On April 2, 2018, the magistrate judge for the US District Court for the Southern District of Indiana issued an order refusing qui tam relators’ request to conduct discovery related to claims submitted to Medicare on a nationwide basis in an ongoing False Claims Act (FCA) case.  Importantly, the judge considered whether statistical sampling could be used to establish liability under the FCA for multiple entities affiliated with the defendant when the alleged false claims in the relators’ complaint originated from a single location. The US Department of Justice (DOJ) subsequently submitted a statement of interest defending relators’ discovery request and the use of statistical sampling to establish liability for false claims, which the court has not yet addressed.

In the underlying qui tam case, the relators alleged that Evansville Hospital, a long-term acute care hospital in Indiana, and a physician violated the FCA by submitting claims to Medicare for medically unnecessary lengths of stay in order to maximize Medicare reimbursement.

The relators also named the hospital’s parent corporation, Select Medical Corporation, as a defendant and asserted that their case was nationwide in scope due to an alleged corporate-wide policy to extend or shorten patient stays without regard to medical necessity. Relators sought discovery to establish alleged illegal Medicare payment claims as to every long-term acute care hospital facility managed or controlled by Select Medical Corporation (over 100 such hospitals in about 26 states).

The judge limited discovery to information proportional to proof of fraudulent Medicare claims only at Evansville Hospital and ruled that nationwide sampling of patient files at affiliated hospitals was not appropriate.

The judge also held that sampling would not address what the relators would ultimately need to prove to prevail in the case—that each claim for Medicare reimbursement was fraudulent based on a theory of lack of medical necessity.  The court concluded that “fraud will have to be proved on a claim-by-claim basis based on the patient’s actual medical condition and actual medical care.” A random sampling of claims, as occurs using a statistical sampling methodology, could not effectuate such a review.

On May 11, the DOJ submitted a statement of interest in support of relators’ objection to the order, defending the relators’ attempt to use statistical sampling in this case. The DOJ argued the judge’s order should be set aside because courts have recognized statistical sampling as an admissible method of proof in complex cases involving large numbers of claims. In addition, if relators could not use statistical sampling in discovery, defendants more broadly would have an incentive to commit large-scale fraud. Defendants submitted a response in opposition to the DOJ’s statement of interest, asking the court to affirm the judge’s order, but the court has not yet ruled on the order.

The magistrate judge’s order in this case is an indication that courts remain skeptical that relators can meet their burden without proving liability as to each allegedly false claim submitted for reimbursement. We will monitor this and similar cases as courts continue to address the sampling issue.   (U.S. ex rel. Conroy v. Select Medical Corporation, No. 3:12-cv-00051 (S.D. Ind.)).