How to Avoid A Business Decsion that Can Cost You Millions

In making a business decision, have you ever considered how much money you might make by hiring another doctor?  Have you considered how much it might cost your business if that doctor is employed by a competing practice?  In the world of health care, these type of business decisions can cost you millions.

On September 30, 2013, a federal court in South Carolina entered a $277 million dollar judgement against Tuomey Health Systems after a jury in May found it violated the Stark law and the False Claims Act.  Certain physician arrangements were found to have violated these federal laws.  The judge decreased the award to $237.5 million.

Tuomey was found to have submitted 21, 730 false claims to Medicare. The whistle blower is a surgeon who Tuomey attempted to hire as a part-time physician.  The case was filed in 2005.  The jury found that Tuomey paid physicians at rates higher than fair market value in order to receive their referrals.

“The Government presented evidence of a one-to-one relationship between each doctor’s aggregate compensation and the volume or value of the doctor’s referrals of [other services] to the hospital.  The Government presented testimony wherein Tuomey acknowledged that each time one of the physicians performed a legitimate procedure on a Medicare patient at Tuomey’s facility pursuant to his or her agreements, the physician’s compensation would increase. In addition, the Government presented testimony that each time one of the physicians referred a patient to Tuomey’s facility, Tuomey received a facility fee for the services that the hospital provided in connection with the referral.”

Tuomey Federal District Court Order, 9/30/13

Whenever you are considering a business decision regarding adding a practice area or service, you need to have the advice of a healthcare attorney.  The Stark and Anti-kickback laws are complex.  Any transaction needs to be analyzed and reviewed under current law.

Further, you must perform a fair market value analysis to determine whether you are paying a “fair” price for the service.  If you pay an amount substantially over the fair market value, you could be accused of paying for referrals.  Remember: every practice needs great advisers.  Whether it’s your accountant or your healthcare attorney, you need experts to help you avoid these pitfalls.

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