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KSM Blog | Katz, Sapper & Miller CPA

Jury Finds Tuomey Guilty On Both Stark Law and False Claims Act

Posted 7:33 PM by

After a four-week trial, a jury ruled in favor of the government finding that Tuomey Healthcare System inappropriately compensated 19 specialists and concurrently submitted over $39 million in fraudulent Medicare claims. The decision is based on a whistleblower lawsuit filed in 2005 by a physician who had been negotiating to join the other 19 specialists in employment with Tuomey.

The basis for the government’s case revolved around Stark violations, citing that the compensation arrangement between Tuomey and the physicians took into account the amount of referrals the physicians would generate for Tuomey. The government also successfully argued that since Tuomey knowingly violated Stark Law, all of the Medicare claims were fraudulent and thus they were also in violation of the False Claims Act.

A portion of Tuomey’s defense centered on following the advice of legal counsel when establishing the contracts. The government argued that while this is a valid defense, Tuomey had fired an outside attorney with an opposing view of the physician contracts in late 2005 and thus they were “opinion shopping.” 

Tuomey was found to have submitted 21,730 Medicare claims during the period that violated the False Claims Act. The Sumter, South Carolina-based hospital could face a potential liability in excess of $350 million. Tuomey has 28 days from the verdict to appeal the case.

The Tuomey verdict shows just how important establishing a compliant fair market value compensation plan is when exploring arrangements and that the fair market value be scrutinized by a qualified independent party.

About the Author
Aaron Brezko is a director in Katz, Sapper & Miller’s Healthcare Resources Group. Aaron provides strategic business planning, as well as other general business and accounting services, to a wide variety of healthcare clients and closely held businesses. Connect with him on LinkedIn.

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