After two jury trials, two trips to the appellate court, and ten years of legal wrangling, Tuomey Healthcare System is still stuck with a stunning verdict against it for violations of the Stark law and the False Claims Act – a verdict that exceeds its annual revenues and is believed to be the largest ever against a community hospital.
Tuomey Healthcare System, Inc. is a nonprofit hospital system in Sumter, South Carolina. The case originated with a whistleblower claim over part-time employment contracts that Tuomey entered into with local physicians. The trial (the second one) turned on evidence that a lawyer, one of several retained by Tuomey to opine on the physician contracts, had warned Tuomey that the arrangements might be a Stark violation. Tuomey subsequently dismissed that lawyer and proceeded with the contracts anyway. The jury concluded that the contracts were a violation of the Stark law, because they rewarded the physicians for referring patients to Tuomey’s hospital. Specifically, the jury found that Tuomey knowingly submitted 21,730 false claims to Medicare, which resulted in a final judgment of more than $237 million.
On July 2, the 4th Circuit Court of Appeals upheld the judgment. Despite the outcome, one concurring judge noted the “troubling” nature of the case, which “will result in a likely death sentence for a community hospital in an already medically underserved area.”
Tuomey has said it is continuing settlement discussions with the government and considering further legal options, which could include an appeal to the US Supreme Court. In the meantime, Tuomey is also reported to be in partnership discussions with Palmetto Health, a much larger nonprofit health system based in Columbia, SC.