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South Carolina doctor refuses illegal referral fees, wins $18 million for blowing the whistle

An orthopedic surgeon who refused to sign an illegal contract with a South Carolina hospital operator and instead blew the whistle will collect $18.1 million as his share of a False Claims Act judgment. 

Dr. Michael K. Drakeford filed a lawsuit in 2005 under the qui tam, or whistleblower, provisions of the False Claims Act. He alleged that Tuomey Healthcare System was paying illegal fees to doctors doctors who sent patients to the hospital chain.

The DOJ said Friday it resolved a $237 million judgment against Tuomey Healthcare for illegally billing the Medicare program for services referred by physicians with whom the hospital had improper financial relationships. 

The United States will receive $72.4 million.

Tuomey, based in Sumter, South Carolina, will be sold to Palmetto Health, a multi-hospital healthcare system based in Columbia, South Carolina.

The False Claims Act permits private individuals to sue on behalf of the government for false claims and to share in any recovery. The FCA allows the government to intervene and take over the action, as it did in this case. 

The DOJ said Tuomey thought it would  lose outpatient procedure referrals to a new freestanding surgery center. So it contracted with 19 specialist doctors, requiring them to refer their outpatient procedures to Tuomey.

In exchange, the DOJ said, Tuomey paid the doctors more than fair market value. Part of the fees came from money Tuomey collected from Medicare for the referred patients. 

Dr. Drakeford sued Tuomey after he was offered but wouldn’t sign one of the illegal contracts, the DOJ said.

The government alleged that Tuomey ignored and suppressed warnings from one of its attorneys that the physician contracts were “risky” and raised “red flags.”

On May 8, 2013, after a month-long trial, a South Carolina jury decided the contracts violated the Stark Law. It prohibits hospitals from billing Medicare for patients referred by doctors in exchange for referral fees. The jury found that Tuomey had filed more than 21,000 false claims with Medicare. 

In October 2013, the trial court entered a judgment under the False Claims Act in favor of the United States for more than $237 million. 

The United States Court of Appeals for the Fourth Circuit affirmed the judgment on July 2, 2015. Friday’s resolution with the DOJ resolves the lawsuit and the judgment.

Benjamin Mizer, head of the DOJ’s Civil Division, said: “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.”

The case was United States ex rel. Drakeford v. Tuomey Healthcare System, Inc., Case No. 3:05-cv-02858 (MBS) (D.S.C.). 


Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.

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