We’re open to a resolution of settlement for less than the amount than we’ve asked for in a judgment and that we’re open to discussions on that,” Acker said.