Judge OKs deferred prosecution in WakeMed case

A federal judge is allowing North Carolina's WakeMed Health and Hospitals to take an unusual deal to avoid a criminal trial because the risk of closing down a Raleigh, N.C., hospital is too perilous for patients and workers.

The not-for-profit WakeMed corporation was charged in December with one count of making materially false statements in order to increase Medicare reimbursements—an unprecedented criminal charge for a community hospital, according to prosecutors and numerous legal experts.

Hospital officials admitted in court records that staff members in the Wake Heart Center on the system's Raleigh campus routinely ignored or even fabricated physician orders, and as a result billed Medicare for inpatient care when cardiac patients didn't stay overnight in the hospital.

The issue first came to light after a review by a Zone Program Integrity Contractor, Cahaba Safeguard Administrators, found that WakeMed had the highest percentage of so-called “zero-day stays” in the state, and one of the highest such rates in the nation, between 2003 and 2006. Subsequent investigations by hospital staff and prosecutors found widespread irregularities that caused the hospital to receive at least $1.2 million more than it should have.

Hospital executives signed an $8 million civil settlement that included False Claims Act penalties and a five-year corporate integrity agreement.

Prosecutors also charged the hospital with a felony, which would result in WakeMed losing its ability to get Medicare payments if found guilty, but then agreed to allow the system to enter a deferred-prosecution agreement in which the charge would be dropped if the system doesn't reoffend within two years. Prosecutors said in court filings that cutting off the system's ability to be paid for treating Medicare patients “would likely result in WakeMed's demise.”

U.S. District Judge Terrence Boyle initially refused to accept the agreement, however, saying it was a “slap on the hand” for an organization he called “too big to fail,” according to news accounts from the hearing.

The decision forced hospital officials and prosecutors to submit detailed briefs and attend a second hearing on Feb. 5 to explain why the settlement was appropriate. On Friday, Boyle accepted the agreement, after considering how a guilty verdict could hurt doctors, staff and patients at WakeMed.

“The court has considered the threat that the provision of essential healthcare to WakeMed's patients would be interrupted and that the needs of the underprivileged in the surrounding area would be drastically and inhumanely curtailed should defendant be forced to close its doors as a result of the instant prosecution,” Boyle wrote (PDF).