Several major industry groups have jumped into a case over whether whistle-blowers may use statistical sampling to prove liability in fraud cases, saying allowing such sampling could be “disastrous” to hospitals and other providers.
The whistle-blowers argue that prohibiting the use of statistical sampling could allow providers and others to more easily get away with large-scale fraud. A ruling allowing statistical sampling in this case could lead to more whistle-blowers using the tactic on healthcare organizations, which already face the lion's share of False Claims Act lawsuits.
The American Hospital Association, the Catholic Health Association and nursing home industry group the American Health Care Association have all filed briefs in recent weeks siding with the provider, Agape Senior Center of South Carolina.
The whistle-blowers allege Agape inappropriately certified patients for hospice and other services that were not medically necessary. The whistle-blowers worked at only one Agape facility but want to use statistical sampling to allege fraud throughout the organization.
Using that method, a group of randomly selected claims would be carefully examined, and if it were found that a certain percentage of those claims were fraudulent, the whistle-blowers would then project that percentage onto all claims submitted by Agape to the government.
A lower court ruled that the whistle-blowers could not use statistical sampling. The 4th U.S. Circuit Court of Appeals is now considering the issue.
Many are closely watching the case because it's the first time a federal appeals court has considered whether statistical sampling may be used in a False Claims Act matter, said Colin Wrabley, a partner at Reed Smith who filed a brief in the case (PDF) on behalf of the American Health Care Association.
The AHA and Catholic Health Association argue in their brief (PDF) that allowing statistical sampling could incentivize whistle-blowers to bring more large, meritless lawsuits. That would increase legal costs and divert money away from patient care.
“If the falsity of claims involving medical judgment could be proven through statistical sampling rather than an analysis of the facts and circumstances of a patient's unique situation, the consequences to health care providers would be hard to overstate,” according to a brief in the case filed by the AHA and Catholic Health Association.
Providers found liable in False Claims Act cases face triple damages and penalties of up to $11,000 for each false claim, meaning in cases with tens of thousands of allegedly false claims, such as the Agape case, liability for the provider could be “catastrophic,” according to the brief.
Agape says it submitted 53,280 claims during the period in question. The whistle-blowers say the number is closer to 61,643.
The groups argue that it's necessary to understand why doctors make decisions for certain patients before fraud can be proven. To understand those decisions, it's important to analyze a patient's medical history, diagnosis and other information, they say.
But attorneys for the whistle-blowers argue in court documents that statistical sampling is necessary.
“Due to the sheer volume of claims at issue, trying this case would be cost-prohibitive and would result in a trial of 'monumental proportions' spanning over a year,” according to a brief filed on behalf of the whistle-blowers.
Prohibiting statistical sampling would make it much more difficult for whistle-blowers to fight large-scale fraud in court, the whistle-blowers argue.
Patrick Burns, a co-executive director of the Taxpayers Against Fraud Education Fund, a not-for-profit supporting whistle-blower incentive programs, said honest providers shouldn't be afraid of statistical sampling.
"Statistical sampling is a really strong defense if, in fact, you didn't do fraud,” Burns said.
Wrabley said oral arguments in the case won't likely be held until summer.
Agape and the whistle-blowers already tried to settle the case at the district court level, but the federal government wouldn't allow the settlement to proceed. The government has officially declined to intervene in the case.
The federal appeals court is now only considering the issues of whether statistical sampling may be used and whether the federal government had a right to veto the settlement, Wrabley said. Once those issues are decided, the case will likely go back to the district court. Other lower courts have ruled on statistical sampling in False Claims Act cases in the past, he said, but those rulings have been mixed.