Facing a potential penalty of up to $237 million, Tuomey Healthcare System
in Sumter, S.C. says it did nothing illegal and is asking a federal judge to throw out a jury verdict that the hospital violated the False Claims Act and the Stark law.
In a rare move, the 242-bed hospital went to trial this year to fight a whistle-blower physician's allegations that Tuomey officials illegally paid 19 doctors to refer Medicare
patients for treatments 21,730 times. It was the second time Tuomey has contested the allegations in court, after losing the first trial in 2010 but then getting the jury's verdict overturned on appeal.
In May, the hospital lost the second jury trial more decisively than the first time, and is now locked in battle of motions before a federal judge to limit the damages while trying to overturn what defense lawyers say was faulty evidence and an unconstitutional enforcement scheme.
Meanwhile, government lawyers continue to lean on the hospital to reach a post-verdict settlement because of the community hospital's inability to afford the $237 million in False Claims Act penalties they have asked U.S. District Judge Margaret Seymour to impose. Tuomey would have to “accept responsibility for its past misconduct” as part of the settlement, government lawyers wrote in a June 24 motion (PDF)
Tuomey's lawyers do not appear to be positioning for any such concession.
“Because the government failed to present sufficient evidence from which a reasonable jury could find that Tuomey knowingly submitted false claims to the government in violation of the FCA, Tuomey is entitled to judgment as a matter of law,” hospital attorneys wrote in a June 5 filing (PDF)
. “Alternately, this court should order a new trial.”
The judge is scheduled to rule sometime after July 15.
One of Tuomey's main arguments is that its executives could not have intended to violate the False Claims Act because they relied in good faith on the advice of their lawyers who said the physician-compensation arrangements in 2005 were legal. At trial, government lawyers said recordings of meetings between doctors and executives proved both sides knew the arrangements would improperly pay doctors to refer patients to Tuomey.
Even if the hospital were to convince the judge to throw out the $237 million False Claims verdict, the jury also found hospital officials violated the Stark law against physician self-referrals—an alternative that could carry a $45 million penalty, if the judge believes the government's lawyers.
Legal experts say Stark law violations are tougher to escape, because the law is what's known as a “strict liability” statute, meaning that it doesn't matter whether the offender intended to violate it—only that a violation took place.
The hospitals' arguments in the Stark context are complex, but they essentially say that government officials misled the jury on the particulars of the law, mischaracterized the nature of the payments to the doctors, and failed to analyze all 21,730 Medicare claims to prove which claims were affected by the allegedly illegal payment contracts.
Michael Clark, a healthcare lawyer with Duane Morris in Houston and former federal prosecutor, said Tuomey officials were trying to minimize the financial damages at the trial level while laying the groundwork to challenge the fundamental basis of the law during any future appeal.
“It's a hell of a risk,” Clark said. “That's why these cases haven't gone to trial that often.”Follow Joe Carlson on Twitter: @MHJCarlson