Tuomey Healthcare System has agreed to pay the federal government $72.4 million to settle False Claims Act allegations, allowing the Sumter, S.C.-based system to avoid a $237 million judgment entered against it and upheld by the U.S. Court of Appeals for the Fourth Circuit in July, according to the Department of Justice.
Here are 10 things to know about the case brought against Tuomey and the system's settlement with the federal government.
The allegations against Tuomey
1. The case arose from a lawsuit filed in October 2005 by Michael K. Drakeford, MD, under the qui tam, or whistle-blower, provision of the False Claims Act. The government joined Dr. Drakeford's case.
2. In its case against Tuomey, the government argued that the system entered into 19 contracts with 19 specialists that required the physicians to refer their outpatient procedures to Tuomey, and, in exchange, paid them compensation that far exceeded fair market value.
3. The government alleged that throughout the process of developing the physician contracts, Tuomey ignored warnings from one of its attorneys that the physician contracts were "risky" and raised "red flags."
How the case played out in court
4. In May 2013, a jury found Tuomey violated Stark Law and the False Claims Act by submitting $39 million in false claims to Medicare and compensating physicians for referrals.
5. At the district court level, a $237.5 million judgment was entered against Tuomey, which was comprised of damages of $117.9 million and civil penalties of $119.5 million.
6. The system appealed the ruling. A three-judge panel unanimously upheld the district court's ruling in July.
Tuomey's settlement with the federal government
7. To avoid the $237.4 million judgment against it, Tuomey entered into a settlement agreement with the federal government.
8. Under the terms of the settlement agreement, Tuomey will pay $72.4 million to settle the case and be sold to Columbia, S.C.-based Palmetto Health.
9. Dr. Drakeford, the whistle-blower, will receive approximately $18.1 million under the settlement.
10. Regarding the settlement, Dan Levinson, who heads HHS' Office of Inspector General, said, "The extensive litigation and settlement in this case should send a signal to the hospital industry that these tainted financial relationships simply will not be tolerated."
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