On October 16, 2015, Tuomey Healthcare agreed to pay more than $74 million to resolve a $237 million judgment in a long-standing FCA matter that had threatened to bankrupt the nonprofit hospital. The action, styled U.S. ex rel. Drakeford v. Tuomey Healthcare Systems, Inc., No. 05-2858 (D.S.C.), involved FCA allegations that Tuomey employed and compensated 19 part-time physicians in excess of fair market value and in a manner that varied with the volume of value of their referrals, in violation of the Stark Law. The settlement came after a July 2015 ruling from the U.S. Court of Appeals for the Fourth Circuit, which affirmed the district court’s $237 judgment against Tuomey following a jury trial in 2013.
The settlement agreement calls for Tuomey to pay $72.4 million to the United States—of which the relator will receive 25% ($18.1 million)—and an additional $2.5 million for the relator’s attorneys’ fees and costs. Payment of $32.4 million of the settlement amount is conditioned on the successful acquisition of Tuomey by Palmetto Health prior to December 31, 2015. In connection with settlement, Tuomey agreed to enter into a five-year CIA with HHS-OIG.
As we previously reported, physician compensation continues to be in the FCA crosshairs. In 2015 to date, there have been at least 12 FCA settlements involving alleged Stark Law violations, with the large majority of those being enforcement actions against hospitals like Tuomey.