D.O.J. Announces $72.4 Million Settlement in False Claims Act/Stark Law Case Resolving a Decade of Litigation

Friday, October 30, 2015
By George F. Indest III, J.D., M.P.A., LL.M., Board Certified by The Florida Bar in Health Law

In a qui tam False Claims Act (FCA) case based on Stark Law violations, the United States Department of Justice (DOJ) and Tuomey Healthcare Systems, Inc. (Tuomey), reached a settlement of $72.4 million on October 16, 2015.  This settlement put to rest a decade of litigation, including two trials and two U.S. Fourth Circuit appellate decisions.  Tuomey's liability for FCA and Stark Law violations varied significantly from $45 million to $237 million.  

Tuomey was alleged to have employment agreements with 19 physicians that violated the Stark Law and FCA by compensating the physicians in excess of fair market value (FMV) in order to obtain referrals for the health system.  The qui tam initiator or "whistleblower" of the case (dating back to 2005), Dr. Michael K. Drakeford, formerly rejected an offer of employment from Tuomey.  Dr. Drakeford will receive 25% (or approximately $18.1 million) of the settlement.  

To read more information on the facts of the case from its inception and the decisions of the Fourth Circuit on both appeals, click here for the court's published decision dated March 30, 2012 and click here for the court's published decision dated July 2, 2015


Establishing Liability Under the FCA: Defining the Term "Knowingly."

Under Section 3729 (a)(1), 31 United States Code titled "Liability for Certain Acts," "knowingly" is a highly recurring term.  A person does not violate the FCA simply by submitting a false claim.  Rather a person must have submitted the false claim with knowledge of its falsity.  The federal law goes on to define the terms "knowing" and "knowingly" to [mean]:


"(A)   [that] a person, with respect to information--

(i)   has actual knowledge of the information;

(ii)   acts in deliberate ignorance of the truth or falsity of the information; or

(iii)   acts in reckless disregard of the truth or falsity of the information; and

(B)   require no proof of specific intent to defraud..."  Section 3729 (b)(1), 31 United States Code.

Fourth Circuit Holds "Opinion Shopping" Does Not Constitute a Valid "Advice of Counsel" Defense.

One of the arguments raised by Tuomey on appeal was the "advice of counsel" defense.  The Fourth Circuit in United States v. Painter, 314 F.2d 939, at 943, held "...a defendant may avoid liability under the FCA if it can show that it acted in good faith on the advice of counsel."  

Tuomey claimed that it sought advice of counsel who approved of the physician employment contracts at issue.  Therefore, Tuomey made the argument that it was unaware of any violations of the FCA and Stark Law and the government had not met its burden of "intent."  

However, in this case, the record indicated that Tuomey consulted with numerous attorneys, including its long-term counsel (Nexsen Pruet), about the alleged Stark Law implications of the proposed employment contracts.  Upon unsuccessful negotiations with Dr. Drakeford, Tuomey sought further counsel of Kevin McAnaney, an attorney in private practice with expertise in the Stark Law having formerly served as the Chief of the Industry Guidance Branch of the United Stated Department of Health and Human Services Office of Counsel to the Inspector General.  

McAnaney advised Tuomey and Dr. Drakeford that the proposed employment contracts raised significant "red flags" under the Stark Law, and specifically, that Tuomey would experience great difficulty in persuading the government that the physicians were not being compensated in excess of FMV.  United States ex rel. Drakeford, M.D. v. Tuomey, No. 13-2219 (4th Cir. decided July 2, 2015).

Therefore, the Fourth Circuit rejected Tuomey's defense of counsel argument with a finding that "the record here is replete with evidence indicating that Tuomey shopped for legal opinions approving of the employment contracts, while ignoring negative assessments..."  Shopping for a legal opinion to coincide with Tuomey's endeavors was insufficient to meet the strict liability standards of the Stark Law which requires no evidence of ill intent.

Click here to read about the ten largest False Claims, Stark Law and Anti-Kickback settlements of 2014. 

Click here to read one of our previous blogs on one of the largest settlements in health care fraud from this year.


Whistleblowers Must Have Documentation to Support their Allegations.

The single most important item that the DOJ or the U.S. Attorney reviewing a potential whistleblower case looks for is documentation.  Actual false claims (CMS 1500s), explanations of benefits (EOBs), medical records, super-bills, ledgers, reports, letters, e-mails, contracts and other hard documentation is a necessity.  Therefore, if you are thinking of bringing one of these cases, make or obtain copies of the documents while you can.  They may be difficult or impossible to locate or obtain later. 


Comments?


Are you currently involved in an employment contract that may raise "red flags" under the Stark Law or that may implicate FCA violations?


Contact Health Law Attorneys Experienced with Qui Tam or Whistleblower Cases.


Attorneys with The Health Law Firm also represent health care professionals and health facilities in qui tam or whistleblower cases both in defending such claims and in bringing such claims. We have developed relationships with recognized experts in health care accounting, health care financing, utilization review, medical review, filling, coding, and other services that assist us in such matters. We have represented doctors, nurses and others as relators in bringing qui tam or whistleblower cases, as well.

To contact The Health Law Firm, please call (407) 331-6620 or (850) 439-1001 and visit our website at www.TheHealthLawFirm.com.


Sources:


Harper, Jacob J and Brennan, Robert M.  "Tuomey is Put to Bed: DOJ Announces Settlement in Historic FCA/Stark Case."  American Health Lawyers Association: 22 Oct. 2015.  Web.  26 Oct. 2015.  

United States ex rel. Drakeford, M.D. v. Tuomey, No. 13-2219 (4th Cir. decided July 2, 2015).


About the Author:
George F. Indest III, J.D., M.P.A., LL.M., is Board Certified by The Florida Bar in Health Law. He is the President and Managing Partner of The Health Law Firm, which has a national practice. Its main office is in the Orlando, Florida, area. www.TheHealthLawFirm.com The Health Law Firm, 1101 Douglas Ave., Altamonte Springs, FL 32714, Phone: (407) 331-6620.


Keywords:
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10/30/2015

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