BRADENTON, Fla. — The Tuomey Healthcare System in South Carolina disclosed Oct. 2 that it is appealing a court ruling ordering Tuomey to pay $39.9 million for violations of the False Claims Act plus $237.5 million in civil fines.

At the same time, Standard & Poor's dropped the hospital's 2006 underlying bonds rating further into junk territory, to CCC from BB.

The verdict and additional fines sought by prosecutors for 21,730 false Medicare and Medicaid claims were confirmed by U.S. District Judge Margaret Seymour Sept. 30, according to documents filed on the Municipal Securities Rulemaking Board's EMMA filing system.

"Tuomey has appealed these judgments and intends to file a motion for stay of these judgments pending appeal," the system said in a material event notice.

Tuomey Board Chairman John Brabham said on the hospital's website that it "respectfully disagrees with the ruling," and remains open to a settlement.

A settlement can occur up until there is a final appellate ruling, according to legal expects. In May, while final judgment was pending, Toumey told bondholders in a notice that an adverse ruling could render it insolvent.

Meanwhile, Standard & Poor's lowered its rating to CCC, and revised the outlook to developing from negative.

"Given the increasing likelihood that Tuomey may have to pay a sizable settlement and the related uncertainty surrounding the subsequent effects on Tuomey's financial profile, we believe a lower rating is warranted," said analyst Margaret McNamara. "The CCC rating connotes our view that Tuomey is currently vulnerable to nonpayment."

S&P said the developing outlook reflects the possibility the rating could be raised if a change in legal status ultimately is more favorable to Tuomey or it presents a plan for resolving the judgment consistent with a higher rating. A lower rating could occur if Tuomey files for bankruptcy or experiences substantial financial decline.

The 242-bed hospital in Sumter County had $88.8 million of outstanding long-term debt issued in 2001, 2006 and 2008, according to the Sept. 30, 2012 audit.

The 2006 bonds, originally issued in the amount of $74.5 million by the South Carolina Jobs-Economic Development Authority, were insured by CIFG Assurance NA. Proceeds were used to add 35 beds to an existing patient tower and refund $36.25 million of debt sold in 1995.

In Tuomey's case, a jury found that compensation arrangements with 19 referring physicians that had part-time employment agreements were not permitted under the federal Stark Law. The Stark law limits payments that physicians in a financial relationship with a hospital can receive for certain procedures or referrals. The relationship resulted in 21,730 false claims filed for Medicare and Medicaid payments.

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