Lies and Statistics: Statistical Sampling in Liability Determinations under the False Claims Act

By Kennedy, Patrick | Stanford Law Review, May 2019 | Go to article overview

Lies and Statistics: Statistical Sampling in Liability Determinations under the False Claims Act


Kennedy, Patrick, Stanford Law Review


Table of Contents  Introduction  I.     Due Process Problems with Sampling        A.   The Statutory Framework        B.   Sampling: A Solution with Its Own Problems        C.   Statutory Analysis II.    The FCA: Patchwork Enforcement, Deterrence Problems, and        Misaligned Incentives III.   Evaluating the Due Process Problem with Sampling        A.   Private Interests        B.   Risk of Error        C.   Interests of the Government or Relator             1.   Direct financial interests             2.   Signaling and deterrence interests             3.   Negative impacts on government and relator interests        D.   Balancing IV.    Guidelines for Implementing Statistical Analysis        A.   Modified Bellwether Option        B.   Class Action Analog Conclusion 

Introduction

Few issues incite furor and partisanship in the present political climate more than federal health care spending. Indeed, in recent years Republican leaders have stated that Congress should place Medicare spending in its crosshairs, citing growing concerns about cost and debt. (1) While cutting the program is one way to reduce costs, fixing systemic difficulties in prosecuting Medicare fraud could also save the government billions without sacrificing coverage for senior citizens. According to the Centers for Medicare and Medicaid Services (CMS), fraudulent submissions to Medicare cost taxpayers billions of dollars per year. (2) In order to protect the public from this rampant abuse, as well as other fraudulent schemes, Congress has passed a suite of statutes designed to punish fraud, graft, and corruption. (3) The False Claims Act (FCA) is one such statute. (4) The FCA creates civil liability for any person who "knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval," or "knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim." (5) This statutory provision is often used to file suits combating Medicare fraud, (6) and represents a potential solution to the Medicare crisis.

The specter of big data produces anxiety in the legal community, but fears about "trial by statistics" are exaggerated. Individualized adjudication is a bedrock of American jurisprudence, and the U.S. Supreme Court has repeatedly recognized this principle to be protected by the Due Process Clause. (7) Statistical forecasting techniques use virtually the opposite approach to traditional legal analysis, focusing on patterns and relationships between a number of similar situations to construct inferences rather than making individualized findings.

Perhaps unsurprisingly, the Supreme Court has looked askance at plaintiffs' efforts to introduce statistical evidence to prove liability in class action cases. For example, the Court rejected statistical evidence about Wal-Mart's discriminatory labor practices in the landmark case Wal-Mart Stores, Inc. v. Dukes, (8) seemingly foreclosing class action plaintiffs' ability to submit statistical proof during the liability phase of a trial. (9) But just five years later, the Court limited its holding in Dukes, holding in Tyson Foods, Inc. v. Bouaphakeo that class action plaintiffs may introduce statistical inference evidence when the evidence would prove an element of the claim in each individual plaintiffs trial. (10) While the Court relaxed its position on individualized adjudication to some extent, it carefully limited its holding in Bouaphakeo to just a subset of class action cases, leaving open the question whether plaintiffs could use statistical inference in any other context. (11)

Demonstrating hospitals', health care facilities', or physicians' liability for Medicare fraud under the FCA one payment at a time is unworkable where tens of thousands of Medicare payments are at issue, leading plaintiffs to attempt to introduce statistical evidence to prove liability. (12) So far, these attempts have met with mixed success, since the Supreme Court's precedent remains fractured and plaintiffs do not file FCA claims as class actions. …

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