BRADENTON, Fla. — Tuomey Healthcare System in South Carolina does not plan to file for bankruptcy. At least not at this time.
Tuomey is in a lengthy legal dispute with the federal government over violations of the Stark Law and the False Claims Act in which the government won a $237.5 million judgment against the 301-bed hospital in Sumter.
The hospital has been negotiating with the court and federal prosecutors for a stay in order to appeal the ruling. A stay, or delay in paying the judgment pending the appeal, required putting funds in escrow or posting the money with the court.
Some amounts sought by the government resulted in Tuomey warning in April that it would be forced to file for bankruptcy.
In a notice to bondholders July 31, the hospital said the federal court has ruled that it must deposit $40 million into the court's registry, and that the government would be further secured by a judgment of $10 million if Tuomey loses the appeal.
"The board of trustees has reviewed Tuomey's financial circumstances and bond obligations in light of the stay order," the notice on EMMA said. "Based on this review, the board of trustees has decided not to file a bankruptcy petition at this time."
The hospital board said it would continue to actively monitor Tuomey's finances and bond obligations "to determine if a later bankruptcy petition is necessary to best protect Tuomey, its creditors, employees, stakeholders in the hospital service area, and other interested parties."
In May, Standard & Poor's cut Tuomey's bond ratings two notches, to CC from CCC, citing the hospital's plan to file for bankruptcy.
The downgrade applied to $50.2 million of rated outstanding revenue bonds issued in 2006 by the South Carolina Jobs Economic Development Authority. S&P said the outlook is negative.
In addition to the 2006 bonds, Tuomey also has $21 million of unrated 1998 bonds insured by Ambac Assurance Corp. and $16.4 million of unrated, uninsured bonds that it repurchased in 2010.
In a case that has spanned nine years, a federal jury found Tuomey's compensation arrangements with 19 referring physicians that had part-time employment agreements were unlawful under the Stark Law, resulting in 21,730 violation of the False Claims Act with a monetary value of $39.3 million in improper payments from Medicaid and Medicare.
After a second trial in a whistleblower case filed under the False Claims Act, a federal district court on Oct. 2, 2013 ordered Tuomey to pay more than $237.5 million in fines and penalties for the improper Medicaid and Medicare reimbursement.
