Legal Problems May Push Tuomey Into Bankruptcy

The board of Tuomey Healthcare System in Sumter, S.C., has given the green light to executives to file for bankruptcy as soon as this month, according to a report from The Sumter Item.

The board's decision to interim CEO Michael Schwartz and his team comes as Tuomey faces mounting costs from a massive legal challenge. Last May, a jury found Tuomey violated Stark Law and the False Claims Act by filing $39 million in false claims to Medicare and compensating physicians for not referring patients to competing hospitals or physicians. As a result, a judgment was entered against Tuomey in the amount of $237 million.

Last month, a federal district court in South Carolina ordered Tuomey to pay $70 million as its appeal of the case takes course.

The financial problems have accumulated for Tuomey since the case started. Last fall, soon after Tuomey found out it had to pay more than $237 million in fines, Standard & Poor's Ratings Services downgraded the system's credit rating by two notches, from "BB" to "CCC". S&P analysts said Tuomey's credit could be hit further if it files for bankruptcy or posts large financial losses. No timeline was given for when, or if, Tuomey would file for bankruptcy.

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