Charles B. Oppenheim, Partner at Hooper, Lundy & Bookman PC
Benjamin Durie, Associate at Hooper, Lundy & Bookman PC
The Tuomey Healthcare case is one which shows documenting FMV is not the end all of physician compensation compliance. In cases of compliance infractions, courts consider all the relevant facts in including commercial reasonableness of an arrangement and whether or not an organization made a good faith effort to comply.
Tuomey Healthcare created part-time employment agreements with 19 physicians to ensure that they would continue to perform surgeries at the hospital, instead of performing them at an ASC. The part-time arrangements included all the benefits of full-time employment including the opportunity to earn large productivity and incentive bonuses. Despite Tuomey’s FMV documentation, they were still hit with a $237 million fine.
The court ultimately found that the amount of physician collections was not enough to sustain the contracted physician compensation without the additional incentive benefits. The deficit indicated that despite the FMV documentation, the arrangement was not commercially reasonable and was therefore out of compliance. Furthermore, the proceedings revealed that an initial Stark expert brought in to evaluate the program advised against the proposed arrangements. Tuomey leadership then brought in a second valuation firm who wrote up the FMV documentation without including the employee benefits and bonuses portion of the arrangement. These additional facts strongly contributed to the size of the penalty. Ultimately, a demonstrable, good faith effort of FMV documentation paired with consideration of commercial reasonableness are what guide the judgments of less than compliant situations and should be the standard.
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