$237 million judgment against Tuomey Healthcare upheld by federal appeals court

On July 2, the U.S. Circuit Court of Appeals for the Fourth Circuit upheld the $237 million judgment against Tuomey Healthcare System located in Sumter, South Carolina. The judgment was issued against Tuomey in a 2013 federal jury trial in the U.S. District Court. The jury found that Tuomey had violated the federal False Claims Act by submitting 21,730 false claims to Medicare worth $39.3 million due to physician compensation arrangements that violated the Stark Law. The case against Tuomey originated from a whistleblower claim brought by Dr. Michael Drakeford, a local physician who declined a proposed contractual arrangement with Tuomey.

The Fourth Circuit’s affirmation of the Tuomey judgment underscores the potentially exorbitant penalties health care providers may face under the False Claims Act and the Stark Law – a law renowned for its complexity and unforgiving strict liability application – if they fail to structure physician compensation arrangements properly. Health care providers attempting to take reasonable steps to comply remain at risk that they may later be found to have misunderstood or misapplied the law.

To date, the judgment against Tuomey is believed to be the largest False Claims Act judgment issued against a nonprofit community hospital. Reports indicate the $237 million judgment exceeds Tuomey’s annual revenues. Tuomey is reportedly considering its legal options moving forward, including potentially requesting a rehearing of the full panel at the  Fourth Circuit or taking its case to the U.S. Supreme Court.