Tuomey Healthcare System, facing legal damages believed to be the largest of their kind levied against a community hospital, apparently has found a white knight. The Sumter, S.C.-based system is entering negotiations to partner with South Carolina's Palmetto Health.
“During the past several months, Tuomey's board of trustees and administrators completed an exhaustive process to determine the best course of action for the future of Tuomey and healthcare in the Sumter area,” according to a Tuomey statement Friday. “Through this evaluation, Tuomey's leadership decided partnering with another health system was the best decision for the community.”
The not-for-profit Tuomey system is anchored by Tuomey Regional Medical Center, which has 301 licensed beds. It's the only hospital in Sumter, a city of about 40,000. Palmetto Health has 1,138 licensed beds and is based in Columbia, about 45 miles from Sumter. Palmetto describes itself as the region's “largest, most comprehensive, locally owned, not-for-profit healthcare resource.”
The Tuomey board voted Thursday to enter into exclusive, nonbinding negotiations to form a partnership with Palmetto and announced the vote Friday.
A federal judge two years ago ordered Tuomey to pay the government $237 million, a sum that exceeds its annual revenue.
Tuomey's board and management are continuing to pursue a settlement with the government. They've also appealed the penalty to the 4th U.S. Circuit Court of Appeals, which is expected to rule soon.
Tuomey needs a partner because of unsustainable financial trends including an admissions drop, an inability to meet lender requirements and the ongoing legal battle, according to presentations given by Tuomey executives to community groups in recent weeks.
“We are working hard to make sure we do what is in the best interest of Sumter, our employees and our physicians,” Tuomey Board Chairman John Brabham said in a statement.
Tuomey CEO Michael Schwartz said the system wanted to find a culturally compatible, healthy South Carolina system to partner with. Tuomey wanted to find a system that “could meet our financial needs, but also someone who cared about the employees and families we serve,” he said.
Palmetto Health CEO Charles Beaman Jr. also said Tuomey would be an excellent partner for Palmetto.
“First and foremost, our cultures are highly complementary, with a shared focus on the patient and commitment to providing high-quality care,” Beaman said in a statement. “We are in close proximity to each other, and we have enjoyed a strong relationship with the Tuomey staff and physicians through the years.”
A federal jury concluded in 2013 that Tuomey violated the False Claims Act by submitting tens of thousands of illegal claims to Medicare. The jury found that Tuomey paid doctors in ways that rewarded them financially for referring patients to the hospital in violation of the Stark law, causing the Medicare claims to be tainted.
Tuomey has lost its case over the alleged overpayments twice in U.S. District Court over the last 10 years. A jury ruled against the system in a split verdict after a 2010 trial, and the judge ordered Tuomey to pay $45 million. That result was overturned on appeal, but in May 2013 a second jury found the hospital liable for wider violations.
Any agreement is still subject to negotiations, regulatory approval and additional board action by both systems.
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