In a case in which it chose not to intervene, DOJ has stepped in to defend the relator’s attempt to use statistical sampling to prove FCA liability. The relators allege that Select Medical Corporation, a related entity in Evansville, Indiana, and a physician violated the FCA by making medically unnecessary admissions to long term care facilities and increasing reimbursements by manipulating patients’ lengths of stay and falsifying diagnoses. The relators contend that their claims encompass Select’s facilities nationwide, and advised the Court that they intended to propose a plan to use statistical sampling to establish FCA liability based on evaluation of a subset of medical records from facilities throughout the country. The defendants contend that the claims should be limited to the named facility in Evansville. (more…)
The extent to which statistical sampling can be used to establish FCA liability remains a hotly disputed topic among federal courts. In a closely watched case, the Fourth Circuit last week declined to become the first circuit court directly to address the issue. See United States ex rel. Michaels v. Agape Senior Cmty., Inc., No. 15-2145 (4th Cir. Feb. 14, 2017).
As we reported here and here, the question of whether statistical sampling can be used to establish FCA liability became intertwined in a Fourth Circuit interlocutory appeal challenging the government’s assertion that it has unfettered authority to veto FCA settlements. United States ex rel. Michaels v. Agape Senior Cmty., Inc., No. 15-2145 (4th Cir.). During oral arguments last week, the Fourth Circuit panel demonstrated a clear preference for avoiding the sampling component of the appeal, likely leaving the lower courts to continue to develop a piecemeal approach.
We previously reported on the Supreme Court’s opinion earlier this year in Tyson Foods v. Bouaphakeo, a non-FCA case that upheld the use of statistical sampling to establish liability in a Fair Labor Standards Act suit, but which offered important narrowing limitations that we argued were applicable to FCA cases (see here). Relying in part on Tyson Foods, a district court recently refused to allow a relator to use extrapolation to establish FCA liability, finding that extrapolation was inappropriate in a case based on claims of medical necessity. See United States ex rel. Wall v. Vista Hospice Care, Inc., No. 07-cv-00604 (N.D. Tex. June 20, 2016).
The Supreme Court recently ruled that plaintiffs under the Fair Labor Standards Act may, in at least certain circumstances, use statistical sampling to establish liability. See Tyson Foods v. Bouphakeo, 135 S. Ct. 2806 (2015). The Court’s embrace of the use of statistical sampling suggests that it would be unlikely to hold in the FCA context that sampling is per se inappropriate to demonstrate liability. However, Tyson Foods does not suggest that sampling is appropriate in every case, and the opinion provides helpful guidance as to the circumstances under which statistical sampling might not be appropriate to establish FCA liability. We explore these arguments in an article available here.
Today, the district court in the AseraCare case delivered the coup de grace to the Department of Justice, granting summary judgment for AseraCare after previously vacating a jury’s verdict in favor of DOJ. In so doing, the court’s brief order emphasizes that disagreements over medical necessity, standing alone, provide no basis for an FCA claim. See Order in United States v. AseraCare Inc., No. 12-cv-00245 (N.D. Ala. Mar. 31, 2016). The district court’s holding that “contradiction based on clinical judgment or opinion alone cannot constitute falsity under the FCA as a matter of law” buttresses potential defense arguments in suits involving issues of medical necessity or other judgment calls, including alleged upcoding.
As we reported here, the Fourth Circuit is currently facing a unique case presenting the question of whether the government has an unfettered veto authority over FCA settlements and, if not, whether the district court erred in rejecting the government’s objections to a settlement. See United States ex rel. Michaels v. Agape Senior Cmty., Inc., No. 15-2145 (4th Cir.). Notably, the government’s objections were premised on the use of statistical sampling to establish FCA liability, adding to the dispute a critical issue that has been generating significant debate.
The Fourth Circuit has agreed to consider on interlocutory appeal whether statistical sampling can be used to establish FCA liability, as we previously reported here. See 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.
In a stunning reversal, a federal district court overseeing the AseraCare trial has not only vacated a verdict in favor of DOJ on the issue of whether claims submitted by the defendant were false, but has strongly indicated that the court is likely to grant summary judgment for the defendants. As we have previously reported here and here, in May 2015, the district court elected to bifurcate the trial into two phases, one focused on the falsity of a sample of claims and the second phase focused on the remaining elements of FCA liability. If the government could establish FCA liability through the two phases of the trial as to at least a fraction of the sample, the court planned to permit extrapolation of this liability to the broader universe of claims submitted by AseraCare. A critical issue in the falsity phase has been whether patients met CMS’ medical criteria for hospice eligibility, i.e., they have “a life expectancy of 6 months or less if the terminal illness runs its normal course.” Prior to the court’s decision to bifurcate, the government represented in interrogatories that it would only use the testimony of its expert witness and the sampled medical records to demonstrate that patients did not meet CMS’ criteria, and therefore AseraCare falsely certified to their eligibility for hospice care.
The Fourth Circuit has agreed to hear an interlocutory appeal from a case in the District of South Carolina (discussed here), regarding the now hotly-debated role of statistical sampling in establishing liability and damages in FCA cases. See United States ex rel. Michaels v. Agape Senior Cmty., Inc., No. 15-238 (4th Cir. Sept. 29, 2015). The Fourth Circuit will be the first appellate court to weigh in on the issue. The district court initially ruled that the relator could not use sampling for purposes of extrapolating damages, but it ultimately certified the question for interlocutory appeal, alongside a second question as to whether the government has unfettered veto authority over settlements resolving non-intervened qui tam suits. As we discussed here, the government and the defendant in the qui tam suit both filed briefs opposing appellate review of the district court’s ruling on statistical sampling, while the relator urged the Fourth Circuit to rule on the question. We will continue to monitor and provide updates on the appeal.
A copy of the Fourth Circuit’s order can be found here.