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Jury Sides with DOJ in First Phase of FCA Statistical Sampling Trial

Last week, a jury in Alabama federal court sided with the Department of Justice (DOJ) and qui tam relators in the first part of a False Claims Act (FCA) case against AseraCare Inc., a provider of hospice and palliative care services, and found that claims submitted by AseraCare for 104 patients were objectively false.

In this case, relators (and DOJ in intervention) accused AseraCare of overbilling Medicare for hospice services by hiding information from physicians in order to obtain certifications of hospice eligibility for patients who were not terminally ill. DOJ used statistical sampling to arrive at a damages figure of more than $200 million by taking a sample of 124 patients from a pool of 2,181 patients, looking at payments in the sample, extrapolating those payments to a larger universe of claims and then tripling the amount (as treble damages are allowed under the FCA).

In what DOJ called an “unprecedented” move, U.S. District Judge Karon O. Bowdre granted AseraCare's motion to bifurcate the trial into two parts. In the first part of the trial, the jury considered whether the claims submitted for a sample of 121 patients (Judge Bowdre removed from consideration some of the patients from DOJ’s original sample) were objectively false and found that claims submitted for 104 of those 121 patients were, in fact, objectively false. In the second part of the trial, DOJ will have to prove that AseraCare had knowledge that the claims for those 104 patients were false.

Judge Bowdre ordered the split trial after deciding that it would be inflammatory for jurors to hear about AseraCare’s practices related to knowledge of falsity while also having to decide whether the claims it submitted were objectively false.

This case is one to watch for a number of reasons. First, it involves the controversial practice of statistical sampling. While DOJ favors this sampling approach because it makes punishing large-scale fraud easier, the defense bar argues that statistical sampling unfairly distorts data. Second, the use of a split trial to preserve a jury’s objectivity when considering the falsity of claims is currently an uncommon practice. However, other defendants may soon follow AseraCare’s lead and seek bifurcated trials in the future. Finally, many FCA cases never proceed to trial because of the potential imposition of harsh per-claim penalties of up to $11,000 in addition to treble damages.

We will be keeping an eye on this case and report on future updates.

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Samantha advises clients on regulatory and enforcement matters. She has deep experience handling violations of the federal ant-kickback statute and FCA investigations for clinical laboratories and hospitals.