$237 Million Judgment Against Health Care System for Stark Law and False Claims Act Violations
A federal court ordered Tuomey Healthcare System to pay $237,454,195 after a jury found that it had violated the Stark Law (restricting physician referrals and payments) and the False Claims Act (FCA) when it submitted 21,730 false claims involving physicians with whom it had financial relationships that violated the Stark Law. United States ex rel. Drakeford v. Tuomey d/b/a Tuomey Healthcare System, Inc., C/A No. 3:05-2858-MBS (D. S.C. Oct. 2, 2013).
The case began as a qui tam action and the government later intervened. The complaint alleged that Tuomey entered into employment agreements with physicians that were not consistent with fair market value or commercially reasonable. The jury found that the contracts violated the Stark Law and that Tuomey violated the FCA when it submitted 21,730 claims in connection with these prohibited contractual arrangements. The court entered judgment under the FCA in the amount of $237,454,195, plus interest.
This case highlights the importance of carefully reviewing physician arrangements with counsel to ensure compliance with the Stark Law. It also exemplifies the need to attempt to resolve these cases before trial to avoid the substantial damages available under the FCA, which can put most healthcare entities out of business.