Last May, we reported on a False Claims Act (FCA) case pending
in the 4th Circuit Court of Appeals regarding a claim brought in
the U.S. District Court in South Carolina against a network of 24
nursing home providers (collectively, "Agape").
The case, U.S. ex rel. Brianna Michaels and Amy Whitesides v.
Agape Senior Community, et al., alleged that Agape engaged in a
scheme to submit claims to Medicare, Medicaid and Tricare for
hospice and nursing home inpatient services that were false because
the care was not medically necessary or the certifications required
to obtain reimbursement were falsified.
District Court Judge Joseph S. Anderson, Jr. initially denied
the plaintiff relators' (the "Relators") request to
prove liability and damages based on a statistical sampling model,
determining that statistical sampling would not be appropriate
because (1) each claim asserted in the case presented the question
of whether services furnished to nursing home patients were
medically necessary; (2) answering the question for each of the
patients would involve a highly fact-intensive inquiry involving
expert testimony after a review of each patient's medical
chart; and (3) the medical charts of each patient for which the
false claims were alleged were intact and were available for review
by the parties. Thus, Judge Anderson was satisfied that an
extrapolation from a statistical sample may not accurately reflect
the non-sampled cases.
Thereafter, the Relators and Agape reached a settlement without
the involvement of the Government (which had elected not to
intervene in the case), which would pay Relators $2.5 million in
settlement of all claims. The settlement was then submitted to the
Government for approval, is required under federal law. However,
the Government rejected the settlement, based in large part on its
own statistical sampling analysis that put the value of the case at
$25 million. The Relators and Agape objected to the
Government's refusal to approve the settlement, but Judge
Anderson ruled that the plain language of the FCA required the
Government's approval, regardless of whether it elected to
intervene in the case. Judge Anderson certified both of his rulings
for immediate appeal.
The 4th Circuit Court of Appeals upheld Judge Anderson's
ruling that the Government had an absolute veto right over any
settlement of the case. The Court found no exceptions in the law to
this requirement in the language of the statute. The Court further
noted that its ruling was consistent with the overall intent of the
FCA, noting that while qui tam relators " are motivated
primarily by prospects of monetary reward rather than the public
good," ... "the United States is the real party in
interest in any [FCA] suit," even when it chooses not to
intervene in the case. 2017 U.S. App. LEXIS 2570 at p. 20.
The Court of Appeals then determined that Judge Anderson's
decision rejecting statistical sampling as a measure of damages was
too fact-based to warrant an immediate appellate review. The Court
therefore remanded the case back to Judge Anderson to hold the
Thus, the Relators and Agape are going to have to decide whether
to spend what Relators estimated could be "between $16.2
million and $36.5 million in pretrial preparation alone for a case
that the Government values at $25 million." 2017 U.S. App.
LEXIS 2570 at p. 10. It will be interesting to see whether the
parties will proceed with the trial, or try to enter into a new
settlement that is more palatable to the Government.
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