When the Stark Stakes Get Higher

Posted on 29 Jan, 2018 |comments_icon 0|By Elizabeth

“It seems as if, even for well-intentioned healthcare providers, the Stark Law has become a booby trap rigged with strict liability and potentially ruinous exposure — especially when coupled with the False Claims Act,”

—said 4th U.S. Circuit Court of Appeals Judge Albert Diaz who upheld the $237 million judgment against the Sumter, SC-based Tuomey Healthcare System in 2015.

Judge Albert Diaz’s opinion, along with facts of the Tuomey case, exemplify how government regulators and prosecutors approach financial arrangements between physicians and health systems.

Below are some of Tuomey’s wrong turns, which physicians in your medical practice should keep in mind as they navigate financial relationships with other healthcare entities:

Wrong Turn #1:

The Tuomey Healthcare System was desperate to lure physicians back.

Local doctors had begun performing outpatient procedures in their offices or in self-owned ambulatory surgery centers (ASCs). Prior to this time, the physicians had used Tuomey facilities for these procedures, and Tuomey was vying to recoup their lost revenue.

Tuomey then came up with a plan that looked good on the books. In healthcare, though, profit maneuvers must align with regulations. Compliance matters eclipse revenue concerns.

Wrong Turn #2:

The Tuomey Healthcare System incentivized facility use.

Ten-year contracts required physicians to do their outpatient procedures at Tuomey and awarded physician salaries and bonuses with a cut of Tuomey’s net profit.

Stark came into play because the doctors had a financial interest in Tuomey. Their compensation, based on Tuomey’s net profit, was directly proportional to the volume and value of their referrals. Furthermore, the lack of any set hours, among other perks of their contractual arrangement, disqualified them from Stark’s employment exception.

Wrong Turn #3:

The physicians’ income rose dramatically as a result of the arrangement.

The court found, for example, that one ophthalmologist’s yearly income doubled after he entered contract with Tuomey—from $500,000 to $1,000,000 annually.

Eye-Opener: The court not only looked at the money exchanged, but also at other types of compensation. Judge Diaz pointed out that Tuomey footed the bill for their physicians’ medical and malpractice liability insurance. Tuomey also absorbed billing and collections costs for their physicians’ private practices.

Wrong Turn #4:

The Tuomey Healthcare System went through the motions of Stark compliance.

Tuomey had hired an independent firm for fair market value (FMV) guidance but didn’t heed it. This was seen by the court as duplicitous, as well as evidence that they knew what they were doing. By all accounts, Tuomey attempted to squeeze the arrangement with their physicians into Stark’s fair market value exception, but their efforts clearly weren’t in earnest.

Wrong Turn #5:

Stark problems often lead to False Claims Act (FCA) problems.

Orthopedic surgeon Dr. Michael Drakeford was negotiating an employment contract for himself, along with other doctors, when he eventually blew the whistle on Tuomey.

Drakeford started to question the deal once he recognized the Stark issues. He then questioned it further when an attorney he and Tuomey had hired to review the deal warned them about potential violations in 2005. Drakeford chose to walk away from Tuomey’s offer.

As a qui tam relator, Dr. Drakeford received a portion of the civil monetary penalties collected by the government. His share of Tuomey’s payout came to a whopping $18.1 million.

The adage to remember is trite but true. Crime doesn’t pay.

Gear up for Compliance in 2018

Is your staff adequately trained to avoid AKS, Stark, OSHA, FCA, MACs, RACs, EMTALA, and HIPAA violations?

From start to finish, The Physician Practice Compliance Sourcebook will equip you to plan and execute a compliance program that meets federal and state laws requirements.

Read more about the Tuomey case or recent false claims judgements.



Elizabeth works on an array of projects at TCI, researching and writing about modern reimbursement challenges. Since joining TCI in 2017, she has also covered the nuts and bolts of cybersecurity, compliance with federal laws, and how to tap into the advantages of telehealth services.

More from this author

View More

Leave a Reply

Newsletter Signup