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An Investigation: Part 1 of 2 Bled dry How a hospital died under the care of a Texas doctor TONOPAH, Nev. – Lanya Ramirez stared out her windshield, crying and cursing the 210-mile drive on a two-lane highway through the mountains. All the way to Las Vegas. Just to reach a hospital. Somewhere in the skies above, an air ambulance carried her brother who had collapsed in his apartment, barely breathing. Tonopah’s only hospital had shut down almost three months earlier, in August of 2015, leaving the only major town between Vegas and Reno without an emergency room or clinic. Short ambulance rides had turned into hours-long ordeals. Some patients needed a plane trip to a far-flung ER. So Ramirez and her husband drove on and on. Ramirez and a raft of residents, local officials and health-care experts say they know who is to blame for the hospital's demise: a Texas doctor and businessman who drained it of millions of dollars while splurging on fancy hotels, lavish meals and a 100-acre Hill Country ranch. Under a fragmented and often toothless regulatory system, no one stepped in to stop him despite years of red flags. Lanya Ramirez removes glasses from a table at her restaurant, Cisco's, in Tonopah. Her brother, Norman Anton, had to be airlifted to Las Vegas about three months after the town’s hospital was shuttered. (Andy Jacobsohn/Staff Photographer) Vincent F. Scoccia The doctor, Vincent F. Scoccia, did not respond to repeated interview requests or written questions about the hospital. The Dallas Morning News pieced together the sometimes bizarre tale through dozens of interviews and a review of thousands of pages of hospital records and court filings. Scoccia has not been charged with any crimes. “My son saved lives, and he kept that hospital running when no one else could,” Scoccia’s father, and frequent business partner, Vincent J. Scoccia, said in an interview. The doctor himself has testified that he bought the hospital to help the community. “We got involved in a small rural area where health care was basically nonexistent,” Scoccia said in a deposition in 2000. “And being altruistic, we stepped in and we took a risk and we kept the hospital running.” Records from bankruptcy court — where a judge took the unusual step of ousting him as head of the hospital — tell a different story.


