The FCA and the Use of Statistical Sampling

The U.S. Department of Justice late last month agreed to a $275,000 settlement in a False Claims Act case against a South Carolina-based company that operates elder care facilities. What’s significant about this case is that two years earlier, the DOJ rejected a significantly higher – $2.5 million – settlement.

In the initial case, United States ex rel. Michaels v. Agape Senior Community Inc., whistleblowers and former Agape employees Brianna Michaels and Amy Whitesides, alleged that Agape submitted claims for medically unnecessary services as well as billed for services that were not provided.

Rather than show specifically which claims were fraudulent, the Relators noted that doing so would be too time-consuming and expensive. Instead, they wanted to use a statistical sampling to show that more than 50,000 claims had been falsified. The government estimated that losses were around $25 million.

Statistical sampling is, as the name suggests, reviewing a small sample of submitted claims during a period in which the alleged violations occurred in an effort to show a pattern of fraud. It’s a practice many have criticized as being akin to a “trial by formula.â€

The case received significant attention because, while the government initially declined to intervene in the whistleblower case, the U.S. Court of Appeals for the Fourth Circuit, following an interlocutory appeal argument in February, allowed it to reject the initial settlement. In that ruling the appellate court stated that it agreed with previous court rulings in similar cases that the Attorney General “possesses absolute veto power over voluntary settlements in FCA qui tam actions.â€

At the same time, however, the appellate court declined to rule on whether the Relators could rely on a statistical sampling to prove its case. Previously, the district court had ruled that using statistical sampling and extrapolation would not be appropriate based on the particular facts and evidence presented in this action. In declining to rule, the appellate court stated that it was “constrained to dismiss that aspect of the relators’ appeal as improvidently granted.â€

By declining to rule, the Fourth Circuit leaves undisturbed the lower court’s decision prohibiting the use of statistical sampling in FCA cases.

What this means down the road for other FCA cases that rely on statistical sampling remains to be seen. Absent an appellate court ruling, FCA litigants on both sides may face additional challenges going forward. Those who choose to file an FCA case may find it cost prohibitive if the courts reject the use of statistical sampling. At the same time, those defending FCA cases may, depending on the circumstances of the case, be better able to successfully defend themselves.

The Health Law Offices of Anthony C. Vitale is known for its representation of whistleblowers, as well as our ability to defend those who are the target of a whistleblower action. Call us at 305-358-4500 or send an email to info@vitalehealthlaw.com and let’s discuss how we might be able to help.