The next round in United States ex. rel. Drakeford v. Tuomey Healthcare System, Inc., is underway and Tuomey Healthcare keeps fighting. As previously reported, on May 8, 2013, a federal jury found that Tuomey Healthcare System, a non-profit system in South Carolina, violated the Stark law and the False Claims Act in connection with its compensation structure for specialists on its medical staff. The jury also found that Tuomey submitted over 21,000 improper claims, totaling $39 million. Including penalties and treble damages, Tuomey faces a maximum judgment of $357 million. On May 22, 2013, the Government filed a motion asking the Court to enter judgment against Tuomey in the amount of $237,454,195. In a footnote the Government acknowledged that this was the minimum recovery authorized by law. The Government also acknowledged that Tuomey’s resources “may be inadequate to fully satisfy this judgment.” In an unusual move, the Government stated that it remains open to discussing a settlement at some amount less than $237 million. Late last week, Tuomey fired back, filing multiple motions arguing that the Government failed to prove: (1) the existence of any Stark-prohibited referrals or the presentment of any false claims, and (2) that the Government suffered any financial loss as a result of anything Tuomey did. Tuomey also asserted in its motions that it consulted with lawyers when structuring the employment agreements with the physicians and followed that advice. As a consequence, Tuomey maintains that it is not liable for any of the penalties sought by the Government. Tuomey also argued that the excessive fines provision of the Eighth Amendment and the due process provisions of the Fifth Amendment preclude the Court from imposing penalties against the health system. In support of its position, Tuomey acknowledged that the Government’s suggested judgment amount of $237 million would “destroy the only hospital in Sumter County” and provided the Court with a resolution from the Sumter County Legislative Delegation and letters from local economic development agencies confirming that the closure of Tuomey Hospital would be catastrophic for the community. It is clear that all parties agree that the minimum judgment the Government is seeking, based on the jury verdict, will bankrupt the hospital. However, the FCA does not give the Court discretion to reduce the statutory fines below the minimum of $5,500 per penalty. Stay tuned to see if Tuomey’s aggressive position results in a negotiated settlement with which the hospital can live or causes the Government to harden its stance.
