October 16, 2014

Court Approves Statistical Sampling in False Claims Act Cases

By Jason Enzler

A district court has upheld the use of statistical sampling in a False Claims Act case. As the court discussed in its decision, the use of sampling in False Claims Act litigation is not new. But it generally has been limited to establishing damages or to cases where the use of sampling is not contested. In United States ex rel. Martin v. Life Care Centers of America, Inc., however, the court approved the use of sampling to establish liability under the False Claims Act.

The case involves a lawsuit brought by two whistleblowers (and joined by the government) against their former employer, Life Care Centers of America, alleging Life Care Centers was committing Medicare fraud by billing for unreasonable and unnecessary services. Life Care Centers is a health care corporation with over 200 skilled nursing facilities across the country, so it should come as no surprise that the government contended there were over 150,000 claims at issue. In order to prove that Life Care Center was fraudulently billing Medicare, the government sought to use a random sampling of 400 patient admissions and extrapolate the data to the larger set.

The court approved the use of such sampling, writing that “given the large number of claims that can be submitted by a single entity to be reimbursed by Medicare, it is often not practical to do a claim-by-claim review of each allegedly false claim in a complex False Claims Act action.” While defendants will still be able to argue to jurors that such sampling exercises should be accorded little or no weight, the court noted an all-out bar on the use of statistical sampling would “materially limit the efficacy of the False Claims Act” because “perpetrators of fraud would be emboldened by the fact that a claim-by-claim review is often impractical” and it would “open the door to more fraudulent activity.”

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