UNITED STATES OF AMERICA et al v. SELECT MEDICAL CORPORATION et al

Filing 218

Order Governing Discovery - For the foregoing reasons, the court finds that discovery is limited to the discovery of information proportional to proof of fraudulent Medicare claims (of the type that survived dismissal) for patients at Evansville Hospital only and for the period on or after March 23, 2010, and on or before September 30, 2016. SEE ORDER. Signed by Magistrate Judge Debra McVicker Lynch on 4/2/2018.(JRB)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
EVANSVILLE DIVISION
UNITED STATES OF AMERICA ex rel.
TRACY CONROY,
PAMELA SCHENCK, and
LISA WILSON,
Plaintiffs,
v.
SELECT MEDICAL CORPORATION,
SELECT SPECIALTY HOSPITALEVANSVILLE, INC.,
DR. RICHARD SLOAN, and
SELECT EMPLOYMENT SERVICES,
INC.,
Defendants.

)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)

No. 3:12-cv-00051-RLY-DML

Order Governing Discovery
Introduction
This is a qui tam case brought under the federal False Claims Act. The
plaintiffs were formerly employed at a long-term acute care hospital in Evansville,
Indiana operated by defendant Select Specialty Hospital-Evansville, Inc. The
United States gave notice of its decision declining to intervene in June 2015, and a
second amended complaint was then filed by the plaintiffs on October 19, 2015,
naming as defendants (1) Select Specialty Hospital-Evansville, Inc. (“Evansville
Hospital”), (2) the Chief Medical Officer of Evansville Hospital, Dr. Richard Sloan,
(3) Evansville Hospital’s parent corporation, Select Medical Corporation (“Select
Medical”), and (4) an affiliate corporation, Select Employment Services, Inc. (“Select

Employment”), which was the plaintiffs’ formal employer. The claims against Select
Employment are that it unlawfully retaliated against the plaintiffs; Select
Employment is not alleged to have been a part of the scheme described in the
second amended complaint that Select Medical, Evansville Hospital, and Dr. Sloan
defrauded the Medicare program through the submission of alleged false and
fraudulent claims.
The issues before the court concern the appropriate geographic and temporal
scope of discovery, and the plaintiffs’ plan to use sampling data obtained in
nationwide discovery to establish liability or damages or both.
The plaintiffs assert that their case is nationwide in scope and they therefore
are entitled to discovery to establish alleged illegal Medicare payment claims as to
every long-term acute care hospital managed or controlled by defendant Select
Medical Corporation—over 100 such hospitals located in about 26 states. They
assert that the temporal scope of discovery with respect to Medicare reimbursement
claims does not end with the date this case was filed, but they do not propose any
particular ending date. They also suggest that the court should address the use of
statistical sampling for establishing liability and/or damages after some portion of
discovery is undertaken. See Dkt. 201.
The defendants have a different view. They contend that discovery must be
limited to Medicare payment claims for Evansville Hospital and that discovery
about Medicare payment claims at each of the 100+ Select Medical Corporationaffiliated hospitals across the country is not justified by the nature of the claims in

2

this case and as a matter of proportional discovery. As to temporal limits, the
defendants contend that Medicare claims after the case was filed in 2012 should not
be considered part of the case. With respect to sampling, the defendants state that
sampling is unnecessary and inappropriate because this case is limited to the
Evansville Hospital. See Dkts. 199 and 203 (Select Medical and Evansville
Hospital) and 200 and 202 (Dr. Sloan).
Overview of this Case
The following overview is taken substantially, and sometimes verbatim, from
the court’s September 30, 2016 entry on the defendants’ motion to dismiss.
A. The Second Amended Complaint
The plaintiffs’ second amended complaint alleges that Select Medical,
Evansville Hospital, and Dr. Richard Sloan perpetrated a scheme to defraud the
Medicare program in violation of the False Claims Act, 31 U.S.C. §§ 3729-3733.
Evansville Hospital (and other hospitals managed or controlled by Select Medical) is
a long-term acute care hospital (“LTACH”). Patients admitted to an LTACH
typically come from general acute hospitals and often have serious medical
conditions and needs that require inpatient stays that exceed the typical length of
stay appropriate to a general acute care hospital setting.
Medicare is a federally-funded health insurance program that, in general,
covers the costs of reasonable and medically necessary services for persons over the
age of 65. Health care providers who participate in the Medicare program must
provide services “economically and only when, and to the extent, medically

