A jury in South Carolina concluded earlier this week that Tuomey Healthcare System, a 242-bed community hospital in Sumter, South Carolina, violated the federal Stark law and False Claims Act by illegally billing Medicare $39 million. As a result of the jury’s verdict, Tuomey faces up to $357 million in penalties – a penalty that some say could essentially put Tuomey out of business.
The case arose when Dr. Michael Drakeford filed a whistleblower action against Tuomey in October 2005. The government investigated the action and decided to take over the case from Dr. Drakeford in 2008. The government ultimately alleged that Tuomey violated the federal Stark law by compensating nineteen physician specialists in such a way that financially rewarded the physicians for referring patients to Tuomey, and that it violated the False Claims Act by receiving over $44.8 million in Medicare reimbursement as a result of these illegal referral arrangements. The government also sought treble damages, meaning if it prevailed, Tuomey would be obligated to pay three times the amount of damages it caused.
The case initially went to trial before a jury in 2010, resulting in a split finding from the jury. That jury found that Tuomey violated the federal Stark law, but not the False Claims Act. The court imposed a penalty in the amount of $45 million, and granted a new trial on the government’s False Claims Act claim against Tuomey. The $45 million judgment was later overturned, so the government proceeded to not only retry the False Claims Act allegation, but also the federal Stark law allegation.
Earlier this week, the jury concluded that Tuomey violated both the Stark law and False Claims Act. The jury concluded that Tuomey had illegal compensation arrangements with the nineteen specialists, thereby violating the Stark law, and that these arrangements resulted in 21,730 improper claims to Medicare, thereby violating the False Claims Act.
This is an important case for a variety of reasons. First, it demonstrates that federal prosecutors are serious about enforcing the federal Stark and anti-kickback laws. Second, it reveals the large amount of money that could be at stake if the government succeeds in such a case. The penalties imposed for violating these federal laws may far exceed the amount of money that the physician or entity received as a result of the illegal compensation arrangement and billing practices.
As we’ve discussed recently, particularly in our post Increased Whistleblower Rewards Could Affect Your Practice, it is imperative for your practice to establish a Compliance Plan that describes your entity’s activities and initiatives to promote legally compliant business operations. In the healthcare field, it should describe in simple language these federal laws governing the medical practice, as well as other applicable state and federal laws and how the practice complies with them, should be reviewed and signed by all employees, and should set out a process for internal monitoring and auditing.
Presenting a Compliance Plan to investigators and requiring that employees comply with internal reporting requirements prior to filing a whistleblower lawsuit can help protect your company from facing federal prosecutors in a court room. In addition, you should ensure that all compensation arrangements are reviewed for legal compliance. At the Bittinger Law Firm, we will gladly create or review your Compliance Plan, as well as any employment or other compensation arrangements that you may have in place. Please feel free to contact us with your questions and concerns.