On October 26, 2010, the Fourth Circuit Court of Appeals (the Fourth Circuit) denied Tuomey Healthcare System Inc.’s (Tuomey) petition to appeal the U.S. District Court for the District of South Carolina’s (the District Court) order granting the government’s motion for a new trial. The case will now head for a re-trial.

U.S. ex rel. Drakeford v. Tuomey Healthcare System, Inc., Civ. No. 3:05-2858 (D.S.C.) is a qui tam action brought under the federal False Claims Act (FCA), 31 U.S.C. § 3729-3733, in federal district court in South Carolina. A prior Health Headline article summarizing the underlying arguments in the case is available by clicking here. In March 2010, the district court jury found in favor of Tuomey on the FCA claims but found that Tuomey owed $45 million for violation of the Stark Law. Following the verdict, the District Court granted the government’s motion for a new trial on August 27, 2010, based upon the District Court judge’s own admission of error in refusing to admit testimony of Tuomey’s Chief Operating Officer. The government argued that testimony provides evidence of Tuomey’s knowledge that the physician contracts at issue violated the Stark Law, which would support the government’s FCA allegations against Tuomey.

Tuomey filed the petition for permission to appeal the District Court’s order granting a new trial on September 7, 2010. Tuomey argued the order allowed testimony that was properly excluded in the first trial, thereby prolonging a case in which the parties had not even been able to obtain a clear legal ruling that the Stark Law applied to the facts at hand. The government filed its opposition to the hospital’s petition raising two arguments. First, the government argued that new trials are not reviewable on appeal except in the most “exceptional circumstances,” which circumstances are not present in this case. Second, the government argued that Tuomey’s appeal did not meet the requirement that interlocutory appeals be based on “a controlling issue of law as to which there is a substantial ground for difference of opinion.”

As a result of the Fourth Circuit’s order denying Tuomey’s petition, Tuomey now faces a trial that could last weeks and the potential for nearly $300 million in fines and damages under the government’s allegations of FCA violations.

A copy of the Fourth Circuit’s order is available by clicking here. A copy of Tuomey’s petition for permission to appeal is available by clicking here and the government’s opposition to the hospital’s petition is available by clicking here.