3

necessary.” 42 U.S.C. § 1320c-5(a)(1). A provider’s participation requires
certification that any claims made for reimbursement comply with all Medicare
requirements. The claims form to obtain reimbursement, a CMS-1500 form,
requires the provider to certify that the services that were rendered and for which
reimbursement is sought were “medically . . . necessary to the health of the
patient.” (See second amended complaint, ¶¶ 21-22). The FCA imposes liability on
a 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” to the
government.” 31 U.S.C. § 3729(a)(1)(A)-(B).
According to the complaint, during the relevant period, Medicare reimbursed
LTACHs on a prospective payment system. Under this system, an LTACH receives
payment on a per-patient basis depending generally on the patient’s illness and a
corresponding diagnosis related group (“DRG”). Depending on the DRG, the
LTACH receives a predetermined payment based on the average cost of treating
that illness, no matter the actual duration of the patient’s stay or the actual costs
that were incurred, though payment adjustments are made for certain “outlier”
patients. When an LTACH discharges a patient whose length of stay is less than
five-sixths of the geometric mean for that patient’s DRG, the patient is deemed a
“short-stay outlier” and the LTACH receives less than the full DRG payment.
Concomitantly, an LTACH’s profits will suffer the longer a patient’s stay
exceeds the five-sixths date. Special payment provisions apply, however, when a

4

patient leaves the LTACH for another facility but then returns to the LTACH. If
the patient leaves the LTACH for another facility but then returns within three
days, the LTACH receives only one DRG payment (as if the stay at the LTACH had
not been interrupted). But if the interruption exceeds three days, the LTACH may
receive two separate DRG payments if the stay at the other facility exceeds certain
“fixed day periods” depending on the nature of the other facility (e.g., whether it
was an acute care hospital, or an inpatient rehabilitation facility, or a skilled
nursing facility). For example, if a patient transfers from the LTACH to an acute
care hospital and stays there for more than nine days before returning to the
LTACH, then the return stay is deemed a “new stay” readmission that entitles the
LTACH to another DRG payment.
The plaintiffs allege that beginning as early as 2006, Dr. Sloan implemented
and effected at the Evansville Hospital a corporate-wide policy devised by Select
Medical to extend or shorten patient stays depending on where a patient fell with
respect to the five-sixths date for his or her DRG, without regard to reasonable
medical necessity. Dr. Sloan is alleged to have substantially controlled the
practices of discharge and admission for the majority of patients at Evansville
Hospital. Medical care decisions allegedly were driven not by the patient’s
wellbeing and medical necessity but by the desire to maximize Medicare payments;
decisions were made to minimize both short-stay outliers and five-sixths
“overstays.” For example, patients who were at risk of early discharge (and thus a
less than full DRG payment), allegedly were prescribed additional services that

5

were not medically necessary, such as occupational therapy, speech therapy, or
physical therapy to lengthen their stay to the five-sixths date. Also, patients whose
stays were substantially exceeding the five-sixths date allegedly would be
discharged to an acute care hospital for treatment that was not medically necessary
but that would require remaining at the hospital for a sufficiently lengthy period
before re-transfer to the LTACH so that the re-admission to the LTACH would
permit two DRG payments. The plaintiffs also allege that patient diagnoses were
sometimes “upcoded” to a higher-paying DRG even though the medical evidence
did not support that coding.
The second amended complaint alleges that the decisions made by Dr. Sloan
in managing and controlling patient stays, care, and DRGs at Evansville Hospital
were reflective of Select Medical company-wide policies. The plaintiffs allege that
Select Medical “recruits and rewards physicians willing to manage patients with the
primary goal of maximizing DRG reimbursement even at the cost of patient health
and safety” (¶ 65) and that Dr. Sloan in particular was rewarded through his
appointment as the Chief Medical Officer of Evansville Hospital. They allege he
substantially controlled the practices of discharge and admission for the majority of
patients at Evansville Hospital and his decision-making was guided by managing
each patient “to the . . . optimal date for reimbursement” even when not in the best
interest of the patient’s medical needs. (¶¶ 67, 75, 78). Dr. Sloan is also alleged to
have falsely coded diagnoses in order to increase DRG reimbursement. (¶ 83).

