Whistleblower Law Blog

Fourth Circuit Will Rule on Use of Sampling to Establish FCA Liability

In United States ex rel. Michaels et al. v. Agape Senior Community Inc. et al., the United States District Court for the District of South Carolina certified its ruling rejecting the Plaintiff-Relators’ use of statistical sampling to prove liability and damages, setting the ruling for interlocutory appeal by the U.S. Court of Appeals for the Fourth Circuit.  On September 29, 2015, the Fourth Circuit agreed to review whether statistical sampling can be used to prove liability in a fraud case.

In Agape, the Plaintiff-Relators claimed that Defendants, a network of twenty-four nursing homes, committed fraud by submitting false Medicare, Medicaid, and Tricare claims and seeking reimbursement for nursing home-related services.  The government declined to intervene.  The case involves claims for at least 10,166 patients.  The district court found that “each claim asserted here presents the question of whether certain services furnished to nursing home patients were medically necessary,” meaning that each claim for each patient is distinct and unique from the other claims.

It would cost the Plaintiff-Relators between $16.2 million and $36.5 million for an expert to analyze each claim, while the government estimates that the claims are worth, at most, around $25 million.  Due to the costs involved in analyzing each patient and claim, Plaintiff-Relators sought to use statistical sampling to prove liability.  In the sampling, Plaintiff-Relators would examine a percentage of randomly selected claims.  Plaintiff-Realtors would then project the percentage of the sample found to be fraudulent onto the total universe of claims submitted by Agape.  Defendants objected to Plaintiff-Relators’ use of statistical sampling to prove liability, and the district court ordered the parties to brief the issue.

The parties’ briefs cited numerous cases for and against the use of statistical sampling.  In rejecting the use of statistical sampling in this case, the district court stressed that it is not one where the evidence has been destroyed, thus rendering statistical sampling the only way to prove damages, and that each claim presents a unique issue of fact.

The Fourth Circuit will also review the Government’s right to reject a settlement in a qui tam action in which it has not intervened.

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