AHA urges Fourth Circuit to strike down false claims extrapolation

The American Hospital Association (AHA), in conjunction with the Catholic Health Association of the United States (CHA), urged the U.S. Court of Appeals for the Fourth Circuit to affirm a lower court’s ruling that qui tam relators are not permitted to use statistical sampling and extrapolation to determine the number of false claims submitted for reimbursement. The associations, via an amici curiae brief, emphasized the False Claims Act’s (FCA) (31 U.S.C. §3729) requirement of proof that a physician’s treatment decision was unreasonable to the point of fraud.

No proof, no settlement

Last year, the South Carolina district court ruled that the federal government can veto a qui tam settlement, even when it chooses not to intervene. In U.S. ex rel. Michaels v. Agape Senior Community, Inc., this veto was based upon the settlement’s reliance on statistical extrapolation to determine how many claims were fraudulent (see Between a rock and a hard place: U.S. won’t help with trial but blocks settlement, Health Law Daily, June 29, 2015). The relators brought the case against 24 affiliated skilled nursing facilities on the grounds that hospice claims and claims for general inpatient care services were filed without regard to medical necessity. The suit involved tens of thousands of claims, and review of each claim would cost between $16.2 and $36.5 million. In lieu of review, the relators proposed extrapolating the number of false claims from a sample of patient files. The relators and companies agreed to settle the case for $2.25 million, which the government rejected due to a belief that the case was worth $25 million.

Amici curae

The AHA and CHA find the notion of FCA liability based on extrapolation “extremely alarming,” as their members provide many services reimbursed by the government. The associations believe that the risks of allowing FCA extrapolation on health care providers would be enormous due to treble damages, per-claim penalties, and fee shifting for attorneys fees. The brief argues that extensive penalties should not be levied without requiring a relator to prove that claims are actually false, in accordance with prior Fourth Circuit rulings as well as the FCA itself.