6

B. Court’s Order on Motion to Dismiss
In its order on the defendants’ motion to dismiss, described in more detail in
the Analysis section of this order, the court dismissed certain portions of the
plaintiffs’ Medicare fraud claims because they were not pleaded with particularity
as required by Fed. R. Civ. P. 9(b). The court ruled that (1) the alleged scheme to
render unnecessary medical care to patients who would otherwise constitute shortstay outliers was pleaded with particularity; (2) the alleged scheme to upcode DRG
designations to maximize Medicare payments was pleaded with particularity; (3)
the alleged scheme to exploit the interrupted stay rules to obtain multiple DRG
payments was not pleaded with particularity; and (4) the alleged scheme to
discharge patients prematurely once they had reached their five-sixths date was not
pleaded with particularity. Schemes three and four were deficient generally
because their “success” depended in part on the participation of other hospitals or
nursing facilities and nothing had been alleged about the decision-making of those
facilities. See Dkt. 163 at pp. 36-40.
And significantly, Judge Young determined in his order that the allegations
in the plaintiffs’ second amended complaint had been publicly disclosed,1 that their
action was based upon the publicly disclosed information, and that none of the

Public disclosure had been made through two sources: a February 9, 2010
article in the New York Times and in a qui tam complaint filed in Ohio, which was
unsealed in September 2011, in which the relators named as defendants Select
Medical and each of its LTACHs across the country, including Evansville Hospital.
See Dismissal Order, Dkt. 163 at pp. 15-19.
1

7

plaintiffs qualified as an original source. See id. at pp. 22-23. As a consequence, the
court ruled it lacked subject matter jurisdiction over all claims arising from conduct
that occurred before March 23, 2010, the effective date of the amendment to the
False Claims Act. Id. He also ruled that but for the government’s objection to
dismissal of the remaining claims, the court would have dismissed this case in its
entirety. Id. at 35.2

Analysis
The resolution of the parties’ differing views of how discovery ought to be
conducted in this case—and particularly their dispute about whether it should
proceed on a nationwide basis—is guided by several considerations. The first is
recognition of the court’s well-established discretion in managing discovery.
Second, the court should consider the nature of qui tam litigation and its effect on
discovery. Third, the court must obviously consider what the appropriate discovery
is in light of the claims encompassed in the second amended complaint. Fourth, the
court will consider whether the plaintiffs’ request simply to do statistical sampling
of nationwide data ameliorates what would otherwise be burdensome and
oppressive discovery. And finally, the court will employ some of those same
considerations in determining the appropriate temporal scope for discovery.

Effective as of March 23, 2010, Congress amended the public disclosure rule
and its original source exception. Congress clarified the definition of an “original
source,” United States ex rel. Bogina v. Medline Industries, Inc., 809 F.3d 365 368-69
(7th Cir. 2016), and it prohibited a court from dismissing an action based on publicly
disclosed allegations and brought by a person who is not an original source if the
government opposes dismissal. See 31 U.S.C. § 3730(e)(4).
2

