The Supreme Court’s refusal to review a False Claims Act (FCA) case was a setback to whistleblowers (also known as relators) who allege fraud based largely on statistical data. The high court announced in December that it had denied a petition to review the Fifth Circuit’s affirmation of a district court’s dismissal of a $61.8 lawsuit brought by a data analytics company, which alleged that a hospital system had committed fraud against Medicare. This case is part of a growing trend in which serial, data-driven relators analyze statistics to root out irregularities in the hope of receiving a share of the settlement under the FCA’s qui tam provision.
United States ex rel. Integra Med Analytics LLC v. Baylor Scott & White Health
In 2018, Integra Med Analytics of Austin, Texas filed a qui tam lawsuit on behalf of the United States against Baylor Scott & White Health and its affiliates under the FCA. Integra Med alleged that the Texas hospital system used inflated codes to overcharge Medicare to the tune of $61.8 million over six years. Integra Med provided comparisons of Baylor data to industry averages to support its claim.
When patients covered by Medicare are hospitalized, the amount that Medicare reimburses the hospital is based on many factors, primarily the diagnosis. Diagnoses are classified based on the principal diagnosis code along with secondary diagnostic codes which are assigned if the patient has comorbidities or complications. Integra Med’s allegations focused on Baylor’s use of secondary diagnosis codes, saying the hospital system fraudulently used codes that would garner higher reimbursement.
Integra Med alleged Baylor trained its physicians and other employees to “upcode” comorbidities and complications and that it provided unnecessary treatments in order to use high-value codes. Specifically, Integra Med contended that “Baylor purposefully placed and kept post-operative patients on ventilator support” when it was medically unnecessary. This allegation was predicated on the fact that “Baylor patients undergoing major heart surgery were placed on mechanical ventilation [at rates] over twice the national average.”
Integra Med analyzed inpatient claims data from 2011 to 2017 from the Centers for Medicare and Medicaid Services (CMS) to discover that Baylor had been claiming certain codes at a rate that was significantly above the national average for other hospitals. Specifically, Integra Med found that Baylor coded for encephalopathy, respiratory failure and severe malnutrition at elevated rates. Integra Med claimed Baylor’s higher rate could not be explained by patient characteristics, county demographic data, the patient’s attending physician or regional differences.
The court’s ruling
To allege fraud, a party cannot merely present statistical data, the Fifth Circuit said. It must also state the circumstances constituting fraud – the who, what, when and where. Further, claims must be plausible, rather than merely conceivable. A claim is merely conceivable and not plausible if the facts pleaded are consistent with both the claimed misconduct and a legal and “obvious alternative explanation.”
In this case, Integra Med’s statistical analysis is consistent with both Baylor having submitted fraudulent Medicare reimbursement claims and with Baylor being ahead of most health care providers in following new guidelines issued by CMS, which increased the number of usable secondary diagnostic codes.
Integra Med’s complaint contained a dozen allegations that Baylor was providing unnecessary treatment to its patients, claims that were supported by a single statistic – that Baylor patients undergoing major heart surgery were put on a mechanical ventilator at a rate in excess of twice the national average. Nonetheless, the claim did not rise to the level of conceivable since “Integra Med does not present sufficient particular details of this alleged fraud claim,” the Fifth Circuit said.
The takeaway
Advances in data mining in recent years have given rise to the use of algorithms and analytics by companies like Integra Med to identify patterns that potentially point to abuse of government programs. Although they do not fit the traditional definition of qui tam whistleblowers – typically former employees or other stakeholders with inside information about an organization’s potentially fraudulent practices – relators engaging in data mining have brought FCA cases in various district courts around the country. As the Fifth Circuit made its position clear and the Supreme Court declining to intervene, professional relators have been dealt a blow. It remains to be seen how these cases will play out in other circuits around the country.
