BRADENTON, Fla. – South Carolina’s Tuomey Healthcare System has negotiated a $72.4 million settlement with the Department of Justice for filing 21,000 false Medicare claims.
The settlement, announced Friday, represents a significant reduction in the $237 million in damages the DOJ previously sought to resolve violations of the Stark Law related to Tuomey’s improper compensation arrangements with 19 referring physicians.
Tuomey also announced that it will merge into Palmetto Health, a multi-hospital healthcare system based in Columbia, S.C.
“Secret sweetheart deals between hospitals and physicians, like the ones in this case, undermine patient confidence and drive up healthcare costs for everybody, including the Medicare program and its beneficiaries,” said a statement by Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.
“This case demonstrates the United States’ commitment to ensuring that doctors who refer Medicare beneficiaries to hospitals for procedures, tests and other health services do so only because they believe the service is in the patient’s best interest, and not because the physician stands to gain financially from the referral,” he added.
In a market notice concerning the DOJ settlement on Friday, Tuomey said it had executed a binding affiliation agreement with Palmetto Health, which has promised to make major capital improvements and increase healthcare services. Tuomey in February had announced such talks were underway.
“Upon finalization of the partnership, expected on Jan. 1, 2016, the settlement will bring to a close a decade-long journey to resolve outstanding issues with the United States Department of Justice,” said the notice posted on the Municipal Securities Rulemaking Board’s EMMA filing system.
In 2013, a federal jury in South Carolina found that the contracts Tuomey had with 19 physicians violated the Stark Law. The trial court entered a judgment for $237 million under the False Claims Act.
The Fourth Circuit Court of Appeals affirmed the $237 million award on July 2, 2015.
The larger payment had at one time threatened to bankrupt the 301-bed hospital in Sumter, and disrupt payments on $85 million in outstanding bonds issued on its behalf by the South Carolina Jobs-Economic Development Authority. The debt is insured except for $16. 4 million of bonds issued in 2008.
After the appellate court’s ruling in July, Standard & Poor's affirmed its CC ratings and negative outlook on Tuomey Healthcare’s revenue bonds saying that the hospital did not have the financial wherewithal to pay the judgment.
The rating has not been revised since Friday’s lower settlement was announced.
