Tuomey Healthcare or Nexsen Pruet - Who’s Really Guilty in $72M Kickback Settlement

Healthcare fraud is becoming more problematic and intricate every day. One might tend to believe that once a case is settled, that is basically the end of the matter; the bad guys have been made somehow accountable, the government recovers moneys lost, the whistleblower becomes the hero and gets a reward.

Tuomey Healthcare or Nexsen Pruet - Who’s Really Guilty in $72M Kickback Settlement

Unfortunately, healthcare providers given to fraudulent behavior seem to have found a way to try to get back some of the money they should never have received from Medicare/Medicaid in the first place. Namely, some of them have begun to sue their legal counsel, alleging that they “didn’t know” they were breaking the law. A recent case involving Tuomey Healthcare System, a North Carolina-based hospital, has put this particular legal strategy at the forefront of whistleblower news.

Michael Drakeford, Tuomey Healthcare Whistleblower, Alleged Kickbacks

In October 2015, Tuomey had reached a $72.4 million settlement with the government in a False Claims Act lawsuit initiated by whistleblower Michael Drakeford. The case, which spanned over 10 years and included various appeals, was based on allegations that Tuomey had violated the Stark law by entering into certain employment arrangements with physicians in exchange for referrals. The DOJ eventually agreed, and Tuomey was forced to settle, as it was faced with the risk of losing over $200 million in a potential trial.

The whistleblower claimed that Tuomey Healthcare System had approached him about a part-time employment arrangement, which he turned down. Nevertheless, the hospital ended up entering into such arrangements with 19 other physicians in order to secure surgery referrals from them.

At the time of the whistleblower case´s settlement, DOJ sources commented:

“This case demonstrates the United States’ commitment to ensuring that doctors who refer Medicare beneficiaries to hospitals for procedures, tests and other health services do so only because they believe the service is in the patient’s best interest, and not because the physician stands to gain financially from the referral. The Department of Justice is determined to prevent the kind of abuses uncovered in this case, and we are willing to take such cases to trial to protect the integrity of the Medicare program.”

Tuomey Healthcare Seeks to Shift Blame in Arrears to Nexsen Pruet Law Firm

Now, months after the settlement, Tuomey strikes back with a suit against Nexsen Pruet, the law firm that represented them, alleging that the attorneys in question failed to inform them that the arrangements with the physicians were not exactly legal.

Tuomey Healthcare System hired Nexsen Pruet over 15 years ago to draft the contracts with physicians in the area of Sumter; the contracts were meant to keep the specialists referring outpatient surgeries to Tuomey’s facilities. The healthcare provider claims they relied on Nexsen Pruet's advice for contracts it entered with the physicians between 2005 and 2007.

Tuomey also claims that their board of directors wanted to know more about the legal standing of the contracts, but Nexsen Pruet failed to respond, and that it was the firm’s poor legal advice that led to Tuomey having to settle with the government last October. According to the healthcare provider’s lawsuit, it paid the law firm $15 million dollars for, essentially, poor legal counsel.

Expert: Tuomey Won’t Easily Win a Lawsuit v Law Firm – “Bad Hospitals” Evade this Way

One of the country’s top health fraud attorneys, Brian Mahany, believes that Tuomey’s case is a mere last attempt to save face and salvage a few million dollars, by a most likely questionable organization, “Bad hospitals give partial facts to their lawyers and then get a wishy washy opinion in return, saying their proposal is legal. When faced with a False Claims Act or CMS enforcement action, they claim lack of scienter because they relied on counsel. I suspect that the hospital will lose badly. Why? Because I bet they never gave all the facts and information to the attorneys when they asked for an opinion.”

While Nexsen Pruet has not been as categoric in its statements as Mahany, their standing is clear. The law firm´s Board Chairman Leighton Lord has commented that they were “very disappointed with results of the almost decade-long dispute with the federal government.” He also clarified that Nexsen Pruet had “stood by Tuomey through that dispute” and expressed the firm´s dissatisfaction with the lawsuit brought against them.

Lesson Learned for Law Firms: Look Beyond What Healthcare Clients Share

While the courts will ultimately have the last word, it seems that a ruling in favor of Tuomey Healthcare System would set a dangerous precedent. What we can learn from the experience is that law firms should be very careful when advising healthcare providers in such matters, and the high sums paid should not prevent them from investigating this type of contract with physicians beyond what the companies are disclosing. If the matter of “having received poor legal advice” ever goes to court, only those who have done their due diligence might come out victorious.

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