Fourth Circuit Punts the Statistical Sampling Issue Back to the Trial Court

The January 17, 2017 blog identified how the False Claims Act (FCA) can be used to secure significant recoveries by a statistical sampling method.   Statistical sampling is applied when a whistleblower claims that Medicare and Medicaid reimbursement requests are fraudulent.  The statistical sampling feature occurs when a few cases of reimbursements for either care not provided or care outside of the resident’s medical needs (the sampling) are applied to an entire skilled care chain.  This method allows plaintiffs to avoid proving whether each case of fraudulent reimbursement is indeed fraudulent.  Typically, the cases serving as the sample are the best cases, and the remaining, potentially, thousands of reimbursements may not be fraudulent in any aspect.  The unfairness of this approach is clear.

Statistical sampling was before the Fourth Circuit Court of Appeals in the case U.S.A. ex rel. Michaels v. Agape Senior Community. In February, the Fourth Circuit issued its ruling on whether a small sampling of false claims (reimbursement for hospice care and general inpatient services) can be applied across the board to all of the approximately 53,280 claims for reimbursement submitted by Agape’s South Carolina facilities.  The Fourth Circuit stated that the statistical sampling issue was not properly before it on interlocutory appeal and returned the issue to the trial court.  For an interlocutory appeal, the issue to be decided must involve a controlling question of law that can assist with determining the case outcome.  The Court noted that there were too many issues of fact related to each claim.  This rationale acknowledges the precise reason why statistical sampling cannot be used in cases involving medical judgment, such as, in Michaels, whether a person qualifies for hospice care.

The Michaels trial court was faced with the question of whether the plaintiffs could prove the total false reimbursement amounts by pulling a sampling of reimbursements, determining the percentage that were false and applying that percentage to the “total universe of claims” the South Carolina facilities submitted.  The trial court denied the plaintiffs’ request to use statistical sampling, noting that “each and every claim at issue in this case is fact-dependent and wholly unrelated to each and every other claim.”  The court observed that Agape preserved all evidence, thereby preventing a standard argument for statistical sampling based on loss or destruction of evidence plaintiffs require to prove damages.

For the courts across the United States looking for guidance on statistical sampling in cases of thousands of Medicare and Medicaid reimbursement claims grounded in the issue of whether residents qualify for services, the Fourth Circuit passed on the issue as a fact-based one not qualifying for interlocutory appeal.  That finding is critical as recognizing that statistical sampling cannot be applied to such claims, with the exception of when evidence of individual medical condition is lost. Thus, the plaintiffs will be held to their burden of proving their cases without the statistical sampling shortcut.

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