Concerns Raised About Former CMS Administrator Tom Scully’s Alleged Comments on MedCath
Senate Finance Committee Chair Chuck Grassley (R-Iowa) has raised concerns with federal regulators that former CMS Administrator Tom Scully made comments about MedCath, a specialty hospital company, that "may have caused a sharp sell-off of the company's stock," the Washington Post reports. In a November letter sent to HHS Secretary Tommy Thompson and the Securities and Exchange Commission, Grassley wrote that participants at a private dinner in New York on April 2, 2002, told the committee Scully made the comments in response to a question raised at the event. According to the letter, Scully "generally noted" that a former exception in federal law that allows physicians to have an ownership stake in specialty hospitals to which they refer patients used by MedCath "would not be around forever," that MedCath should not "anticipate expanding its business relying upon" the exception and that he would not "go long" on MedCath stock. On April 3, 2002, investors traded about 980,000 shares of MedCath stock -- more than nine times the average daily volume -- and the value of the stock decreased by more than 8%, from $18.31 to $16.76, the Post reports. The letter said that Scully may have violated federal ethics rules and securities laws. According to the letter, "There are general governmental ethics standards applicable to federal officials against the use of his or her official position and/or official information not available to the public," as well as "other provisions, which may or may not be applicable here, that may impose criminal penalties upon a federal employee who divulges, discloses, or makes known information that comes to him/her in the course of employment or official duties."
Scully said in telephone interviews that he spoke at the dinner about federal reimbursement policy for the health care industry but did not discuss specific companies. Scully said, "I never comment whether someone should buy or sell stock, and I didn't then." Scully also said that his opposition to the exception "was no secret" the Post reports. According to Scully, in 2002, "he had let it be known in the health care industry that if Congress didn't act to close the exception, CMS 'might look' at trying to close it by regulation," the Post reports (Day, Washington Post, 3/20).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.