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U.S. Court of Appeals for the Fourth Circuit Issues Tuomey Decision.

Strategic Management Services, LLC | July 2015
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The United States Court of Appeals for the Fourth Circuit recently issued its judgment in the Tuomey case.  In the Tuomey case, a whistleblower instituted a qui tam action alleging that Tuomey Healthcare System (Tuomey) violated Stark Law and the False Claims Act (FCA).  The whistleblower alleged that Tuomey submitted 21,730 Medicare claims that were tainted by illegal compensation arrangements with specialty doctors.  After an initial vacated jury verdict and a loss at a second jury trial, Tuomey appealed the lower court decision to the United Stated District Court for the District of South Carolina (District Court).   The District Court ruled against Tuomey and ordered them to pay $237,454,195.  Subsequently to the District Court’s ruling, Tuomey appealed the decision to the U.S. Court of Appeals for the Fourth Circuit.

The U.S. Court of Appeals for the Fourth Circuit (Court) found for the government on all significant issues.  Importantly, the Court rejected Tuomey’s argument that it had merely relied on the advice of its lawyers regarding physician compensation arrangements.  Further, the Court noted that Tuomey should have given more attention to an opinion provided by one of its attorneys who was a recognized expert on the Stark Laws.  The attorney had raised serious concerns about the proposed contracts without knowing the full valuation of the payments proposed under the arrangements.  Ultimately, evidence at trial of the attorney’s concerns was viewed as critical to satisfying the burden of proof necessary to demonstrate that Tuomey acted with the requisite intent under the FCA.  In addition to affirming the District Court’s judgment, the U.S. Court of Appeals rejected all three of Tuomey’s arguments regarding the District Court’s award of damages.

The U.S. Court of Appeals decision is available at:

http://www.ca4.uscourts.gov/Opinions/Published/132219.P.pdf.

United States ex rel. Drakeford v. Tuomey Healthcare System, Inc., No. 13-2219 (4th Cir. 2015).

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