8

A. The court has broad discretion in managing discovery.
As the Seventh Circuit has emphasized time and again, the district court has
wide discretion with respect to discovery matters, including the settling of discovery
disputes, determining the scope of discovery, and otherwise controlling the manner
of discovery. See, e.g., Thermal Design, Inc. v. American Soc’y of Heating,
Refrigerating and Air-Conditioning Engrs., Inc., 755 F.3d 832, 839 (7th Cir. 2014)
(citation and quotation omitted) (“District judges enjoy broad discretion in settling
discovery disputes and in delimiting the scope of discovery in a given case.”); GCIUEmployer Retirement Fund v. Goldfarb Corp., 565 F.3d 1018, 1026 (7th Cir. 2009)
(decisions on discovery matters are within the district court’s discretion); Brown-Bey
v. United States, 720 F.2d 467, 470-71 (7th Cir. 1983) (“[D]istrict court has wide
discretion with respect to discovery matters.” A court’s limits on the manner and
course of discovery are not reversible unless shown to have been improvident and
prejudicial to a party’s substantial rights.). The court’s authority to control all
aspects of discovery arises from several sources, including Fed. R. Civ. P. 1
(directing that the rules be construed, administered, and employed to “secure the
just, speedy, and inexpensive determination of every action”); Rule 16(c)((2)
(addressing pretrial conferences for the purpose of controlling and scheduling
discovery under Rule 26 and Rules 29 through 37); Rule 26(b) (addressing discovery
scope and limits); and Rule 26(c) (addressing protective orders).

9

B. Qui tam cases present particular discovery considerations.
This is not the first time the undersigned has addressed the scope of
discovery in a qui tam case. In McArtor v. Rolls-Royce Corp., 2013 WL 5348536
(S.D. Ind. Sept. 24, 2013), the court addressed the parties’ competing positions on
the appropriate scope of discovery. The defendant had argued that qui tam cases
are subject to special discovery rules and discovery must be stringently limited,
even to the specific examples of fraudulent claims described in the qui tam
complaint. This court noted that some of the case law upon which the defendant
relied had borrowed concepts from the FCA’s original source statutory language to
limit discovery (either temporally or otherwise) to those matters about which the
relator had “direct” or “independent” knowledge of the fraud. See United States ex
rel. Stewart v. The Louisiana Clinic, 2003 WL 21283944 (E.D. La. June 4, 2003)
((limiting discovery to the precise Medicaid or Medicare fraudulent billings
described in the complaint because the case should be limited to the matters about
which the relator had independent knowledge of the fraud); United States ex rel.
Lusby v. Rolls-Royce Corp., No. 1:03-cv-680-SEB-WGH (S.D. Ind. July 12, 2010)
(limiting temporal scope of discovery to period that relator was employed by the
defendant because that was the only time frame during which the relator could
have had “direct and independent knowledge” of the substantive events).
The defendants here suggest that as a rationale for limiting discovery to the
universe, geographically and temporally, of which the plaintiffs have that sort of
knowledge. Some courts in qui tam cases have borrowed from the public

10

disclosure/original source provisions of the statute in determining the proper scope
of discovery. But this court has rejected the notion of tying discovery to the FCA’s
public disclosure bar/original source exception because these statutory concepts
have not been static but have been periodically amended by Congress over the
years, not every qui tam case requires a relator to be an “original source,” and the
concepts were not designed as discovery principles but to affect the court’s subject
matter jurisdiction (pre-March 23, 2010) or, as of March 23, 2010, its decision not to
dismiss a case over the government’s objection. See generally McArtor, 2013 WL
5348536.
This litigation illustrates why it would be incongruent to use public
disclosure/original source statutory concepts to regulate discovery. In its dismissal
order, the court determined that none of the plaintiffs is an original source and that
the case would have been dismissed in its entirety had the government not objected
to dismissal of those claims arising after the post-2010 amendment to the FCA.
Tying discovery to original source concerns about the relator’s independent
knowledge would make no sense in a case where no relator is an original source but
the case was not dismissed because of the government’s objection.
But this court is still convinced, as it described in McArtor, that “discovery
must hew closely to matters specifically described in the complaint lest discovery,
because of its burden and expense, become the centerpiece of litigation strategy.”
2013 WL 5348536 at *7. Moreover, since McArtor, Federal Rule of Civil Procedure
26(b), describing the scope and limits of discovery, was amended effective December