National problem Across the country, dozens of small hospitals like Tonopah’s – including several near Dallas – have failed in the last decade, leaving their communities bereft of jobs, health care and peace of mind. The usual explanations involve poor economics and heavy federal regulations. But an investigation by The News found that in some cases these hospitals had an additional problem: reckless management by businessmen who found them a rich source of cash. With few government rules about who can buy a hospital and minimal regulatory oversight, unscrupulous or inept operators have profited while turning troubled medical centers into vacant hulks. Most states and the federal government do not screen owners for financial problems, poor management or most forms of fraud. And regulatory agencies have few tools for investigating problems or forcing improvements. Regulators say their main goal is to keep hospitals open, not to punish management. Ailing hospitals may seem unlikely targets for profiteering. But they offer access to federal grants and insurance funds, including the multibillion-dollar Medicare and Medicaid programs for the poor, disabled and elderly, which have proven highly susceptible to waste, fraud and abuse. Slideshow: The town of Tonopah Main Street, Tonopah, Nev. (Andy Jacobsohn/Staff Photographer) The view west of Tonopah. (Andy Jacobsohn/Staff Photographer) Nye Regional Medical Center’s sign is lit up at dawn on Aug. 21, 2015, the last day of the hospital’s operation. (Andy Jacobsohn/Staff Photographer) Duffy Otteson, head coach of the Tonopah high school football team, is surrounded by players after a huddle a week after the hospital’s closure. Potential injuries had become a bigger concern. (Andy Jacobsohn/Staff Photographer) Sierra Lutheran of Carson City, Nev., and Tonopah High School play a football game the week after the hospital closed. Tonopah won 55-26. (Andy Jacobsohn/Staff Photographer) A week after the hospital closes, Nye County ambulance driver Patty Winters (center) keeps a close eye on her son, Scott May, a running back for the Tonopah High Muckers, during a football game. (Andy Jacobsohn/Staff Photographer) Main Street in Tonopah (Andy Jacobsohn/Staff Photographer) Main Street in Tonopah (Andy Jacobsohn/Staff Photographer) The view of Tonopah, Nev., from the Tonopah Historic Mining Park. (Andy Jacobsohn/Staff Photographer) A quilt hangs in the Tonopah Senior Center in Tonopah. (Andy Jacobsohn/Staff Photographer) A storefront along Main Street in Tonopah. (Andy Jacobsohn/Staff Photographer) Weak oversight “There’s the potential for large billing volumes, and there’s social and political support for keeping hospitals open,” said Malcolm Sparrow, a professor of public management at Harvard and an expert on health-care fraud. “Plus, there’s weak oversight.” The remoteness of rural hospitals helps shield operators from regulatory scrutiny, while fears of losing medical care can prompt local officials to embrace any buyer without asking questions. All those factors were at play in Tonopah, a historic gold-mining town and county seat of Nye County, at 18,000 square miles the the third-largest in the country. Two million vehicles a year drive through the county on a mountainous 385-mile stretch of U.S. Highway 95 between Vegas and Reno, the state’s two gambling meccas. Scores of cars have rolled over in recent years in blinding dust storms, blizzards or poor visibility created by low-hanging clouds. For decades, accident victims were taken to Nye Regional Medical Center, which was built in the late 1960s using federal grants. Residents of Tonopah worked as nurses and administrators at the hospital, donated time and money, and staffed a volunteer ambulance system. Bled dry: Part 2 State and federal regulators don't scrub the companies and individuals who take over hospitals. Owners can siphon off cash while medical care suffers. Read Part 2 Related coverage Leading Texas lawmaker acts Despite a steady stream of emergency patients, the 46-bed hospital faced mounting financial troubles in the 1990s. A sagging mining industry prompted many residents to leave the area, taking their tax payments and health insurance with them. The town’s population fell by almost a quarter, to 2,500. The hospital’s debt grew to $3 million and by 1999 Nye Regional was under the temporary control of the state. That year, Nevada passed a law allowing counties to reorganize their rural hospitals. One option: Turn them over to private business. Nye County commissioners jumped at the chance. The only serious bidder was Scoccia. Born and raised near Youngstown, Ohio, the old steel town near the Pennsylvania border, he had graduated from Des Moines University College of Osteopathic Medicine in 1993. He bought a family practice in a Youngstown suburb and soon employed other doctors. A local newspaper quoted the young doctor as an expert on managed care. But behind the scenes his troubles were mounting. He got into a dispute with a local hospital which had loaned him several hundred thousand dollars to start and expand his practice, according to allegations in a fraud lawsuit the hospital filed in 2002. He settled for an undisclosed sum. Slideshow: Jamie Sanders Shawn Sanders stands near the street corner where he last spoke with his brother before Jamie overdosed in December 1998. (Andy Jacobsohn/Staff Photographer) A photograph of Jamie Sanders (far right) with his parents and siblings at a wedding in April, 1990. (Andy Jacobsohn/Staff Photographer) Jamie Sanders’ medical records document two previous drug overdoses under Scoccia’s care before he died of a third. (Andy Jacobsohn/Staff Photographer) A view from East Market Street in Warren, Ohio, where Sanders was born. (Andy Jacobsohn/Staff Photographer) More seriously, one of his patients died after a drug overdose right before Christmas of 1998. Police found Jamie Sanders’ arms plastered with three fentanyl patches Scoccia had prescribed, according to a coroner’s report. In addition to those potent painkillers, the 33-year-old Sanders also had consumed cocaine and alcohol. The Ohio Medical Board launched an investigation, according to a letter it wrote to Sanders’ family, though regulators never released any findings. The Sanderses filed a malpractice suit, saying they had warned Scoccia that Jamie was addicted to drugs. He had overdosed twice before under Scoccia’s care, according to medical records. The lawsuit was settled in 2003 for an undisclosed amount. Scoccia denied any wrongdoing. In a later deposition, he said he did not know the size of the settlement, which was paid by his insurance company. The family says there was enough money to pay for college for Sanders’ son.

