(Story updated with comment and additional details at 8:20 p.m. ET.)
After a four-week do-over trial, a jury concluded Wednesday that Tuomey Healthcare System in Sumter, S.C., violated the False Claims Act by submitting tens of thousands of illegal bills to Medicare worth $39 million.
The community hospital faces up to $357 million in potential False Claims Act liabilities, though attorneys who are not involved with the case said the hospital was likely to receive a penalty less than that amount.
The 10-person jury agreed with prosecutors and a physician whistle-blower in the highly charged case, finding that the hospital was paying doctors in ways that rewarded them financially for referring patients to the hospital, violating both the Stark law and the False Claims Act.
The jury took less than five hours to reach its verdict that Tuomey improperly compensated 19 specialty doctors whom hospital executives allegedly feared would divert lucrative patients to other hospitals or doctors' offices. Jurors found that Tuomey submitted a total of 21,730 Medicare claims that were tainted by illegal compensation arrangements.
“This case may embolden (the Justice Department) to take complicated Stark cases before a jury,” said Donald Romano, a lawyer with Foley & Lardner and a former attorney overseeing Stark law policy at the CMS. “I think the effect is that hospitals are going to have to be more careful about fair-market value, and that noncompete agreements with referring physicians after Tuomey … are going to be very risky.”
Sandra L.W. Miller, attorney at the firm Womble Carlyle Sandridge & Rice for whistle-blower Dr. Michael Drakeford, said her client was pleased by the jury verdict.
“It has been a nine-year, hard-fought battle for a well-regarded physician who had the courage of his convictions,” Miller said in an e-mailed statement. “Perhaps the message to be taken from this verdict is that the Stark law really does have teeth and when a hospital decides to pay physicians for referrals, it risks paying a very high price.”
Drakeford first filed his whistle-blower lawsuit against Tuomey in 2005 after he declined to enter into one of the agreements that the hospital was offering.
Tuomey lawyers have said a finding of False Claims Act liability could be financially catastrophic for the 242-bed community hospital
. “Obviously we're disappointed in the jury's verdict,” lead defense attorney Bart Daniel was quoted as saying in Sumter's The Item newspaper. “We'll be evaluating our options in the coming days.”
The hospital's ultimate financial penalty is not yet decided. Federal law would require repayment of all of the money paid under illegal Medicare claims, and the False Claims Act allows the government to try to reclaim up to triple the amount of total damages, plus as much as $11,000 per claim.
Mary Deal, the courtroom deputy for U.S. Senior District Judge Margaret Seymour, said each side will now submit motions interpreting what they think is the proper amount of damages. Seymour will then rule on those motions and announce a specific penalty sometime in the future.
Romano said Tuomey was likely to pay far less than the maximum penalty by entering into a post-verdict settlement based on the hospital's ability to pay the penalty.
In 2010, a jury that considered largely the same evidence found that the hospital violated the Stark law, but not the False Claims Act. The trial judge imposed a $45 million penalty on the hospital, but disputes over how the judge interpreted the split finding in the initial trial led the 4th U.S. Circuit Court of Appeals to invalidate the ruling and order the retrial that concluded Thursday.Follow Joe Carlson on Twitter: @MHJCarlson