11

1, 2015, to once again protect against over-discovery and to emphasize judicial
management of the discovery process. See Noble Roman’s, Inc. v. Hattenhauer
Distributing Co., 314 F.R.D. 304, 307-08 (S.D. Ind. 2016). The court must be
especially mindful that discovery is “proportional” to the needs of a case and must
protect against undue burden and expense.
The same concern about controlling discovery to some manageable level in
qui tam cases is highlighted in various cases cited by the parties. In some of them,
the courts were convinced that the case was a nationwide case and discovery was
initially limited to a subset geographic area that could be widened depending on the
state of proof uncovered through discovery focused on the smaller geographic
subset. See United States ex rel. Spay v. CVS Caremark Corp., 2013 WL 4525226 at
*7 (E.D. Pa. Aug. 27, 2013) (collecting cases where limited discovery addressed to a
geographic region was permitted “while reserving for a later date broader
nationwide discovery. . . .”) In some cases, the courts were convinced that despite a
complaint’s allegations about nationwide or otherwise broadly-based fraud, a fairer
reading of the complaint was that it was limited to a smaller geographic area or had
some other smaller focus. See United States ex rel. Rigsby v. State Farm Fire and
Casualty, 2017 WL 2901698 at *1-2 (S.D. Miss. Apr. 12, 2017) (decision about scope
of discovery after remand from Fifth Circuit to permit case to include Hurricane
Katrina/National Flood Insurance Program false claims broader than the claim that
was tried to a jury); CVS Caremark, 2013 WL 4525226 at *2-3 (E.D. Pa. Aug. 27,
2013) (limiting temporal scope to two-year period emphasized in complaint and

12

limiting discovery as to certain fraud claims to particular states described in the
complaint); United States ex rel. Regan v. Medtronic, Inc., 2000 WL 1478476 at *2-3
(D. Kan. July 13, 2000) (limiting discovery to Wichita, Kansas sales district, and
rejecting assertion that nationwide discovery was appropriate under the complaint).
In another case, the court determined that the claims were nationwide in scope and
addressed the burden and expense of discovery through cost-sharing. United States
ex rel. Bibby v. Wells Fargo Bank, N.A., 165 F. Supp. 3d 1340, 1355-56 (N.D. Ga.
2015).
As discussed below, the court rejects the plaintiffs’ argument that a fair
reading of their complaint and Judge Young’s ruling on the motion to dismiss
require that they be permitted to conduct discovery on a nationwide basis rather
than focusing on the Evansville facility.
C. The allegations of the Second Amended Complaint do not compel
the conclusion that this case encompasses Medicare claims at all
100+ Select Medical facilities in the United States.
The plaintiffs’ stance on discovery proceeds from the assumption that this is
a nationwide case for which they are entitled to nationwide discovery about alleged
Medicare fraud at every one of the 100+ LTACHs across the country “controlled” by
Select Medical. The court disagrees that this case must be treated as a nationwide
Medicare fraud case.
First, Judge Young’s dismissal order does not purport to rule that the case
encompasses every Medicare claim at every Select Medical LTACH for which a DRG
was allegedly fraudulently upcoded or unnecessary medical care was allegedly

13

rendered to avoid short-stay outliers. Judge Young made no ruling that the naming
of Select Medical as a defendant means that the case involves every potentially false
Medicare claim in the above categories at every Select Medical LTACH.
Second, the complaint itself does not require that conclusion. Although the
plaintiffs assert that there was no reason for them to name Select Medical as a
defendant unless this is a nationwide case, their second amended complaint does
not support that conclusion. That complaint alleges that the Medicare fraud was
perpetrated by Select Medical, Evansville Hospital and Dr. Sloan and that they
“conspired together” to defraud the United States by knowingly making false or
fraudulent claims. See Dkt. 128, ¶¶ 135-138.3 Neither Evansville Hospital nor Dr.
Sloan is alleged to have played any role with respect to any LTACH except
Evansville Hospital itself. And the complaint indicates that the success of the
alleged nationwide policy depended on a compliant doctor in a position such as Dr.
Sloan’s. The complaint does not make any specific allegations about any other
specific Chief Medical Officer or other named official at any other LTACH who
allegedly controlled upcoding or short-term outliers at their hospitals in a way
knowingly to defraud the Medicare program.4

