Doctor to Receive $18.1 Million for Reporting Illegal Contract Offer by Hospital

Another hospital has settled allegations of violations of the Stark Law that were brought by a whistleblower lawsuit under the False Claims Act. This time, it was Tuomey Healthcare System, which had previously lost at trial, resulting in an order to pay $277 million for violations of the law, and in its Fourth Circuit appeal. It ultimately settled the case for $72.5 million from the South Carolina hospital system, which will be sold to Palmetto Health.

In this case, the hospital entered into contractual relationships with area specialty physicians after becoming concerned that it would lose referrals of surgical procedures from them. The part-time employment agreements required them to send their cases to Tuomey and paid bonuses based in part on their referrals. The Stark Law prohibits the payment of anything of value to physicians based on their referrals of business paid for by the federal healthcare programs. One of the individuals that Tuomey offered a contract to reported them to the Department of Justice.

Many people have the mistaken impression that only an individual who works for a company can bring a whistleblower lawsuit. This is not true. Any individual that has nonpublic information sufficient to demonstrate fraud can file a lawsuit. However, insiders are typically the most likely individuals to have such information so they have gotten. Job seekers, industry experts, consultants, competitors and other individuals can also report health care fraud to the U.S. Government.

The resolution to this case came after a long legal battle, with two trials in a U.S. District Court and two appeals. The first verdict led to an order of payment of $45 million for Stark Law violations but was overturned on appeal. The second jury found Tuomey liable for additional misconduct under the False Claims Act. Tuomey began exploring a sale of the company while facing the largest potential penalty levied against a community hospital. The board and management determined a sale was its best option due to financial difficulties. Based on the discounted recovery, it seems likely that the Justice Department took these into account when reducing the fine against the community hospital.

In September, there were two other hospital settlements of cases under the False Claims Act for kickbacks in violation of the Stark Law. These two settlements totaled almost $200 million in recoveries for the United States Government.

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