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Jury Finds Tuomey Health System False Claims Act – Facing up to $357 Million in Potential Liabilities

As previously posted in this Blog, the retrial in the case against Tuomey Healthcare System Inc. (Tuomey) alleging it violated the Stark Law and the False Claims Act (FCA) by illegally paying referring physicians started last month.  After a month long retrial, the jury found that Tuomey’s compensation arrangements with referring physicians violated the Stark Law. The result, nearly 22,000 false claims and more than $39 million in overpayments.  In total, with fines and penalties Toumey is facing $357 million in potential liabilities.  Tuomey officials have indicated that such a large penalty may cause the closure of its business.

This case serves as a reminder of the care needed to structure arrangements between hospitals and physicians.  Anticipated referrals cannot be considered when structuring physician compensation.  The bona fide employment exception to Stark requires that physicians only be compensated for the professional services they personally perform and that the compensation not exceed fair market value.  Both physicians and hospitals should ensure review of physician compensation arrangements for legal compliance.