Tuomey Healthcare System to pay $72.4 million to settle judgement over referral scheme; will affiliate with Palmetto Health
The settlement brings to a close legal issues going back 10 years.
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Tuomey Healthcare System in South Carolina will pay the federal government $72.4 million and will affiliate with Palmetto Health to resolve claims it billed Medicare for services referred by physicians it illegally paid, according to the U.S. Department of Justice.
The settlement, announced October 16, resolves a $237 million judgement upheld by an appeals court against Tuomey in July.
Tuomey, based in Sumter, has entered into a binding affiliation agreement with Palmetto Health, a multi-hospital healthcare system based in Columbia, South Carolina. The closing date is January 1, 2016.
Palmetto has pledged to make major capital improvements in Tuomey and to increase services, according to a statement by the health system.
"We are now able to close this chapter and look to the future," said Tuomey CEO and President Michelle Logan-Owens.
[Also: Running list of notable 2015 healthcare frauds]
The settlement brings to a close legal issues going back 10 years beginning with a whistleblower physician who refused to sign an exclusive referrals contract with the health system.
Tuomey, fearing that it could lose lucrative outpatient procedure referrals to a new freestanding surgery center, entered into contracts with 19 specialist physicians that required the physicians to refer their outpatient procedures to Tuomey, according to authorities. In exchange for their signatures, Tuomey paid the doctors compensation that far exceeded fair market value and included part of the money Tuomey received from Medicare for the referred procedures, according to the court record.
Whistleblower Dr. Michael K. Drakeford, an orthopedic surgeon, will receive approximately $18.1 million under the settlement, according to the Department of Justice.
The government argued that Tuomey ignored and suppressed warnings from one of its attorneys that the physician contracts were risky and raised red flags.
In 2013, after a month-long trial, a South Carolina jury determined that Tuomey had filed more than 21,000 false claims with Medicare. The judgment of more than $237 million was upheld by the United States Court of Appeals on July 2, 2015.
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The $72 million being paid by Tuomey to the United States includes $40 million previously placed in escrow by the court.
As part of the settlement, Tuomey will be required to retain an independent review organization to monitor any arrangements it makes with physicians or other sources of referrals for the duration of the five-year Corporate Integrity Agreement.
"The type of abusive compensation arrangements at issue in this case is precisely what the physician self-referral law was designed to prevent," said Inspector General Dan Levinson of the Department of Health and Human Services-Office of the Inspector General. "The extensive litigation and settlement in this case should send a signal to the hospital industry that these tainted financial relationships simply will not be tolerated."
Twitter: @SusanJMorse
