Friday August 14, 2015
The article below is from a recent edition of McKnight's and
addresses the importance of Statistical Analysis in defending fraud
and abuse allegations in long term care facilities. To learn more
about Arthur J Gallagher's Billing Errors & Omissions Liability
Insurance Program please open the attachment below. Please contact
Gerry Gilbert in our office to discuss this Liability Insurance
Program and its availability. He can be reached at 205-414-6184 or
by email at gerry_gilbert@ajg.com.
In this month's McKnight's article, the author reviews the
increasing importance of statistical analysis in defending against
fraud and abuse allegations.
False Claims Act enforcement, and the attendant risk of
financial liability, is on the rise. The United States Department
of Justice has obtained almost $44 billion in FCA settlements and
judgments since 1986, and almost $6 billion in 2014 alone.
Significantly, roughly $2.5 billion of the funds recovered in 2014
came from the health care industry, marking the fifth straight year
of fraud recoveries in excess of $2 billion. If FBI estimates that
3% to 10% of all federal healthcare billings are lost to fraud,
then it would appear that these eye-popping numbers still have room
to grow.
FCA enforcement in the long term care industry has been no
exception. The industry has been squarely in the sights of
government enforcement attorneys following a 2012 report from the
Office of Inspector General that found roughly 20% of all Medicare
Part A SNF claims were upcoded to a higher RUG group in 2009,
resulting in $1.2 billion in improper payments. Recent FCA
complaints have relied on a number of arguments to substantiate the
submission of false claims for Medicare reimbursement: systematic
upcoding to higher RUG levels due to corporate pressure on front
line care providers; targeting therapy at or around RUG thresholds;
increasing therapy during look back periods; and providing skilled
therapy that was not required for improvement in functioning.
Although long-term care providers and other FCA defendants have
raised a wide range of reasonable explanations for the billing
patterns identified in recent complaints, the DOJ and private
whistleblowers have been emboldened by a series of significant
settlements. Enforcement attorneys have also been given a new, and
potentially game-changing, tool thanks to a series of recent court
opinions involving the use of statistical sampling and
extrapolation to demonstrate FCA liability.
Wait, don't they need to identify an actual claim?
While courts have long recognized statistical sampling as a
valid method of proof, its use in FCA cases has been, until
recently, fairly limited. The reasons for this limitation are
somewhat intuitive, as sampling has typically been used to prove
the amount of damages resulting from a fraudulent billing scheme
(i.e., the amount the government was overbilled). This status quo,
however, was disrupted in late 2014 when the Eastern District of
Tennessee gave its blessing for prosecutors in U.S. ex rel. Martin
v. Life Care Centers of America to use statistical sampling and
extrapolation to prove not only damages, but actual liability under
the FCA.
Life Care operates over 200 skilled nursing facilities
nationwide that received $4.2 billion in Medicare reimbursement
between 2006 and 2011. In Martin, the company is alleged to have
engaged in a systematic practice of upcoding and providing
medically unnecessary services that resulted in the submission of
150,000 false claims involving over 54,000 patients. In the typical
FCA case, the government would have needed to demonstrate which of
those 150,000 claims were false (i.e., submitted for medically
unnecessary services) and whether the defendant knew those claims
were false at the time they were submitted to a federal health care
program. In Martin, however, the government analyzed just 400
representative sample cases and then sought to extrapolate the
percentage of claims identified as false to the larger universe of
150,000 unidentified claims. Not surprisingly, Life Care sought
summary judgment (i.e., that there is no factual dispute and the
law requires a judgment in its favor) as to the unidentified
claims, arguing that the falsity of an individual claim cannot be
determined through statistical means.
Contrary to established expectations, the court denied Life
Care's motion and allowed the case to go to trial. While granting
that using extrapolation to establish damages when liability has
been proven is different than using extrapolation to establish
liability and finding no definitive precedent for doing so, the
court still found that the government could use the evidence to
prove its case due to the general acceptability of statistical
analysis. Life Care, meanwhile, would be free to argue that the
jury should not credit the government's analysis because it is
wrong or flawed.
As a practical matter, the use of statistical analysis to prove
liability instead of damages would do two things. First, it would
dramatically reduce the time and scrutiny of individual claims that
is usually necessary to prosecute a credible FCA case. Second, and
relatedly, it would allow the government and/or private
whistleblowers to expand vastly the universe of allegedly false
claims and set the stage for an environment where, once a handful
of allegedly false claims is identified, every claim a defendant
made within a specific time period could be fair game. And in this
sort of environment, long-term care providers could see their FCA
exposure driven less by pesky details like fact and medical
necessity, and more by their ability to hire a better mathematics
expert than their whistleblower.
This is not good news for providers, especially in light of the
other recent changes to the FCA statute that have made it easier
for whistleblowers to extract significant settlements.
A slippery slope ahead
Already, Life Care is beginning to bear fruit for whistleblowers
and their attorneys. In U.S. ex rel. Ruckh v. CMC II LLC, for
example, a federal judge in the Middle District of Florida cited
Life Care in an order allowing the relator to use statistical
evidence to prove liability in an FCA case involving roughly
identical allegations of upcoding and medically unnecessary
procedures. If Life Care continues to gain traction in cases such
as Ruckh, it will create a dangerous precedent for long term care
providers.
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