March 30, 2012 4th Circuit published opinion

United States v Toumey Healthcare Systems

Toumey operates a hospital in Sumter County, South Carolina. It negotiated exclusive use contracts with several specialists in the region requiring outpatient procedures be done in Toumey facilities. A specialist who did not enter the agreement filed a false claims act action claiming the agreements violated the Stark Act prohibition on certain financial incentives for referrals of Medicare and Medicaid patients to facilities. The government took over the action. The jury found the agreements violated the Stark Act, but, no false claims were made. The district court set aside the verdict and entered a $44 million judgment on equitable theories to the government. The panel reversed. The majority held entering judgment after making the verdict a legal nullity violated the 7th Amendment. It also held the personal services contracts did not exclude facility fees from the Stark Act and that contracts which take into account anticipated volume or value of referrals are covered by the Stark act. It remanded for a determination of whether the agreements here did include anticipated volume or value. The remaining judge concurred in result arguing the legal nullity finding disposed of the case and the discussion of the contract was an advisory opinion.

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