Home / Medicine & the Law / Prevailing in medical necessity fraud case

Prevailing in medical necessity fraud case

By Charles I. Artz, Esq.

Physicians frequently receive information and updates about other physicians and providers going to jail for billing fraud or paying millions of dollars in fines and sanctions for violating the civil False Claims Act. Rare is the opportunity to provide good news in terms of a successful physician defense. The purpose of this article is to explain how a physician elevated principle over expediency, and refused to succumb to the draconian pressures asserted by the federal government in a meritless fraud case.

In U.S. v. Prabhu, 442 F. Supp.2d 1008 (D. Nev. 2006), a federal court in Nevada dismissed the government’s claims against Dr. Prabhu and his medical practice for allegedly billing medically unnecessary pulmonary rehabilitation services and pulmonary stress tests, and for failing to properly code those services.

Although obviously not every physician bills for pulmonary rehabilitation services and pulmonary stress tests, every physician is potentially exposed to government and commercial third party payors’ overreaching assertions that the physicians’ services were not medically necessary and were not properly coded. The Prabhu successful defense demonstrates that physicians should stand their ground when they have not done anything wrong, and that the court system can effectuate justice and acquit a physician of baseless charges of fraud and false claims.

This article will summarize the important clinical and operational facts, the medical necessity evidence presented, and the Court’s rulings explaining why the physician’s claims were not false or fraudulent.

Important Clinical and Operational Facts to Establish

Dr. Prabhu proved many important facts. First, despite the government’s position in the litigation, Medicare always covered some form of, or the component parts of, the rehabilitation and diagnostic testing services at issue. Second, the CPT codes at issue did not include certain elements that the government contended must be performed to bill the services. Third, the CPT Assistant, in a written opinion, confirmed that services the government contended must be included in the code were actually not required to be included.

Moreover, the physician sought and obtained advice from the carrier how to bill for the pulmonary rehab and stress test services. On multiple occasions, the physician and his staff reached out to the carrier to obtain instructions regarding billing for the services and tests, which were followed on each occasion. Throughout the time the physician’s staff was obtaining verbal guidance, the carrier approved reimbursement.

Medical Necessity Evidence

The Court found the record to be replete with evidence of medical necessity to support the pulmonary rehab and stress tests given to the physician’s patients. The medical records documented a variety of chronic conditions, chronic impairments that limited the patient’s ability to exercise and ability to engage in activities of daily living, and patient improvement in each case as a direct result of the rehabilitation and therapy.

The government’s expert argued many of the services were not documented as medically necessary, using a medical policy from another state, because the state in which the case was being litigated did not have any controlling standard. The government’s medical expert conceded that the out-of-state medical policy would never dictate how a Nevada physician should document his services.

The Physician’s Claims Were Not False as a Matter of Law

After analyzing all of the evidence in the records presented by the physician’s attorney, the Court determined the physician’s claims could not be false as a matter of law. Four of the Court’s holdings give physicians hope:

· In order to make a fraud case, the government must prove a violation of a controlling rule, regulation or standard.

· Claims are not legally false when reasonable persons can disagree regarding whether the service was properly billed. Differences in interpretation growing out of a disputed legal question are not false.

· The physician presented overwhelming evidence he followed the instructions he received from the carrier. Following carrier advice defeats falsity. The carrier provided no advice, no bulletins and no denials that would give the physician any reason to think differently about the lawful nature of his claims.

· The physician undertook significant efforts to ensure the accuracy of his coding and documentation.

The Physician Did Not Knowingly Submit Any False Claims to the Government: Analysis of Intent

In order to establish fraud, the government must prove the physician knowingly submitted false claims. The term “knowingly” means actual knowledge; intentional disregard of the billing rules and regulations; or reckless disregard of the rules. In finding the physician did not knowingly submit any false claims, the Court made the following important rulings:

· Fraud claims do not extend to honest mistakes but only to lies.

· A physician cannot be prosecuted for fraud when his conduct is consistent with a reasonable interpretation of ambiguous regulations or regulatory guidance.

· Innocent mistakes or mere negligence are not subject to fraud prosecution.

· A physician who follows government instructions and carrier advice does not commit fraud.

· The physician’s billing practice conformed to a reasonable interpretation of ambiguous regulations that he and his staff believed in good faith were proper.

The Physician’s Claims Regarding Medical Necessity and Documentation Cannot Be False as a Matter of Law

The Court found the government failed to prove medical necessity violations. Notably, the Court applied the treating physician rule, which provides that the judgment of the treating physician should be given extra weight when dealing with medical necessity cases. This is important because it is the first fraud case in which a federal court has adopted the treating physician rule as an element in its analysis.

The physician’s claims were not false as a matter of law because the government failed to prove the physician violated any controlling rule, regulation or standard in the provision of pulmonary rehab and stress tests. The carrier did not have a controlling medical policy setting forth the precise manner in which those services must be documented. The out-of-state (California) medical policy does not establish a controlling documentation standard.

The physician’s claims could not be legally false because there was no articulated, objective standard that dictates that the documentation underlying the claims was false, inaccurate or incomplete. In the absence of an articulated objective standard, the physician’s documentation was within the range of reasonable medical and scientific judgment.

This is a landmark decision in which a physician with an outstanding legal team prevailed in a case the government continued to press without sufficient evidence. It shows that not every physician accused of fraud is guilty of fraud or false claims, and that the government does not always bring lawsuits and actions against guilty physicians.

Charles I. Artz, Esq., concentrates his practice on representing physicians in fraud and abuse compliance, and the defense of fraud and false claims cases. He is the principal of Artz Health Law, with offices in Harrisburg and Philadelphia.

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