A view of the Nye Regional Medical Center in Tonopah, Nev., on the morning of Friday August 21, 2015, its final day of operation. (Andy Jacobsohn/Staff Photographer)

Warning signs? A friend who was working in Nevada tipped Scoccia off to an opportunity in Tonopah. In the summer of 1999, Scoccia filed paperwork with the state to take over Nye Regional. Under the proposed deal, the hospital would be converted from a government facility to a nonprofit, meaning it was to be run for the benefit of the community in return for a tax exemption. Nye County would pay off the debt, Scoccia would get the one-story building complex, the land and all its equipment for $10,000 down, with $90,000 to be paid over time. There were warning signs in the application to the Nevada health department. One letter from an employee of Scoccia said his existing company in Ohio, PennBrook Professional Group Inc., “specialized in acquiring and revitalizing failing rural health centers.” The News could find no evidence that the company was ever involved in hospital management. In depositions, Scoccia said this was the company through which he ran his Ohio medical practice. Along with that letter, PennBrook submitted financial documents, which were unaudited, to the state. They showed the practice had been losing money at least since 1997 and had accumulated half a million dollars of long-term debt. The letter asked state officials not to share the financial documents with Nye County. None of that mattered. The state approved the deal four days after the letter arrived. Officials of the Nevada Division of Public and Behavioral Health say their mission is ensuring that facilities provide quality care. They did what they could to evaluate Scoccia within the bounds of state law by running a criminal background check on him, they said in a statement. Checking civil court records is not permitted. Casino operators get far more scrutiny. No financial expert ever reviewed the paperwork, the agency acknowledged. It pointed the finger at Nye County. Officials there should have done “their diligence to determine whether Dr. Scoccia was a wise choice to receive ownership of the facility,” said Joe Pollock, the agency’s deputy administrator. “This is a situation of seller beware.” County leaders put the onus back on the state. The federal government is the main regulator of hospitals through the Centers for Medicare & Medicaid Services. That agency doesn’t investigate the financial backgrounds of operators who apply for Medicare funding, except to check whether they’ve been previously excluded from federal programs for problems such as health-care billing fraud. Even before Scoccia moved full-time to Nevada, he took tight control of the hospital’s checkbook. Cathie Clifford, the hospital’s long-time accountant, flew to Ohio to train his office staff on the financial system – and didn’t like what she heard. “He just let loose on them, saying ‘Nobody does anything unless I’m around.’” she said. “This was in front of other people. I thought, ‘Geez, I’d walk out.”


Owie Boo-Boo Soon Scoccia installed Karin Richardson, who worked at his Ohio office, as his chief financial officer in Tonopah, while he ran the emergency room. The doctor began laying off hospital employees to cut costs. His father, a retired school principal and businessman, said he and his son found rampant nepotism among the hospital staff. The doctor found several ways to profit from the hospital, according to court records. In January 2003, he and Richardson jointly registered two limited liability companies with the Nevada Secretary of State’s office and soon began transferring hospital assets to them. Tuna Park L.P became a holding company for the hospital’s land and buildings; Owie Boo-Boo L.P. owned the equipment. The doctor registered a third company, Scoccia Medical Services L.P., listing his father and other relatives as officers. In 2004, those three companies received $1.28 million – 16 percent of the hospital’s revenues – according to documents Nye Regional filed with the Internal Revenue Service. The doctor charged the hospital almost $900,000 for his medical services and more than $400,000 for leasing to the hospital the land, building and equipment that had been purchased from the county for just $100,000. At least $7 million of hospital money poured into Scoccia’s companies between 2004 and 2011, according to court filings and IRS records.The actual amount may be larger because not all of the tax documents detail payments to his companies, and one year the hospital didn’t file a report with the IRS at all. Scoccia later created other companies that got hundreds of thousands of dollars more, in payments and loans, the county alleged in court filings. Nye County officials later contended that the companies were merely vehicles to help Scoccia siphon cash from the hospital, according to court records and other public documents. In a deposition, Scoccia said lawyers had advised him to create the companies, and that he had no idea how much money he received from them. Vincent Scoccia, Sr. His father told The News that the companies were a way for his son to increase his profit. “You have companies so you can pick more of your earnings up through these companies without that much taxation,” he said. “It’s a legal process, and it was done legally.” “The county didn’t like it,” he added. “But that’s too bad.” It’s common for physicians to use limited partnerships to protect their assets and lower their tax bills. But IRS guidelines urge governing boards of nonprofit companies to scrutinize finances and payments to insiders to avoid conflicts of interest and profiteering. Former administrators and members of the hospital board testified in recent years that they knew little or nothing about the companies during their tenure. The Alamo There were other ways hospital money found its way to Scoccia. After Scoccia and Richardson married in August 2004 in Gibraltar on the Mediterranean Sea, the hospital paid Richardson a $175,000 bonus. Hospital documents show the couple used that money to make a downpayment on a $1.5 million ranch in the Texas Hill Country. They built a massive entrance gate modeled on the Alamo, with their initials carved in the white stone. The hospital rented an “office” at the ranch and paid to fly the couple back and forth to Nevada. After the hospital paid Dr. Scoccia’s former wife, Karin Richardson, a $175,000 bonus the couple used it to make a down payment on this 100-acre ranch in Kerrville, Texas, now valued at $1.5 million. (Miles Moffeit/Staff) The hospital’s auditors later found the couple improperly charged more than $75,000 to the hospital’s credit cards. They billed Nye Regional for groceries and wine, booked $500 rooms at the Four Seasons in Las Vegas and were regulars at The Palm restaurant. The hospital provided housing for the couple in Tonopah and paid salaries to Richardson and to Scoccia’s father. All told, payments and loans to Scoccia and his family came to at least $8 million between 2004 and 2014, according to tax returns, hospital finance records and court-filing allegations. Where did the money come from? Insurance, mostly. In its emergency room, almost 60 percent of the 2,311 patients in 2009 had private insurance, a quarter used the federal insurance programs Medicaid and Medicare, and 17 percent paid out of pocket, according to tax filings. Though the hospital was nonprofit, “In Dr. Scoccia's mind he owned it,” Richard Kilburn, who served as its administrator between 2004 and 2007, said in a deposition. “He wanted to do what he wanted to do and be damned with anybody else,” Kilburn said, complaining that Scoccia would not put money into the hospital’s building or equipment.

