The Fourth Circuit Court of Appeals agreed in 2015 to hear an interlocutory appeal of a district court's decision to prohibit a qui tam relator from using statistical sampling to prove liability and damages in a False Claims Act (FCA) case involving Agape Senior Community, Inc. and its affiliates. The Agape case involved more than 10,000 patients and more than 50,000 claims. The relators estimated that reviewing each patient's chart to prove liability and damages would potentially cost up to $36 million. The government, through statistical sampling, estimated Agape's liability to be $25 million. The Fourth Circuit would have been the first circuit court to consider the use of statistical sampling to prove liability and damages in an FCA case. The case was being widely watched for its potential impact on the ability of the government and relators to prove large Medicare FCA cases and defendants' ability to fight the allegations, winning the battle but losing the war as a result of the costs involved.
However, the Fourth Circuit dismissed the statistical sampling portion of the Agape interlocutory appeal as improvidently granted because the relator's appeal did not present a pure question of law for review. As the relator's brief stated, "[t]he true question for the District Court is not whether statistical sampling and extrapolation, in and of itself, is appropriate.... Rather ... the issue is whether [the relators'] proposed 'statistical sampling [was] conducted in a scientifically proven and accepted manner'.... Thus, the relators' appeal raise[d] the question of whether the district court may, in its discretion allow the relators to use statistical sampling to prove their case."
The Agape case also highlights the difficult and daunting choices facing relators in cases involving large numbers of patients and claims. In this case, the relators and Agape entered mediation with the government in late 2014 but could not reach a settlement. Agape and the relators mediated again in January 2015 and reached a proposed settlement. The government, however, objected to the settlement as it was "appreciably less than $25 million, the Government's estimate of total damages..."
Following the lead of the Fifth and Sixth Circuits, the Fourth Circuit upheld the government's "unreviewable right" to veto the relator's proposed settlement of FCA causes of action against Agape, despite the fact that it had not intervened in the case. The district court aptly noted the "unique dilemma" that the relators faced – the government objected to the settlement reached by the relators and Agape based on statistical sampling that the district court precluded the relators from using. In light of the costs of proving the case, the district court noted that a compelling case could be made that the government's position was not reasonable. It is going to be interesting to watch this case to see whether the relators are willing to continue prosecuting the case and if so, how they meet their evidentiary burdens.
Despite the preclusion of statistical evidence in this case, providers should be aware that courts have long admitted sampling and statistical data to support damages calculations in appropriate FCA cases and, in the last few years, have increasingly allowed such data to be used to establish FCA liability where "the defendants' conduct caused the submission of more false claims and records than could reasonably be tried before a court on a claim by claim basis."
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