Jury Ruled in Tuomey Healthcare Retrial that the Hospital Violated the Stark Law and False Claims Act


On May 8, 2013, a jury concluded that Tuomey Healthcare System, Inc. (Tuomey), a community hospital in Sumter, S.C., violated the Stark law for allegedly improper compensation arrangements in 2005 between the hospital and 19 specialist physicians, pursuant to which the physicians agreed to perform outpatient services at Tuomey and to reassign to Tuomey the right to bill and receive all reimbursement amounts paid by third party payors for such services.  United States ex rel. Drakeford v. Tuomey Healthcare System Inc., D. South Carolina, No. 3:05-cv-02858-MBS, May, 8, 2013  The jury also determined that the hospital violated the False Claims Act (FCA) by submitting more than 20,000 illegal claims to Medicare worth more than $39 million. 

Although the hospital faces up to $357 million in potential False Claims Act liabilities as the FCA allows the government to recover up to triple the amount of total damages, plus $5,500 to $11,000 per claim, Tuomey’s final monetary penalty still remains to be determined.  Each side will have the opportunity to submit motions presenting their respective positions regarding the proper amount of damages.  

The four-week retrial comes after a Fourth Circuit decision in 2012 finding that the district court violated Tuomey’s Seventh Amendment right to a jury trial.  United States ex rel. Drakeford v. Tuomey Healthcare System Inc., 675 F.3d 394(4th Cir. 2012)  (vacating a $44.9 million judgment against Tuomey for Stark law violations and remanding the case to federal district court).  A copy of the jury instructions are available here and the jury verdict is available here.  A more detailed background about the Toumey case and Fourth Circuit decision remanding the case for retrial is available at the April 9, 2012 Health Headline entitled “Fourth Circuit Tuomey Decision Interprets Stark While Remanding Case for Retrial,” here.

Reporter, Juliet M. McBride, Houston, +1 713 276 7448, jmcbride@kslaw.com.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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