EXCLUSIVE: Lexington Medical settles civil fraud suit for $17 million

Lexington Medical Center
Lexington Medical Center

Lexington Medical Center has settled a federal civil fraud lawsuit brought by a whistleblowing former doctor-employee for $17 million.

In settling the lawsuit, Lexington Medical admitted no fault. The U.S. Department of Justice had joined in the lawsuit against the hospital.

“The settlement, in which Lexington Medical Center expressly denied any wrongdoing, allowed the medical center to avoid continued costly litigation that could have lasted for several years,” hospital spokeswoman Jennifer Wilson said in a statement released Friday afternoon.

Wilson stressed none of the matters covered in the lawsuit were related “to the quality of care provided by Lexington Medical Center or inaccurate billing.”

The suit was brought by a former Lexington Medical physician-employee, David Hammett, a 2001 Wake Forest Medical School graduate, who alleged the hospital was violating federal law by submitting illegal claims to Medicare and other federal health insurance programs, according to his complaint.

Hammett, a neurologist, also alleged Lexington Medical Center required him and other doctors to send patients to its hospital facilities for further tests and that the doctors would be compensated for making referrals. Under federal law, it is illegal for doctors to have financial incentives based on where they send patients for tests. Doctors should have only medical reasons for referring patients.

Exact financial details of the $17 million settlement are to be released next week by the U.S. Justice Department.

Generally speaking, the whistleblower in such cases winds up with 25-30 percent of the total settlement, and the federal government gets the rest.

That means Hammett is in line for a payment of some $4 million to $5 million.

In whistleblower lawsuits, a person comes forward and files a lawsuit under seal claiming that a corporation is committing fraud against the U.S. government. If the government investigates and finds evidence of fraud, it can join in the case.

In this case, Hammett filed a lawsuit against Lexington Medical Center under seal in 2014. The government investigated and eventually joined the action.

A hospital statement said, “While Lexington Medical Center was prepared to vigorously defend the case and to demonstrate why it believes the compensation paid to Lexington Medical Center employed physicians is in accordance with all laws and regulations, the outcome of this inquiry reflects the challenges hospitals face navigating highly complex employment law regulations for physicians.”

Lexington Medical, a 428-bed public hospital with 6,000 employees, is the largest employer in Lexington County. It employs 300 physicians and has 58 doctors’ groups around the Midlands. It is one of the busiest hospitals in South Carolina, doing 20,000 surgeries a year and delivering 3,700 babies.

Lexington Medical will be paying the $17 million from its own funds. Hospital officials stressed that the $17 million is a “very small” number relative to the hospital’s $850 million yearly net revenue.

Former U.S. Attorney in Columbia Bill Nettles, under whose watch Hammett’s lawsuit was developed, on Friday praised the hospital.

“The hospital’s lawyers did their client a huge service because they recognized there was potential exposure and negotiated a favorable settlement for their client,” Nettles said. “That $17 million is nothing compared to what it could have been if it had gone to trial.”

The $17 million payout by Lexington Medical is in marked contrast to a huge judgment against Tuomey Hospital of Sumter in a similar whistleblower case. In that case, Tuomey fought the federal government for nine years, spending some $15 million on legal-related expenses and starting off with a $5.5 million jury verdict against it that swelled to a $237 million verdict in a retrial.

The once-independent Tuomey was forced out of business and absorbed by Columbia’s giant hospital complex, Palmetto Health.

Hammett’s lawsuit said that after he and his physician’s group joined Lexington Medical Center, he referred some patients to an MRI provider in Richland County. When the hospital found out, it told him “his actions were putting jobs at risk,” the lawsuit said.

The hospital fired him when he refused to comply with the hospital’s referral practices, the lawsuit said.

Hammett filed suit in September 2014. Last September, the lawsuit was made public. A federal court filing Friday revealed the negotiated settlement, ending the case.

Hammett’s lawyers included Wes Jackson, Shaun Blake, Dick Harpootlian and Chris Kenney. Lexington Medical’s lawyers included Dwight Drake, David Rosenbloom and David Summer. Lawyers’ fees have not yet been made public.

Lexington Medical Center president and CEO Tod Augsburger said Friday, “We are pleased to be able to resolve this matter and to commit all our resources to the care we provide patients.”