Judge rejects proposed WakeMed settlement

A federal judge Thursday rejected an attempt by North Carolina's WakeMed Health and Hospitals to admit wrongdoing and settle a case that is believed to be the first time a U.S. hospital has been charged criminally with making false statements to rip off Medicare.

U.S. District Judge Terrence Boyle gave attorneys in the case an earful at the afternoon hearing, according to local media reports, before deciding to postpone a hearing to decide whether to accept the health system's admissions and $8 million settlement.

In return for admitting the crimes against Medicare that resulted in at least $1.2 million in overpayments, the hospital was supposed to receive a deferred-prosecution agreement that could erase the criminal charge after two years. Instead, Boyle called the agreement a “slap on the hand” and declined to approve it, continuing the hearing until Feb. 5.

A report in the News and Observer said Boyle told the lawyers in the courtroom that only the day before he had sentenced a woman to a year in prison for an insurance fraud involving just $235,000. The judge noted that deferred-prosecution agreements were usually offered to marijuana-smoking teenagers, not corporations accused of financial crimes, the story said.

WakeMed was charged last month with a single count of making material false statements to Medicare, after a government auditor noticed in 2007 that the system had one of the highest rates in the nation of so-called “zero-day stays,” in which the hospital asks to be reimbursed for costly inpatient care even though the Medicare beneficiaries never actually spend a night in the hospital.

Despite the uptick in investigations against hospitals for questionable Medicare bills, the case against WakeMed appeared to be the first time a hospital in America had faced a criminal charge for such conduct, numerous healthcare attorneys say.

Across the country, cases of inflated Medicare bills have typically been pursued civilly under the False Claims Act and disposed of through settlements with no admission of wrongdoing.

But the 116-page proposed settlement and deferred prosecution agreement required WakeMed to admit that many of its heart-care patients between 2000 and 2008 lacked medical orders for overnight hospital care even though the cases were billed that way, and that some physician orders were fabricated in the process of tracking patients and billing for their care.

Officials with WakeMed and the U.S. attorney's office in Raleigh declined requests for comment on the ongoing criminal case.