5 Stark Lessons from the Tuomey Case

The Tuomey case reared its head again last week when a federal appeals court upheld a $237 million False Claims Act decision against the Sumpter, South Carolina health system.

Tuomey? Again? Yes. Tuomey. Again.

The name likely rings a few bells because it’s been going on for more than ten years and the health system has lost the case twice before. Physician compliance watchers like to stay abreast of Tuomey because it’s one of the few times the controversial and cumbersome Stark Law has been tested in court.

Tuomey paid doctors in ways that violated the Stark law — tainting 21,730 Medicare claims worth $39.3 million and triggering the FCA, government prosecutors say.

Judge Slams Stark

The appeals court upheld the lower court’s decision, but also took the opportunity to take the Stark law to task. “It seems as if, even for well-intentioned healthcare providers, the Stark law has become a booby trap rigged with strict liability and potentially ruinous exposure — especially when coupled with the False Claims Act,” concluded Judge Albert Diaz in the opinion.

Tuomey could decide to take its appeal to the next level, or it could decide to give up and pay up; its leaders will weigh their options over the next month or so, according to a health system press release.

Tuomey Troubles

The details of the case are a road map for how government regulators and prosecutors approach financial arrangements between physicians and health systems. And road maps like this are all the more relevant this summer, as the OIG signals its intent to hold physicians just as accountable as health systems for non-compliant financial arrangements, at least as far as the anti-kickback statute is concerned.

You should keep an eye on Tuomey’s biggest lessons as you navigate your own practice’s financial relationships. Here are some details that led to Tuomey’s current $237-million problem.

1. The health system wanted to do a deal very badly.

Why? Area doctors had begun to perform certain outpatient procedures in their own offices or in ASCs that they owned themselves. Previously, the doctors had done such procedures at Tuomey facilities, so the health system was trying to regain lost revenue. But shrewd business moves that might make good sense in other industries can trigger compliance woes in health care.

2.The doctors had a financial interest in Tuomey, which implicated Stark.

The physicians’ ten-year contracts required them to perform their outpatient procedures at Tuomey facilities, and their salaries and productivity bonuses were based on a percentage of Tuomey’s net cash collections. Also, their financial arrangement with Tuomey did not fall into Stark’s employment safe harbor exception because their compensation varied with the volume and value of their referrals, the jury concluded. Other features of the employment arrangement, such as the lack of any set hours, also caused it to fall short of the exception.

3. The physicians involved included ophthalmologists, gastroenterologists, surgeons, and ob-gyn specialists.

One ophthalmologist’s annual income was $500,000 before he entered the contract, and $1 million annually after he entered the contract, the government alleged.

Eye-Opener: The court looked not only at money changing hands, but also other things of value. The opinion mentions that Tuomey paid for the physicians’ medical and malpractice liability insurance, as well as billing and collections costs for their practices.

4. Tuomey hired an independent valuation firm for FMV advice, but ignored it.

Tuomey only went through the motions to wedge the arrangements into Stark’s fair market value exception, the government alleged.

5. What started off as a Stark problem because a FCA case.

The whistleblower is Dr. Michael Drakeford, an orthopedic surgeon who, at first, was negotiating an employment contract for himself along with the other doctors. Drakeford began to question the deal when he spotted the Stark problems, and he began to question it even more when an attorney both he and Tuomey hired to review the deal warned them about potential red flags in 2005. Drakeford declined the deal. As a qui tam relator, he stands to collect a portion of the civil monetary penalties the government collects.

Fun fact: The attorney who advised Dr. Drakeford and Tuomey in 2005 was Kevin McAnaney, who was the industry guidance branch chief at HHS OIG during the time regulators were laboring to translate the Stark legislation into rules (1997-2003).

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