Federal Court Orders Tuomey to Pay $237 Million for Violations of the Stark Law and False Claims Act
On Sept. 30, the District Court of South Carolina ordered Tuomey Healthcare System (Tuomey) to pay $277 million for violating the False Claims Act. Just two days later, the Court reduced the judgment to $237 million. This judgment resulted from both trebling the jury verdict of $39 million and assessing civil penalties for each of the 21,730 false claims. Tuomey has already filed notice that it intended to appeal the court’s judgment.
This judgment is pursuant to a verdict from May 2013, in which a jury found Tuomey guilty for violations of the Stark Law and False Claims Act by entering into employment arrangements with physicians where compensation was based on the volume or value of referrals by the physicians. The verdict from this year was actually the second guilty verdict against Tuomey in this case. A 2010 jury found Tuomey guilty of violations of the Stark Law, but not of the False Claims Act. The Court in that case set aside the jury verdict and entered a judgment against Tuomey in the amount of $44 million. Tuomey appealed, and that judgment was overturned and remanded for a new trial.
Originating as a whistleblower lawsuit in 2005 alleging violations of the Stark Law by Tuomey through improper financial agreements with 19 physician specialists performing outpatient services, the federal government intervened in the suit in 2007. The government alleged that Tuomey had entered into part-time employment contracts with these physicians that were excess of fair market value in response to concerns that an ambulatory surgery center would compete with Tuomey and lead to a decline in profits.