Bernie Merino (from left), Melody Lawrence and Jim Merlino listen to officials discuss the impact of the hospital’s closure at the Tonopah Senior Center. (Andy Jacobsohn/Staff Photographer)

Black sludge and water For years, no one seems to have questioned him, including the local businessmen who served on the community hospital’s board and later testified that they had not even seen budgets — which federal regulations require for hospitals. Many people in town, including board members and local officials, had become patients at his practice, run out of the hospital’s outpatient clinic. The board started to become a bit more diligent in 2009 after pipes broke in the geriatric unit housing 15 elderly patients, flooding it with black sludge and water. Patients had to be evacuated to nursing homes hundreds of miles away. The unit never reopened. The town’s manager, James Eason, later called the shutdown devastating to the community. Inspectors from the Nevada health department who came in over the next few months found multiple violations, from fire hazards to insufficient nurse staffing, according to hospital records. Slideshow: Nye Regional Medical Center Nye Regional Medical Center’s emergency room sits empty on the day the hospital shut down. (Andy Jacobsohn/Staff Photographer) An infant scale in a hospital room. (Andy Jacobsohn/Staff Photographer) Medical equipment lies unused a week after Nye Regional Medical Center closed. (Andy Jacobsohn/Staff Photographer) Staffers walk through the bare hallways of the Nye Regional Medical Center on the hospital’s closing day. (Andy Jacobsohn/Staff Photographer) A dead plant drifts near the front doors. (Andy Jacobsohn/Staff Photographer) Overgrown plants in a courtyard at the former Nye Regional Medical Center. (Andy Jacobsohn/Staff Photographer) Medicare officials ordered the hospital to submit a plan to fix the violations. That agency doesn’t have the power to levy fines on hospitals. The only steps it can take other than order the hospital to fix its problems are to force it to hire safety monitors or to cut off federal funding entirely, which is rare as that can kill a small hospital. Nye Regional struggled to come into compliance; layoffs had left a handful of nurses working 14 days in a row to try to staff the hospital 24 hours a day. Scoccia soon complained that the medical center was “hemorrhaging cash” to the tune of at least $40,000 a month and that didn’t include overtime costs that were “through the moon,”according to hospital records. ‘Thank you for your past services’ A few months later came what employees called his “coup.” Scoccia had gradually installed himself as chairman of the board, chief administrator and chief of the medical staff. When an auditor told the board about his companies, members told Scoccia to bring documentation about Owie Boo-Boo and Tuna Park to their next meeting. Instead, bankruptcy-court filings allege, Scoccia decided to remove the board members – even though he had no authority to do so under the hospital’s bylaws. Flanked by local law enforcement officers, Scoccia called two board members into his office, handing them resignation letters he typed up. He mailed the letter to a third director who was out of town. “He said, ‘Thank you for your past services; they will no longer be needed,’” board member Ken Eason told The News. “Then a deputy escorted me out.” Nye Regional Medical Center nurses Barbara Kaminski (left) and Jessica Kiburis read a local newspaper report about the hospital’s pending closure. (Andy Jacobsohn/Staff Photographer) Eason, a local insurance agent and relative of the town manager, said he didn’t want to put up a fight. Scoccia controlled the hospital — and was his personal physician. “The doctor was always good to me,” Eason said. “My wife and daughter died of cancer. But in their last days, he took care of them.” Meanwhile Richardson, the chief financial officer, filed for divorce and moved to the Texas ranch. Over the next few years, Scoccia ousted other local board members or forced them to quit. His new board members were close friends, business partners, or employees. Most lived out of town. One was a former priest at his high school in Pennsylvania. Another was a UPS driver in Ohio. Neither could be reached for comment. Hospital management also began turning over rapidly.


