Relators Argue Fourth Circuit Must Permit Use of Sampling to Establish FCA Liability

The Fourth Circuit has agreed to consider on interlocutory appeal whether statistical sampling can be used to establish FCA liability, as we previously reported hereSee United States ex rel. Michaels v. Agape Senior Cmty., Inc., No. 15-2145 (4th Cir.).  Because no circuit court has yet ruled on the issue, the Fourth Circuit’s decision could significantly impact the development of this hotly-debated issue in FCA litigation.

The district court had acknowledged that in certain circumstances—for example if evidence were lost or destroyed—statistical sampling may be the only way for a plaintiff to establish liability.  However, the district court did not view the present case as one that necessitated statistical sampling, explaining that “[t]he patients’ medical charts are all intact and available for review by either party.”  The relators’ opening brief, filed on January 14, argues that based on the more than 50,000 claims at issue, the cost to review all of the medical charts and determine the number affected by the alleged upcoding scheme would range from $16.2 million to $36.5 million, meaning that the resulting costs of trying the case would “exceed even the Government’s ambitious damages calculation.”

The relators also emphasize the frequency with which sampling and extrapolation is accepted in other contexts, including administrative recovery of Medicare overpayments.  The district court was not persuaded that the availability of statistical sampling in the Medicare overpayment context meant that sampling should be used to establish FCA liability “because each case involved a Government audit that established the amount of overpayments.”  A district court in the Eastern District of Tennessee, when confronted with the same analogy, further explained that the Medicare recoupment cases are inapposite because, unlike the FCA, “using statistical sampling to determine overpayment amounts is explicitly authorized by statute.”   United States ex rel. Martin v. Life Care Centers of America, Inc., No. 08-cv-251 (E.D. Tenn. Sept. 29, 2014).

The relators also criticize the cases cited by defendants that rejected sampling to establish FCA liability, noting that “they either involve a smaller amount of claims, or they involve scientifically-flawed sampling.”  According to relators, sampling is the only feasible method to determine liability in the Agape case, and so long as the sampling methodology meets statistical standards, there is no unfair harm to the defendant.  The long-term consequence of the district court’s rule, they claimed, would be a “perverse outcome to the federal treasury; namely, the larger the fraud, the less such fraudulent claims can be confronted and remedied via qui tam litigation.”

A copy of the relators’ brief can be found here.  We will continue to monitor the case.