Things may be looking up for Tuomey Healthcare System. Back in 2013, this South Carolina-based healthcare provider was slapped with an initial whopping $276 million fine regarding accusations of physician kickbacks. In a surprising turn of events, the Department of Justice recently announced that it settled with Tuomey for a much lower price tag.
For those who haven’t followed this unfolding case, Tuomey faced a $276 million verdict in 2013 after a whistleblower physician alleged that it engaged in unlawful kickback schemes and wrongfully enticed doctors to refer patients to its facilities.[1.Ayla Ellison, “Tuomey dodges $237M false claims verdict by settling with DOJ: 10 things to know,” Becker’s Hospital Review, October 19, 2015, http://www.beckershospitalreview.com/legal-regulatory-issues/tuomey-dodges-237m-false-claims-verdict-by-settling-with-doj-10-things-to-know.html. As a smaller rural healthcare system, Tuomey was facing certain collapse following the verdict and ardently appealed the staggering ruling to the U.S. Court of Appeals for the Fourth Circuit. That appeal did not result in a favorable finding either, and the Fourth Circuit upheld the verdict, which had been slightly reduced to $237 million after a readjustment of the damages calculation.
Now luck may have turned for the Charleston-based healthcare system, as the Department of Justice recently accepted a settlement agreement allowing Tuomey to dodge the nearly quarter-billion dollar verdict for a more affordable $72 million. As a result, Tuomey will ultimately be acquired by another company, and will avoid the massive verdict entered against it following the contentious 2013 trial in the South Carolina District Court.
Details of the Tuomey-DOJ settlement
Eager to “close this chapter and look to the future,” embattled Tuomey Healthcare announced in October that it had finally reached a settlement agreement with the DOJ, thereby clearing the way for an acquisition of Tuomey by Columbia-based Palmetto Health.[2.“U.S. slashes fine, settles false Medicare claims lawsuit with Tuomey,” Charleston Regional Business Journal, October 19, 2015, http://www.charlestonbusiness.com/news/55982-u-s-slashes-fine-settles-false-medicare-claims-lawsuit-with-tuomey?rss=0.] The company has agreed to acquire the assets of the Tuomey Healthcare system as well as the liabilities incurred as a result of the allegations of misconduct, physician kickbacks, and illegal billing practices.
According to the Department of Justice, Tuomey will pay a total of $72.4 million in exchange for the DOJ’s agreement to release it from any and all future claims arising from the False Claims Act violations. Since Tuomey has already paid $40 million toward the 2013 verdict, it must simply add another $32 million to close the deal – a far cry from the nine-figure penalty it was contemplating just months ago.
In addition to the financial payout, Tuomey also agreed to undergo routine compliance investigations at its own expense. These investigations will be required for a five year period, and will ensure the company – which will be known as Palmetto Health-Tuomey – is complying with all billing standards set forth by the Department of Health and Human Services concerning Medicare, Medicaid, and TRICARE patients.
This case, like so many others, involved improper financial relationships between Tuomey and area physicians. Stating fear of competition from local ambulatory surgery centers, Tuomey allegedly signed compensation documents with dozens of area doctors in exchange for their promise to exclusively refer patients to Tuomey facilities for surgery.
The Department of Justice said in a statement, “Secret sweetheart deals between hospitals and physicians, like the ones in this case, undermine patient confidence and drive up healthcare costs for everybody….This case demonstrates the United States’ commitment to ensuring that doctors who refer Medicare beneficiaries to hospitals for procedures, tests, and other health services do so only because they believe the service is in the patient’s best interest, and not because the physician stands to gain financially from the referral.”[3.U.S. Department of Justice Press Release. “United States Resolves $237 Million False Claims Act Judgment against South Carolina Hospital that Made Illegal Payments to Referring Physicians,” DOJ, October 16, 2015, http://www.justice.gov/opa/pr/united-states-resolves-237-million-false-claims-act-judgment-against-south-carolina-hospital.]