“Omerta” In early 2010, Soccia had an administrator escorted off the premises by police after he refused to sign a loyalty pledge. In what he called “The Edicts of Ash Wednesday,” Scoccia described the hospital as “capitalistic organization” that must always be on the offensive, adding, “Audace, audace, tous jour (sic) audace,” a quote urging audacity attributed to both Napoleon and U.S. Gen. George S. Patton. There were to be no meetings without Scoccia, no checks written that he did not review and no raises. The memo, later given to other employees, asked them to “consign themselves to the Omerta,” an Italian term for organized crime’s code of silence. Scoccia’s loyalty pledge, which he called “The Edicts of Ash Wednesday.” One doctor who worked part-time at the hospital clinic grew so alarmed that he petitioned the state board of osteopathic medicine to examine Scoccia’s competence, according to board records. An investigator cleared him of impairment. The complaining doctor was fired in February 2010, hospital minutes say. Then followed numerous allegations about Scoccia concerning his removal of local board members, his alleged financial self-dealing and reports that he wasn’t showing up in the ER to screen and treat patients. The hospital was kicked out of its insurance co-op, which cited these issues, according to its records. The hospital’s CPAs resigned, saying they had lost confidence in management’s integrity. Two consultants filed a whistleblower lawsuit contending that the hospital was charging for an improbable number of ultrasound procedures. Investigators from the federal Health and Human Services Department’s inspector general demanded documents on the matter but apparently took no further steps. And Scoccia’s own cousin sued him. Mark Latcheran, who had experience in hospital management, left Nye Regional after only six months and filed a breach-of-contract lawsuit alleging “potentially unethical/and or illegal activities.” “Dr. Scoccia saved a lot of lives,” Latcheran said in a later deposition. But he had concerns about the ethics of Scoccia’s personal companies and a charity he had founded, and the hospital’s lack of a written budget. Money played an outsized role in the doctor’s decisions, Latcheran said in bankruptcy testimony, citing a dying woman who arrived in the ER. Scoccia said he was going to admit her to the hospital and try to keep her alive for four hours so the hospital could qualify for a hefty insurance payment from Medicare, which would pay more for in-patient than emergency-room care, Latcheran said. “And this kind of turned my stomach.” The breach-of-contract suit was later settled on undisclosed terms.

