Sampling/Extrapolation
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Courts Weigh Appropriateness of Statistical Sampling in Ongoing Case

On April 2, 2018, the magistrate judge for the US District Court for the Southern District of Indiana issued an order refusing qui tam relators’ request to conduct discovery related to claims submitted to Medicare on a nationwide basis in an ongoing False Claims Act (FCA) case.  Importantly, the judge considered whether statistical sampling could be used to establish liability under the FCA for multiple entities affiliated with the defendant when the alleged false claims in the relators’ complaint originated from a single location. The US Department of Justice (DOJ) subsequently submitted a statement of interest defending relators’ discovery request and the use of statistical sampling to establish liability for false claims, which the court has not yet addressed. In the underlying qui tam case, the relators alleged that Evansville Hospital, a long-term acute care hospital in Indiana, and a physician violated the FCA by submitting claims to Medicare for...

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Update: Judge Denies Relator’s Attempt to Freeze Nursing Home’s Assets Pending Appeal

On January 23, 2018, the same judge who two weeks ago set aside a $350 million jury verdict against a nursing home operator denied a new emergency motion by relator to freeze the defendant’s assets pending the relator’s appeal of the court’s order granting judgment as a matter of law. The relator argued that the defendant should be enjoined from engaging in transactions outside the ordinary course of business during the pendency of the appeal to protect “Relator’s, the United States’, and the State of Florida’s interests during the time the appeal is pending.”  Relator asserted that she has a “strong likelihood of success” on appeal and that the defendant could attempt to “thwart judgment” by transferring assets to related parties while the appeal is pending. The judge denied Relator’s motion, serially rejecting each of Relator’s arguments, with frequent references to the deficiencies in Relator’s case that ultimately led the court to overturn the jury’s...

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Government Backs Down in Landmark Agape Case

In US ex rel. Michaels v. Agape Senior Community, the Department of Justice has assented to a $275,000 settlement after having rejected a $2.5 million settlement two years ago (despite declining to intervene in the case). This case garnered substantial attention because the relators sought to employ statistical sampling to establish liability on hundreds of millions of dollars of allegedly false claims to Medicare and Medicaid. Previously, the Fourth Circuit heard–on interlocutory appeal–argument as to (1) whether statistical sampling could be used to establish liability in a False Claims Act case; and (2) whether the government could veto a False Claims Act settlement in a case in which the government declines to intervene. The Fourth Circuit ruled that the government did possess the authority to veto a settlement in a non-intervened case, and refused to address whether sampling could be used to establish liability. We discussed the Fourth Circuit's decision...

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Fourth Circuit Declines to Address FCA Sampling Dispute as “Issue of Fact” While Affirming That United States Has “Unreviewable Veto Power” to Deny Settlements

On February 14, 2017, after nearly two years of appellate proceedings, the US Court of Appeals for the Fourth Circuit declined to address the substance of an appeal related to the use of statistical sampling to prove liability in a False Claims Act (FCA) case in United States ex rel. Michaels, et al. v. Agape Senior Community, Inc., et al. (4th Cir., Case No 15-2145). In the same opinion, the appellate court affirmed the district court’s holding that the Attorney General has the power to veto settlements between relators and FCA defendants, even when the United States has elected not to intervene in the case. We have been reporting on the developments in this high-profile FCA case as it has proceeded in the Fourth Circuit. From the Court’s acceptance of the appeal, to a summary of opening briefs, to amicus briefs filed by hospital trade associations, to the oral arguments last fall, we have keenly followed this case because of its potentially far-reaching...

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Oral Arguments Held In Closely Watched Agape Case

On October 26, 2016, the US Court of Appeals for the Fourth Circuit held oral arguments in United States ex rel. Michaels v. Agape Senior Community, Inc. In this case, the relators alleged that the defendants caused the submission of false claims for hospice reimbursement. The Medicare regulations governing the hospice benefit require physicians to certify that the patient seeking the benefit have a terminal illness with a prognosis of six months or fewer. The relators allege that those certifications were false. At the district court, the relators had sought to use statistical sampling to establish liability. After the district court concluded—in the context of a discovery dispute—that it would not permit the relators to use statistical sampling to prove their case, the parties engaged in mediation efforts. The relators and defendants reached a settlement, but the government objected. The district court then certified for interlocutory appeal two issues: (1)...