That the plaintiffs did not defend their conspiracy allegations when the
defendants moved to dismiss them does not change the fact that in Count I (their
FCA false claim count), they allege that the false claims were made by Select
Medical, Evansville Hospital, and Dr. Sloan.
3

Further, as Dr. Sloan points out, it would be extraordinarily burdensome and
expensive to him if this case were viewed as nationwide, requiring his lawyers to
participate in discovery that may have nothing to do with the claims against him.
It would be difficult for his counsel to make pre-determinations that all discovery
4

14

The most natural reading of the complaint is that it is limited to fraudulent
Medicare claims for patients at Evansville Hospital. The descriptions in the
complaint about Select Medical’s corporate policy plausibly allege that it played a
role in the submission of false or fraudulent claims for patients at Evansville
Hospital. They plausibly allege that Dr. Sloan engaged in knowing misconduct
because, according to the complaint, Select Medical rewarded and promoted doctors
like him who were willing to make decisions for the purpose of enhancing Medicare
payments at the expense of the medical necessity of particular treatment for
patients at Evansville Hospital. In short, the court does not agree with the
plaintiffs that their naming of Select Medical as a defendant and the complaint’s
description of an alleged company-wide policy geared to defrauding Medicare was
wholly superfluous unless their case encompassed every potential Medicare claim at
every 100+ LTACH.
The court further notes in this regard that the government’s pre-intervention
decision investigation focused only on the Evansville Hospital. According to the
defendants, during the three-year period after the complaint was filed (and sealed)
when the government conducted its pre-intervention decision investigation, the
government investigated Medicare claims only for Evansville Hospital and
requested patient records only from that hospital. See Dkt. 199 at p. 6.
Furthermore, even though this case was not dismissed as to post-2010 FCA

not specifically concerning Evansville Hospital would have no bearing on the
plaintiffs’ proof of their claims against him.
15

amendment claims because of the government’s objection, the government has not
expressed any view about the scope of discovery. The court did not expressly invite
it to make any filing regarding this issue, but the government is served with all
filings in this case (see 31 U.S.C. § 3730(c)(3)), must approve any settlement of the
case, and could have expressed its views had it taken the position that nationwide
discovery is appropriate.
D. The plaintiffs’ request to conduct discovery—and to prove their
case—through nationwide sampling is not an appropriate cure for
oppressive, burdensome, and expensive discovery.
The plaintiffs agree that discovery into patient files and records at Select
Medical’s 100+ facilities would be daunting and oppressive.5 They state that they
do not propose to do such discovery “at this juncture.” Instead, they want to conduct
preliminary discovery about Select Medical’s corporate policies and corporate
database that discloses general patient information such as lengths of stays, 5/6
goal dates, and costs. Then, they say, experts could devise a statistical sampling
method (for later court evaluation and approval) that would require only a random
sampling of actual patient medical records for review by expert doctors. After such
random sampling and doctor review, the plaintiffs expect to propose a method by
which the number of fraudulent Medicare claims and the damages flowing from
them could be determined without ever having to examine medical information for

The defendants do not argue that discovery would be unduly burdensome or
expensive or inappropriate in some other way if it is limited to Evansville Hospital.

5

16

each patient for whom the plaintiffs assert that a fraudulent Medicare claim was
made.
The primary problem with discovery advancing in this manner—aside from
the fact the claims plausibly alleged in the second amended complaint do not
warrant it—is that it ignores what the plaintiffs would ultimately need to prove to
prevail in this case. The plaintiffs cite no authority for the proposition that proving
that a particular Medicare reimbursement claim was fraudulent based on a theory
of lack of medical necessity can be done by a random-sampling method that does not
evaluate whether each particular claim for which the plaintiffs seek relief was
actually knowingly false within the meaning of the FCA. This case is about
unnecessary or inappropriate medical treatment being rendered to a patient in
order to maximize Medicare reimbursement.
The plaintiffs’ suggestion that random sampling and statistical analysis of
claims across 100+ hospitals probably will be sufficient threatens to upend the
burden of proof in this case. The plaintiffs have the burden to prove each false
claim; the defendants should not have the burden to present evidence on every
claim at every hospital to show that the medical treatment and coding was
appropriate and was not rendered for the purpose of inflating Medicare
reimbursement, but that would be the reasonable way it could defend broad
assertions of liability based on sampling. This is a fraud case that depends on
whether medical care or the coding of a medical condition was appropriate, and
fraud will have to be proved on a claim-by-claim basis based on the patient’s actual