Housekeeper John Sorhouet cleans up the nurses station. (Andy Jacobsohn/Staff Photographer)

No money for thermometers During the next three years, Scoccia kept cutting employees and services, as the money drain continued. Even the janitorial crew was eliminated, forcing nurses to mop floors. Lacking basic supplies such as thermometers and antivenom for snake bites, staffers borrowed them from vendors, who went unpaid. Paychecks bounced. The pharmacist stopped showing up. Part-time doctors were quitting for lack of payment. In May of 2012, regulators threatened to yank the hospital’s Medicare funding for failures in ER care. Another inspection by the end of that year found 17 additional safety violations, including a severe shortage of nurses, lax infection control, and unlicensed staffers writing prescriptions, records show. By late 2013, the hospital had flunked at least six safety inspections but still held onto its funding. The only doctor besides Scoccia was a semi-retired internist who had lost his license in California and had been sanctioned by Nevada, according to court records and reports from the state Board of Medical Examiners. The doctor could not be reached for comment. In December, Scoccia put the hospital into bankruptcy. He told the court that the company that ran the hospital’s computer system was threatening to shut it down over big unpaid bills. Nye County commissioners, who sold the hospital in the first place and had loaned it $2 million in recent years, became alarmed at the facility’s dire situation and feared it would be forced to close. The county hired a law firm, which collected testimony from more than a dozen staffers and former employees. The county’s lawyers discovered Scoccia’s payments to his personal companies, the loans, the unauthorized credit card charges. They also found he had recently diverted almost $500,000 to his personal companies, money from Medicare grants that were supposed to pay for computer upgrades at the hospital. Scoccia said in a deposition that he had decided to use the money, called meaningful use funds, for hospital operations rather than to pay for computer upgrades. In April, county officials asked the bankruptcy judge to remove Scoccia, saying he had left the hospital in shambles through dictatorial management, puppet boards and self dealing. “Dr. Scoccia is presently wielding his power for his sole benefit to the detriment of the patients, the hospital and the estate,” one motion read. “While life and death discussions in bankruptcy cases are usually hyperbole, here it is not.” Any delay, the county argued, “will endanger lives.” A month later, the judge ousted Scoccia.

Shaelynn Weigle (right), 4, plays with toys as her stepfather, Tony Villareal (left), speaks to her mother, Shasta Kringlie. Kringlie, who was the last patient to be treated at the hospital on the day it closed, had bronchitis and laryngitis. (Andy Jacobsohn/Staff Photographer)

Small fry Jerry Seelig, whom the court appointed as temporary administrator, reported to the judge that residents now distrusted the hospital: “Some specifically blamed the key physician – Dr. Scoccia – citing instances of alleged poor care or lack of availability.” Jerry Seelig Discovering that many patients had been getting excessive doses of narcotic painkillers, Seelig posted a sign on the hospital’s doors warning that the hospital would no longer prescribe opiates at those levels. In February 2015, Nye County reached a settlement with Scoccia in which he agreed to pay the county $500,000 over the next decade and turn the hospital, land and its equipment all back to the county. Local officials told The News that they struggled over whether to pursue more aggressive criminal or civil actions against Scoccia. They noted that there had been several whistleblowers, investigations and numerous lawsuits alleging fraud. “The allegations have been out there for everyone to see,” said the former town manager, Eason. “Our main responsibility was to save our hospital.” For federal investigators, Scoccia and the hospital weren’t big enough to justify the expense of bringing a case against him, Seelig said. “They considered him small fry,” Seelig said. Please enable Javascript to watch this video David Shapiro, a former FBI agent specializing in financial fraud and now a professor at John Jay College of Criminal Justice in New York, said such considerations by law enforcement aren’t uncommon. In the case of Tonopah, its hospital was only a $10 million-a-year enterprise. The IRS says it cannot comment on individual cases; internal agency reports say it is working on strengthening monitoring of nonprofits. But the agency did go after Scoccia and his businesses for nearly $600,000 in unpaid taxes, according to tax liens filed in Nye County. In the hospital’s last months of operation in 2015, the bankruptcy judge installed another administrator to try to turn it around. But it was too late. The hospital’s debts were too big and its reputation had suffered so much that patient visits were plummeting. It was having a hard time filling its 10 remaining beds. On August 21, 2015, the last day of the hospital’s operation, a maintenance worker climbed a ladder and dragged a tarp over the entrance sign as staffers watched from windows. Inside, nurses clenched Kleenex and hugged each other. For the first time in nearly 40 years, Tonopah had no hospital. “This hospital was a public promise to our community — they trusted that we’d be there for them,” said Patty Winters, who ran the ambulance system. “That promise is now broken.”