An Oct. 3 judgment against Tuomey Health Care Systems (Sumter, S.C.) of $237 million for alleged violations of the physician self-referral laws, commonly referred to as the Stark laws, may exceed the hospital’s annual revenues—estimated at $200 million in 2011. The Tuomey case has been ongoing since a whistleblower complaint was filed in 2005 by an orthopedic surgeon, Michael Drakeford, M.D., who Tuomey tried to hire as a part-time physician. The complaint alleged that Tuomey entered into compensation arrangements with physicians that exceeded fair market value, were not commercially reasonable, and took into account the value and volume of referrals to Tuomey. The complicated case revolved around the hospital attempting to prevent local physicians from performing surgeries and other procedures at competing surgical centers by entering into the suspect arrangements with referring physicians. Tuomey had previously lost two jury trial cases on the same complaint and at one time faced a lower fine of $39 million, but that was before the Department of Justice filed a motion with the U.S. District Court of South Carolina requesting the additional fines and penalties based on FCA calculations that take into account treble damages and a $5,500 to $11,000 per claim penalty. According […]
An Oct. 3 judgment against Tuomey Health Care Systems (Sumter, S.C.) of $237 million for alleged violations of the physician self-referral laws, commonly referred to as the Stark laws, may exceed the hospital’s annual revenues—estimated at $200 million in 2011.
The Tuomey case has been ongoing since a whistleblower complaint was filed in 2005 by an orthopedic surgeon, Michael Drakeford, M.D., who Tuomey tried to hire as a part-time physician. The complaint alleged that Tuomey entered into compensation arrangements with physicians that exceeded fair market value, were not commercially reasonable, and took into account the value and volume of referrals to Tuomey.
The complicated case revolved around the hospital attempting to prevent local physicians from performing surgeries and other procedures at competing surgical centers by entering into the suspect arrangements with referring physicians. Tuomey had previously lost two jury trial cases on the same complaint and at one time faced a lower fine of $39 million, but that was before the Department of Justice filed a motion with the U.S. District Court of South Carolina requesting the additional fines and penalties based on FCA calculations that take into account treble damages and a $5,500 to $11,000 per claim penalty.
According to various documents, including court documents, Tuomey had received the advice of counsel and had received a favorable opinion from a compensation expert concerning the compensation package offered to the physician and its relationship to fair market value.
Tuomey raised a number of arguments before the court, all of which were denied, and Tuomey was ordered to pay the penalties. Tuomey has already stated that it will once again appeal the decision to the U.S. Court of Appeals for the Fourth Circuit. Many observers believe that a post-judgment settlement may be in the works given the size of the fine and Tuomey’s possible inability to pay it.
Lessons for Laboratories
While Tuomey is not specifically a laboratory case, it nonetheless has lessons that labs can learn from studying its details, the most prominent of which is Tuomey’s reliance on experts to no avail and its unwillingness to accept responsibility for its actions.
If a laboratory finds itself the subject of a whistleblower complaint or FCA action, it should make certain that all decisions concerning its actions from that time forward include the advice and counsel of objective, third-party legal experts and, if possible, limit the involvement of executive-level company officers who may have been party to the offending activity.
Takeaway: The government seems to be willing to aggressively prosecute Stark and other violations of laws and regulations under the FCA laws, which result in larger penalties and fines in addition to the actual damages incurred by the Medicare program.
