Too big to fail? Judge accepts WakeMed settlement

U.S. District Judge Terrence W. Boyle accepted a deferred prosecution agreement between WakeMed Health and Hospital Systems and the U.S. Attorney in which WakeMed acknowledged systematically billing outpatient cardiac procedures as inpatient procedures, paid $8 million, submitted to monitoring and agreed to implement an extensive corporate integrity plan.

After hearings on Jan. 17 and Feb. 5, the judge issued the order accepting the agreement on Feb. 8.

The U.S. Attorney filed a criminal indictment against WakeMed in December, alleging that WakeMed billed Medicare for zero-day or one-day inpatient admissions for patients undergoing routine outpatient cardiac procedures. Procedures were billed as inpatient procedures even when referring physicians designated the patient as an outpatient. The deferred prosecution agreement permits WakeMed to settle the criminal charges relating to the false inpatient billing without prosecution and without impairing its status as a Medicare and Medicaid provider.

The judge refused to accept the agreement at the January hearing. According to news reports he questioned why the prosecutors had offered a deferred prosecution agreement rather than accept a guilty plea and propose a deferred sentencing agreement. Reports also indicated that he questioned why the government was not seeking to debar WakeMed from the Medicare and Medicaid programs.

The judge addressed these concerns in his order accepting the agreement, explaining that “the wrongdoing set forth in the statement of facts actually occurred and ... the defendant is responsible for the actions of its officers, directors, and those in its employ,” and that “the statement of facts can be used against defendant at trial in the event of a breach of the agreement.” He noted as well that "the Court is satisfied that nothing in the agreement would prevent the government from investigating and prosecuting any additional fraud or misstatement discovered to have occurred in any other area or department of WakeMed."

But the judge continued that he “had considered the equities at issue,” specifically that excluding WakeMed from Medicare and Medicaid would harm “blameless” healthcare providers and employees of WakeMed, and “the provision of essential healthcare would be interrupted and 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.”

The order requires that the parties submit periodic status reports to the court, and allows the court to conduct a hearing after 12 months, “to determine whether the deferral of prosecution is being properly managed.” If WakeMed fully complies with the terms of the deferred prosecution agreement, the criminal charges will be dismissed 25 months after the date of Boyle's order, which would be March 8, 2015.