Court vindicates Nevada doctor in latest twist of fraud case

Wired witnesses, tapped phones and whistle-blowers. This may sound like plot features in a spy movie, but it's real life for Nevada physician R.D. Prabhu, MD. The federal government has been investigating the internist and pulmonology specialist on and off for more than 13 years.

Dr. Prabhu's story just took a new turn. A federal court in July found that the government's fraud charges didn't hold up because the doctor was just following Medicare instructions.

The Justice Dept. accused Dr. Prabhu of knowingly submitting unlawful bills for simple pulmonary stress tests as part of a pulmonary rehabilitation program. The government alleged that the doctor had violated the False Claims Act because the tests were not covered by Medicare and because he had failed to document their medical necessity for some patients.

But the U.S. District Court for the District of Nevada found that "Dr. Prabhu has always acted in good faith in seeking to understand the government's rules ... in an area rife with confusion."

The decision is a rare victory for doctors, said Robert S. Salcido, a Washington, D.C.-based attorney for Dr. Prabhu. Physicians are often forced to settle such disputes with the government, even when they believe they are acting appropriately, because the financial stakes are so high.

"The case is a beacon of light for doctors," said Salcido, a former Justice Dept. civil fraud lawyer. The decision is significant because it demonstrates that "where there is no government standard letting [doctors] know their conduct is wrong, there is a strong likelihood they will prevail."

The U.S. Attorney's Office for the District of Nevada declined to comment on the ruling. But spokeswoman Natalie Collins said the office was awaiting approval from the Justice Dept. to file a motion for appeal to the 9th U.S. Circuit Court of Appeals.

The odyssey unfolds

Dr. Prabhu's troubles began in 1992, when federal investigators opened a Medicare fraud inquiry into billing practices for various pulmonary tests.

During the probe, the FBI wired potential witnesses to secretly record conversations with the doctor, tapped his phone lines and subpoenaed more than 400 patient medical records.

In July 1993, the government joined a false claims whistle-blower lawsuit against the doctor. But in 1994 the Justice Dept. told the court that it "did not intend to seek [a fraud] indictment against Dr. Prabhu." In 1995, the department also dropped out of the whistle-blower case, which was later dismissed, court documents said.

The government resumed its case against Dr. Prabhu in 2004 with a new complaint, saying that the doctor had submitted false claims for simple pulmonary stress tests from 1998 to 2004.

But in July the Nevada federal court found that in the course of the investigation, Dr. Prabhu and his medical staff regularly had consulted Medicare and the local carrier for guidance. "For 13 years Medicare advised Dr. Prabhu that he was allowed to bill for the simple stress test component of pulmonary rehabilitation," the opinion states.

"A defendant does not knowingly submit false claims when he follows government instructions," wrote Judge Robert C. Jones.

The court also determined that the Centers for Medicare & Medicaid Services did not have an express requirement for additional medical documentation to show medical necessity. In its absence, the court found, Dr. Prabhu in his claim forms met the "reasonable and necessary" provisions to show that the simple stress tests would clinically benefit his patients.

Without a specific rule to determine medical necessity, the courts will give "the judgment of the treating physician ... 'extra weight,' " Jones wrote. To prove that claims are deliberately false, the government must show that they were "lies and not merely a technical dispute," the ruling states.

Samuel B. Benham, a Las Vegas-based attorney for Dr. Prabhu, said the government often pursues false claims complaints because it can recuperate three times the amount of payment. If found guilty, Dr. Prabhu would be liable for more than $20 million in damages, he said.

To protect themselves, "Doctors need to document communication with the Medicare carrier and ask the [carrier's] medical director to answer any billing questions," Benham said.