United States Settles With South Carolina Hospital for $72.4 Million After $237 Million Judgment

L_Kirakosian117On October 4, 2005, whistleblower Dr. Michael K. Drakeford, an orthopedic surgeon, filed a False Claims Act lawsuit against Tuomey Healthcare System for violations of the Stark Laws on behalf of the United States. The government intervened and took over the action.

The case alleged that Tuomey violated the Stark Law, which prohibits health care providers from billing Medicare for certain services that have been referred by physicians with whom the hospital has an improper financial relationship. Although there are exceptions to the rule, the law requires that any payments that a hospital makes to a referring physician be at fair market value for the physician’s actual services, and not take into account the volume or value of the physician’s referrals to the hospital.

Hospital was Warned that Contracts for Kickbacks Risky

The United States alleged that Tuomey unlawfully entered into contracts with 19 specialist physicians that required the physicians to refer their outpatient procedures to Tuomey. In exchange, the hospital paid the doctors compensation that far exceeded fair market value and included part of the money Tuomey received from Medicare for the referred procedures. Billing for services improperly procured is considered Medicare Fraud. The United States even had evidence that Tuomey’s own attorneys warned Tuomey that the physician contracts were “risky” and raised “red flags.”

Why Did the Government Settle for Less?

The case went to trial on May 8, 2013, and the trial court entered a judgment under the False Claims Act in favor of the United States for $237 million. The Court of Appeals for the Fourth Circuit affirmed the judgment on July 2, 2015. So why did the United States settle for far less than the judgment?

It is difficult to ascertain this information from the public record, but it is likely due to the defendant’s ability to pay. By entering into a settlement agreement with Tuomey, the United States has further assurances that it will obtain payment from Tuomey for Tuomey’s wrongful conduct. According to the press release issued by the Department of Justice, Tuomey will be sold to Palmetto Health, a multi-hospital healthcare system based in Columbia, South Carolina. The whistleblower-relator, Dr. Drakeford, will receive approximately $18.1 million under the settlement for coming forward and reporting the fraud.

Contact Waters Kraus Paul & Siegel to Report False Claims and Medicare Fraud

While Waters Kraus Paul & Siegel is not handling this particular False Claims Act case, we are representing whistleblowers in similar Medicare fraud lawsuits. If you have comparable claims against a different medical facility, contact us by email, or call our qui tam attorneys at 800.226.9880. Learn more about our practice and how we can work together to notify the government about illegal kickbacks and Medicare Fraud.

This article was contributed by Louisa Kirakosian one of the qui tam attorneys in the firm’s Los Angeles office.

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