The use of statistical sampling has long been an effective tool of prosecutors and plaintiffs for calculating damages in highly complex cases in which vast amounts of data must be considered in assessing the extent of the harm caused by a defendant’s conduct. Given the increasing sophistication and scale of frauds committed against the Government, the method has proven increasingly reliable in prosecutions under the FCA, and in FCA cases involving extensive Medicare claims in particular. More recently, prosecutors have employed statistical sampling not just to calculate damages in FCA cases, but to prove liability. The new approach to demonstrating liability of companies for claims on a wide scale expands substantially the Government’s ability to pursue bigger and more complex frauds, and should encourage the pursuit of even greater recoveries. A federal district court for the Eastern District of Tennessee recently blessed the use of statistical sampling for this purpose, marking a change in the landscape for the Government’s pursuit of FCA cases, and for the companies defending them.
Statistical sampling involves the use of a small universe of data to predict outcomes for a much larger universe of data. In U.S. ex rel. Martin v. Life Care Centers of America, Inc., No. 1:08-cv-251 (E.D. Tenn.), the Government sought to use statistical sampling to demonstrate liability against Life Care, owner and operator of almost 200 skilled nursing facilities across the county alleged to have committed widespread Medicare fraud. The Government’s allegations include the false and fraudulent billing of Medicare through the knowing provision of therapy that was not “medically reasonable or necessary” as required under the government healthcare program. The Government alleges that Life Care maximized Medicare revenues by instituting inappropriate treatment regimes for patients and by keeping patients longer than necessary to treat their particular condition. The Government seeks to prove liability using a sample 400 patient admissions at 82 Life Care facilities where more than 65% of the facilities therapy days were performed at the highest billing level under Medicare.