Tuomey Health Care Ordered to Pay Over a Quarter Billion Dollars for Health Care Fraud

The case against Tuomey Health Care began when a whistleblower physician refused to do business with the company under the terms of its standard contract, which included anticipated physician referrals as part of the computation of the physician’s compensation. Kickbacks and referral fees are prohibited under the FCA and the Stark Law if any portion of the arrangement is to be submitted to Medicare or Medicaid for reimbursement. Despite the complex and lengthy procedural history of this case, senior U.S. District Judge Margaret B. Seymour has ordered Tuomey to pay approximately $237.5 million in fines as a result of the action.

The Stark Law is one we have not previously examined in depth, but it relates to actions involving unlawful kickbacks and referrals within the health care industry. This law is found in Section 1395nn(h)(5) of the United States Code. The Fourth Circuit explained the law as follows:

The Stark Law….prohibit[s] a physician who has a “financial relationship” with [a hospital] from making a “referral” to that hospital for the furnishing of certain “designated health services” for which payment otherwise may be made by the United States under the Medicare program. A hospital may not submit for payment a Medicare claim for services rendered pursuant to a prohibited referral. The United States may not make payments pursuant to such a claim, and hospitals must reimburse any payments that are mistakenly made by the United States. However, when a physician initiates a service and personally performs it, that action does not constitute a referral under the Stark Law.

The Stark Law and Stark Regulations define a “financial relationship” to include “a compensation arrangement” in which “remuneration” is paid by a hospital to a referring physician “directly or indirectly, overtly or covertly, in cash or in kind.”

An indirect financial relationship exists if…. there is an indirect compensation arrangement between the referring physician and an entity that furnishes services. An indirect compensation arrangement exists if…. the referring physician receives aggregate compensation that “varies with, or takes into account, the volume or value of referrals or other business generated by the referring physician for the entity furnishing[.]”

To summarize, the Stark Law prohibits a doctor from referring patients to a medical facility in which that doctor has a financial interest and thereafter submitting the cost of treating the referral to Medicaid or Medicare.

Basic Facts of  U.S. ex rel. Drakeford v. Tuomey Healthcare System, Inc.

The facts of this case begin in 2002 when a urology healthcare center in South Carolina submitted a certificate of need to build an ambulatory outpatient surgery center focusing on low-risk gastroenterological procedures. At or around the same time, Tuomey Healthcare also submitted a certificate of need for an identical ambulatory outpatient center, thereby creating competition in the community. After performing market research and analysis, Tuomey concluded that it would lose close to $10 million over a 13 year period if gastroenterologists directed patients away from Tuomey and to its competitor. Therefore, it decided to offer physicians lucrative fees for every patient directed into the Tuomey  health care system for treatment. In fact, the compensation package included compensation approximately 31 percent above market value.

Investigations Ensue, Resulting in a Mega-Judgment Against Tuomey

As explained above, the case against Tuomey surfaced when a physician refused to do business under Tuomey’s compensation agreement and subsequently reported said agreement to the U.S. government. After a long and winding procedural road, the Court finally arrived at a judgment amount of $276 million in May of this year. However, earlier this month the judgment was adjusted to $237 million, which includes a statutory penalty of $5,500 per violation, treble damages and fines.

Anyone Can Be a Whistleblower

As this case illustrates, serving as a whistleblower is not limited to just current or former employees – it can also include potential independent contractors or competitors. The FCA encourages anyone with original information about fraud to come forward.

Contact Us to Learn More

Do you need a Whistleblower Lawyer or want to know more information about Qui Tam Law and your rights under the False Claims Act?

There are three easy ways to contact our firm for a free, confidential evaluation with one of our whistleblower attorneys:

  1. Fill out the contact form on this page.
  2. Email quitam@bm.net
  3. Call (888) 647-9292
By | 2018-10-04T15:48:39+00:00 October 10th, 2013|Healthcare Fraud|