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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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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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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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Fourth Circuit to Rule on Use of Statistical Sampling to Prove FCA Liability

The U.S. Court of Appeals for the Fourth Circuit has agreed to hear an interlocutory appeal on the use of statistical sampling as a means of proving liability under the False Claims Act (FCA). While statistical methods of proof have been used with respect to damages, relatively few courts have considered whether such methods are ever appropriate to establish liability under the FCA. Thus, the court’s ruling has the potential to shape practice in this area moving forward. The case, United States ex rel. Michaels v. Agape, concerns allegations that a network of 24 nursing homes throughout South Carolina submitted fraudulent claims to Medicare, Medicaid and Tricare for care that was not medically necessary. Due to the large volume of potentially fraudulent claims—over 50,000 claims were submitted during the relevant time period—relators sought to use statistical sampling to prove that defendants had submitted false claims. Specifically, the relators sought to...

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Use of Statistical Sampling to Establish Damages in FCA Cases Still Controversial

As we previously posted, on April 28, 2015, the United States District Court for the Middle District of Florida in U.S. ex rel. Ruckh v. Genoa Healthcare LLC et al, held that expert testimony based on statistical sampling was appropriate in False Claims Act (FCA) cases and could not be excluded solely due to the concern that sampling, by its nature, subverts individualized proof. The court did, however, preserve the importance of Daubert motions to assail a purported sample, noting that defects in methodology or other evidentiary defects could still result in exclusion of an expert’s sampling analysis. Given the difficulties inherent in identifying a reliable sample in FCA cases involving issues of individualized proof, effective Daubert challenges to a relator’s or the government’s sampling expert are critical when litigating in courts that are inclined to permit sampling, whether offered to prove liability or damages. In Ruckh, the relator alleged that the...

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A Stratified Approach to Statistical Sampling: the Limitations of LifeCare and AseraCare

The decision last fall in United States ex rel. Martin v. LifeCare Centers of America, Inc., No. 08-cv-251, 2014 WL 4816006 (E.D. Tenn. Sept. 29, 2014), has led to considerable discussion among lawyers who litigate claims arising under the False Claims Act (FCA). This decision represents the first time any court has found statistical sampling and extrapolation sufficient to establish FCA liability. Some courts had previously endorsed the use of sampling to demonstrate damages once liability has been established. Other courts had affirmed Department of Health and Human Services (HHS) administrative decisions that applied sampling in concluding that Medicare had overpaid government contractors. But the LifeCare decision went further, denying the defendant’s motion for summary judgment relating to the government’s use of statistical sampling to show falsity – the very essence of a false claim for payment by the government. What is particularly noteworthy about...

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