17

medical condition and actual medical care. Conducting discovery in a manner not
focused on the ultimate burdens of proof is not appropriate.6
Moreover, this is not a case in which records are not available to review the
medical condition and care of patients for making a determination whether medical
necessity took a back seat to Medicare-payment enhancement. There is no showing
of a potential evidentiary gap that is the fault of the defendants for which
representative-type evidence (such as that proposed via the plaintiffs’ discovery
plan) would be appropriate. See Tyson Foods, Inc. v. Bouaphakeo, 136 S. Ct. 1036,
1046-47 (2016) (allowing the use of representative sampling to establish broader
liability where the defendant had not maintained the information it was required by
law to maintain that would have made representative sampling unnecessary).
The court determines, based on the allegations of the second amended
complaint, the need to hew closely to those allegations in determining the proper
scope of discovery so that discovery is proportional, manageable (not unduly
burdensome or expensive), and consistency with the burden of proof, that discovery
in this case is limited to proof that false claims were made as to patients at
Evansville Hospital concerning the two types of fraud that survived dismissal and
that occurred on or after March 23, 2010.

The court focuses here on proof of and defenses to fraud. If fraud is
ultimately proven, statistical evidence based on sampling could be appropriate for
calculating damages, but that is not a matter that needs to be determined now.

6

18

E. Discovery should proceed with a definite temporal scope.
The defendants contend that the court should limit the temporal scope of this
case to Medicare claims made on or after March 23, 2010, and on or before the date
that the plaintiffs filed their complaint under seal (April 18, 2012). The plaintiffs
argue that the filing date of their sealed complaint should not represent the outer
temporal limit of their claims. They do not suggest an outer date, but state only that
the end date “should be determined by the evidence.” Dkt. 13 at p. 13.
The court determines that some end date must be established; otherwise,
discovery would never end. It is not manageable to permit the continued discovery
of patient records, experts’ reviews of them, and deposition testimony about them
through trial.
The date the plaintiffs filed their sealed complaint is not appropriate because
the nature of the allegations is that the scheme was ongoing, and the complaint was
not even served on the defendants until years after it was filed. The dates that the
plaintiffs left their employment at Evansville Hospital are not an appropriate
touchstone; some courts have chosen that date because it marks the end period that
a relator had “direct and independent” knowledge of the alleged fraud, harkening to
the original source requirement under the FCA. But as explained above, grafting
original source concepts onto discovery is not appropriate and in this case, none of
the relators is an original source anyway.
The court finds that an appropriate end date is the date the court entered its
ruling on the defendants’ motion to dismiss and established the claims that

19

survived Rules 12(b)(6) and 9(b). Although picking any end date is somewhat
arbitrary, this end date is a proxy for establishing a reasonable period of overall
time (about 6 ½ years for claims from March 23, 2010, through September 30, 2016)
that is manageable for discovering information about Evansville Hospital’s alleged
fraudulent Medicare claims. It also marks an end point coincident with the court’s
ruling that the claims survived because of the government’s opposition to dismissal.
Conclusion
For the foregoing reasons, the court finds that discovery is limited to the
discovery of information proportional to proof of fraudulent Medicare claims (of the
type that survived dismissal) for patients at Evansville Hospital only and for the
period on or after March 23, 2010, and on or before September 30, 2016.
So ORDERED.
____________________________________
Debra McVicker Lynch
United States Magistrate Judge
Southern District of Indiana

Dated: April 2, 2018

Distribution:
All ECF-registered counsel of record by email through the court’s ECF system

20