Hospital's Part-Time Physician Contracts Violated Stark Law

A jury has found that Tuomey Healthcare System in Sumter, S.C., violated the Stark Law by paying doctors in ways that rewarded them financially for referring patients to the hospital.  The jury found that more than 20,000 Medicare claims were tainted by the illegal compensation arrangements.

The hospital was accused of offering doctors lucrative part-time contracts that paid above fair market value and were not commercially reasonable. 

The contracts contained “non-compete” provisions requiring that the doctors perform their outpatient procedures at the hospital.  The doctors who accepted the contracts were paid an annual base salary plus a “productivity bonus,” which varied based on how much the hospital earned from outpatient procedures.

The trial focused on dueling experts:  The hospital had an appraiser’s opinion that its compensation arrangements with the physicians were consistent with fair market value; the government’s expert disagreed.  The jury agreed with the government’s expert.

The hospital faces up to $357 million in potential False Claims Act liabilities.  Federal law requires repayment of all of the money paid under illegal Medicare claims, and the False Claims Act allows an award of up to three times the amount of total damages, plus as much as $11,000 per claim.

The government’s lawsuit was commenced by a whistleblower, Dr. Michael Drakeford, under the qui tam provisions of the False Claims Act.  Dr. Drakeford filed his whistleblower lawsuit after he declined to enter into one of the agreements that the hospital was offering.

The whistleblower reward in this case will be between 15% and 25% of the amount collected by the government.  Even if the hospital avoids treble damages and penalties by settling the case, the whistleblower reward could be in the range of $7 million to $10 million.

If you have evidence that a hospital, nursing home, or other healthcare facility has agreed to pay physicians in return for referrals, then you should consult with an experienced whistleblower attorney immediately.  You may be entitled to a whistleblower reward.

John Howley, Esq. is an experienced Medicare and Medicaid fraud whistleblower attorney.  Call our office today at (212) 601-2728 or click here to arrange a free and confidential consultation.

John Howley, Esq.

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