United States ex rel. Drakeford v. Tuomey Healthcare System

What happened

Tuomey Healthcare System — a non-profit hospital in Sumter, South Carolina — entered into part-time employment contracts with 19 specialist physicians (gastroenterologists, general surgeons, orthopedists, and OB/GYNs) starting in 2005. Under those contracts, the specialists were paid a base salary plus productivity bonuses tied to a "collections-per-RVU" formula. On its face the structure resembled standard productivity compensation. The problem was the math.

The compensation formula effectively counted the technical and facility components of procedures performed at Tuomey — not just the physician's professional component — toward the bonus pool. As outpatient procedure volume at Tuomey increased, the specialists' bonus dollars increased proportionally. Because the specialists were the principal referral source for those outpatient procedures, the formula converted the employment relationship into a referral-based payment scheme: more referrals to Tuomey meant more total facility billings, which meant more bonus pool, which meant higher physician compensation.

The whistleblower — Dr. Michael Drakeford, an orthopedic surgeon who declined to sign one of the contracts — filed suit in 2005. Tuomey's own outside counsel had warned the board in writing that the contracts likely violated Stark; the board sought a second opinion that gave them comfort, and signed. The case went to two trials. The second jury found Tuomey submitted 21,730 false claims and assessed treble damages plus civil penalties totaling $237M. The case settled post-verdict for $72.4M in 2015 — the largest Stark FCA recovery at the time.

What this means for your arrangements

Tuomey is the case every Stark training cites because it establishes a hard rule: compensation that varies with the volume or value of referrals is impermissible even when wrapped in a productivity formula. If your physician contracts include bonus pools tied to facility billings, technical-component revenue, or any metric that captures referral volume rather than pure personal productivity, the contracts are at risk — regardless of how they are labeled.

The second teachable element is the role of the FMV opinion. Tuomey obtained valuations supporting their compensation; what they did not have was a contemporaneous opinion that the structure — not just the dollar amount — was consistent with FMV. An FMV opinion that values the dollars without examining the formula is not protective.

How ArrowISE prevents this pattern

ArrowISE flags compensation structures with referral-volume- correlated components during the safe-harbor element review. The Schena-Shield risk pattern fmv_above_market captures arrangements where compensation drifts above contemporary benchmarks without a refreshed FMV opinion; the Defensibility Index methodology weights FMV currency at 30% precisely because Tuomey-shape failures are the most-litigated dimension. The audit-log timeline surfaces every FMV opinion change with a tamper-evident hash chain, so the date of the supporting opinion is provable on demand.