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Another Court Rejects Claims Based on Differences of Clinical Judgment; Also Rejects Extrapolation Attempt

On June 20, 2016, the United States District Court for the Northern District of Texas granted summary judgment in defendants’ favor on all but her retaliation claims in relator’s False Claims Act (FCA) suit against defendants Vista Hospice Care, Inc. and VistaCare, Inc.  The court found that the relator, a former social worker at Defendants’ facility, failed to provide any evidence of a corporate scheme to admit Medicare beneficiaries before they were eligible.  The decision echoed principles announced by the United States District Court for the Northern District of Alabama in US ex rel. Paradies v. AseraCare, Inc., which we have been following on this blog (and which is now on appeal to the Eleventh Circuit). The relator relied on two types of evidence: (1) expert testimony that physicians incorrectly certified certain patients’ eligibility; and (2) Defendants’ implementation of corporate policies designed to incentivize improper admissions. The relator’s...

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DOJ Appealing AseraCare Loss

On May 27, 2016, the US Department of Justice said it will appeal to the Eleventh Circuit its loss in the False Claims Act (FCA) case against hospice chain AseraCare Inc. The government’s decision to appeal comes as no surprise, and it means that the substantial attention this case has received will continue. As a reminder, this case, U.S. ex rel. Paradies v. AseraCare, Inc., focused on whether AseraCare fraudulently billed Medicare for hospice services for patients who were not terminally ill. AseraCare argued (and the district court ultimately agreed) that physicians could disagree about a patient’s eligibility for end-of-life care and such differences in clinical judgment are not enough to establish FCA falsity. The government appealed three orders issued by the US District Court for the Northern District of Alabama. We previously posted about each of these three orders. The first order on appeal is the district court’s May 20, 2015 decision bifurcating...

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Hospital Trade Associations Side with Agape in Fourth Circuit Appeal, Urging the Court to Reject Use of Statistical Sampling to Prove Liability in FCA Cases

In late March, three major health care trade associations filed amicus briefs in support of the defendant-appellees in U.S. ex rel. Michaels v. Agape Senior Community, et al., Record No. 15-2145 (4th Cir.).  As we have previously reported, the relator in Agape is pursuing an interlocutory appeal to the U.S. Court of Appeals for the Fourth Circuit regarding the use of statistical sampling to prove False Claims Act (FCA) liability.  In their respective briefs, the American Hospital Association (AHA), Catholic Health Association (CHA) and American Health Care Association (AHCA), did not mince words – a reversal of the District Court’s ruling that sampling cannot be used to prove FCA liability would have catastrophic consequences for the thousands of hospitals and health care providers throughout the United States. In their joint brief, AHA and CHA noted that their member hospitals “submit thousands of claims to Medicare and Medicaid every day based on...

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Opening Briefs Filed in Fourth Circuit Case on Use of Statistical Sampling to Prove FCA Liability – Could Have Far-Reaching Implications for FCA Defendants

As we previously reported in October 2015, the U.S. Court of Appeals for the Fourth Circuit is considering an interlocutory appeal regarding the use of statistical sampling to prove liability under the False Claims Act (FCA).  The Fourth Circuit’s resolution of this case, U.S. ex rel. Michaels v. Agape Senior Community, et al., Record No. 15-2145 (4th Cir.), could have broad-sweeping implications for FCA defendants.  In short, while courts have regularly permitted the use of statistical sampling to determine damages in FCA cases, the use of sampling to prove FCA liability is a relative rarity and the question has never been considered by a circuit court.  The first question on appeal goes directly to this point.  The second question on appeal—which could also have a significant impact on the FCA landscape—is whether the United States has unreviewable “veto authority” under 31 U.S.C. § 3730(b)(1) to reject a settlement in FCA cases where it has elected not to...

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Circumstantial Evidence Stretched Beyond Its Limits in Proving Kickback and Fraud-on-DrugDex Theories

Two decisions from the US District Court for the Southern District of Texas limit the extent to which relators can stretch the use of circumstantial evidence to support a False Claims Act case based on an anti-kickback or off-label marketing theory. In two separate decisions on December 10 and December 14 in US ex rel. King v. Solvay Pharmaceuticals, Inc. (SPI)., the court granted SPI’s summary judgment motion finding insufficient evidence for a reasonable juror to support either theory. For the anti-kickback claim, relators alleged that SPI engaged in a number of activities, such as speaker programs, preceptorships, honorariums, free continuing medical education, and provided gifts such as dinners and event tickets, as part of a national scheme to illegally induce physicians to prescribe SPI’s drugs. In dismissing this claim on December 10, the court first found that the allegations of a nationwide scheme were unsupported because in relator’s response to...

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