DOJ Defends the Use of Statistical Sampling in FCA Case

The DOJ recently submitted a statement of interest defending statistical sampling in a False Claims Act qui tam action against a national healthcare company in the Southern District of Indiana.  The DOJ, after declining to intervene in the case, challenged the Magistrate Judge’s Discovery Order regarding the use of statistical sampling.

The FCA prohibits one from knowingly presenting, or causing to be presented, false or fraudulent claims for payment or approval to the government.  The relators, who filed the qui tam action, allege that the defendants violated the FCA by unnecessarily admitting patients to long-term care facilities, manipulating patients’ length of stay, and falsifying diagnoses.

In the Discovery Order, the Magistrate Judge geographically limited the scope of discovery to only one of the defendant’s hospitals.  The Judge highlighted that the complaint only names this one hospital and one of its doctors as defendants; additionally, the government’s pre-intervention investigation focused only on this one hospital.  The Judge concluded that the “most natural reading of the complaint” geographically limits the claim, and therefore discovery as well, to this single hospital.

Having geographically limited the scope of discovery, the Magistrate Judge ruled that statistical sampling is therefore inappropriate primarily because a random-sampling method cannot “evaluate whether each particular claim for which the plaintiffs seek relief was actually knowingly false within the meaning of the FCA.”  Instead, the judge required case-by-case evaluation to adhere to the geographic limitation and avoid moving the burden of proof to the defendants; the judge reasoned that liability based on sampling would inherently require the defendants to “present evidence on every claim at every hospital.”

The DOJ only challenged the Magistrate Judge’s ruling concerning statistical sampling in the district court.  The DOJ presented two primary arguments.  First, the DOJ argued that the Magistrate Judge’s evaluation of sampling was premature.  Because the plaintiffs have not yet introduced a sampling methodology, the DOJ stated that at this stage, without a fully developed record detailing the proposed use, precluding sampling is premature.

Second, the DOJ alternatively interpreted the ruling as a categorical prohibition of statistical sampling in all FCA cases.  Under this interpretation, DOJ defended sampling using both the language and purpose of the FCA.  The DOJ argued that a prohibition on sampling inhibits the purpose of the FCA as a “tool against fraud in modern times.”  Without sampling, the DOJ presupposed, there would be a “pernicious effect of immunizing the largest perpetrators of fraud” because perpetrators could capitalize on the government’s inability to pursue each individual claim, inconsistent with the purpose of the FCA.

In response, the defendants argued that the DOJ mischaracterized the ruling as premature or a prohibition. The defendants emphasized that the DOJ does not contest the “core findings . . . that sampling would threaten to upend the burden of proof the FCA expressly places on the Relators.” The defendants argued that statistical sampling in this case is improper and requested the district court to affirm the Discovery Order. The district court has not yet issued a ruling on the government’s challenge to the Magistrate Judge’s order.

The case is U.S. ex rel. Conroy v. Select Medical Corporation, 3:12-cv-00051-RLY-DML (S.D. Ind.).