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Feds Use Statistical Calculation to Determine False Claims

Feds Use Statistical Calculation to Determine False Claims

Onslaught of False Claims Act Claims Based on Statistical Sampling

In a case that should cause healthcare providers everywhere to shudder, United States ex rel. Martin et al. v. Life Care Centers of America, Inc., Nos. 1:08-cv-251, 1:12-cv-64, 2014 WL 4816006 (E.D. Tenn. Sept. 29, 2014), the government conducted a random sampling of claims by the defendant, Life Care Centers of America, Inc. (“Life Care”), to statistically calculate the number of False Claims Act claims. The sampling consisted of 400 admissions from 82 Life Care facilities spread over an approximately six-year period. The government used that data to determine a rate of error and applied that rate of error to the 50,000 patient admissions comprising more than 150,000 claims, thereby significantly increasing the number of alleged False Claims Act violations, even though the government lacked any actual proof that a violation had occurred as to each of the alleged violations.

Life Care filed a motion for partial summary judgment alleging that the use of random sampling to extrapolate an error rate and subsequent application of that error rate to all Life Care admissions was improper. Life Care’s network includes more than 200 skilled nursing facilities across the country. Life Care argued that the onslaught of False Claims Act violations without any actual proof that each alleged violation occurred was improper.

Case Survives Summary Judgment as Court Okay’s Statistical Sampling

In denying the motion for partial summary judgment, the court noted that statistical sampling is commonplace in various areas of litigation and is generally accepted by courts.  The court further noted that given the enormity of the logistical issues faced by those tasked with enforcing government programs, such as the False Claims Act, statistical sampling was the only feasible method of addressing the full breadth of violations a healthcare provider has committed, as the time and money needed to fully vet all claims submitted by a given provider would be impractical.  The court went on to note that the provider against whom sampling is used is not denied due process, as it can challenge the sampling by way of expert testimony of its own and cross examination of the government’s expert. This would allow the finder of fact to consider the evidence and make a determination as to whether the sampling is truly representative and the degree of the risk of uncertainty presented by the sampling methodology used.

This case sets a dangerous precedent for expanding the federal government’s ability to assess civil liabilities against healthcare providers. Healthcare providers should consult with their attorneys to assess strategies to prepare for defending these types of claims.

Allen & Gooch is providing this legal update for informational purposes only. This article should not be construed as legal advice or a legal opinion as to any specific facts or circumstances. You should consult your own attorney concerning your particular situation and any specific legal questions you may have.