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Second Tuomey Trial Starts Today

Opening arguments begin today in the second trial in a lawsuit filed by a whistleblower-physician against Tuomey Healthcare System, Inc. (Tuomey). The United States intervened in the matter which alleges that Tuomey entered into part-time employment agreements with 19 physicians that violated the Stark law resulting in False Claims Act (FCA) liability for Tuomey because as the government alleges, that Tuomey took into takes into account the revenue it expected to receive from physicians’ referrals to value the physicians’ base compensation.

The agreements at issue included these common elements:

  1. The physicians were required to perform outpatient procedures at a Tuomey facility.
  2. Tuomey was solely responsible for all billing and collections for outpatient procedures and the physicians expressly reassigned all benefits payable to the physicians by all payors to Toumey.
  3. Tuomey agreed to pay each physician a base salary that would fluctuate based upon Tuomey’s net cash collections for outpatient procedures.
  4. Tuomey agreed to pay each physician a productivity bonus of 80% of net cash collections and an additional incentive bonus that could total up to 7% of the productivity bonus.
  5. Each agreement was for a term of ten years and included a non-compete that was effective during the term of the agreement and for two years thereafter.

The jury in the first trial found that Tuomey, as a result of these agreements, had violated Stark, but not the FCA. Subsequently, the district court entered a judgment against Tuomey on the government’s equitable claims of nearly $45 million. However, the 4th Circuit Court of Appeals found that as a result of rulings on post-trial motions, the district court nullified the jury’s finding that Tuomey had violated Stark and as a result eliminated the basis for the $45 million judgment on the government’s equitable claims. Among the important components of the 4th Circuit opinion is its discussion of the volume or value compensation prohibition of Stark and. Ultimately, the 4th Circuit vacated and remanded the case back to the court for the new trial, which as noted above, begins today.

The start of this second trial should remind providers of the importance of compliance. The $45 million dollars that awarded by the district court in the first trial only accounted for the alleged amounts of improper Medicare reimbursements. That amount plus additional fines under the FCA are at-risk for Tuomey.