Late last year, the Supreme Court declined to review the Fifth Circuit Court of Appeals’ decision in U.S. ex rel. Integra Med Analytics, LLC v. Baylor, Scott & White Health, et al., a decision affirming the dismissal of a False Claims Act complaint that relied predominantly on statistical analysis to state a claim. 

While FCA whistleblower lawsuits are most often brought by insiders with direct knowledge of fraudulent conduct, Integra Med is a data analytics company that has brought a number of FCA claims by relying on analysis of publicly available healthcare data. In this particular lawsuit, Integra alleged that Baylor Scott & White Health (“Baylor”) engaged in a scheme to fraudulently overbill Medicare by upcoding secondary diagnosis codes to include a complication or comorbidity (CC) and major complication or comorbidity (MCC). To support its allegations, Integra Med analyzed inpatient claims data and determined that Baylor had been claiming MCCs significantly above the national average for other hospitals, which could not be explained by patient characteristics, demographic data, the attending physicians, or regional differences. Baylor moved to dismiss Integra Med’s claim arguing that it failed to meet the requisite pleading standard. 

In affirming the dismissal, the Fifth Circuit found that Integra Med’s statistical analysis was consistent both with a fraudulent scheme to upcode and the mere fact that Baylor was ahead of most healthcare providers in following new CMS guidance. In 2007, CMS reduced the standardized reimbursement amount to hospitals, but increased the number of secondary diagnoses identified as CCs and MCCs. In so doing, CMS encouraged providers to take full advantage of coding opportunities to maximize reimbursement and stated that it expected reimbursements to increase under the new coding guidelines. The statistical data in Integra Med’s complaint showed that the healthcare industry as a whole was following in Baylor’s trajectory. Thus, the facts “strongly indicate that a legal and obvious alternative explanation for the statistical data” exists and Integra Med’s allegations of false claims are simply conclusory. The Court does not foreclose the use of statistical data, but concludes that such data cannot meet the pleading requirements if the data is also consistent with a legal and obvious alternative explanation.

Integra Med petitioned for certiorari to the Supreme Court noting the decision “signals an impossible standard for FCA relators relying in part on statistical analyses, as they would need to anticipate and rule out every possible alternative explanation” of the data. The Supreme Court declined to accept the case, leaving the Fifth Circuit’s adverse ruling intact. While a blow to serial relators like Integra Med, the decision may not be fatal. Other cases relying on statistical data, including one brought by Integra Med against a provider in California, are still percolating in the courts. Whether other circuit courts join the Fifth Circuit remains to be seen, but until there is uniformity, use of statistical data (by corporate whistleblowers and traditional relators alike) is likely to continue. 

The attorneys at Chilivis Grubman represent clients of all types and sizes in connection with False Claims Act investigations and qui tam litigation.  If you need assistance with such a matter, please contact us today.