Judge refuses to accept WakeMed settlement with federal prosecutors

Says settlement is a ‘slap on the hand’ for a giant ‘too big to fail’

ablythe@newsobserver.comJanuary 17, 2013 

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WakeMed President and CEO Bill Atkinson held a press conference on Thursday, May 12, 2011 to announce that WakeMed submitted an offer to buy Rex Healthcare for $750 million from the UNC Health Care system.

SHAWN ROCCO — 2012 News and Observer file photo

— WakeMed officials and federal prosecutors spent two years hammering out an $8 million proposal to settle a Medicare fraud investigation.

A federal judge shredded the 116-page agreement in less than 30 minutes on Thursday.

U.S. District Judge Terrence Boyle ticked off a list of his grievances about the proposal, forcing federal prosecutors into the unusual position of defending the defendants.

No WakeMed administrators or board members appeared to answer his questions.

The agreement, Boyle said, appeared to be a “slap on the hand” for a “too big to fail” corporate giant. Only the day before, Boyle told the lawyers, he sentenced a woman to a year in prison in a $235,000 insurance fraud case.

The deferred-prosecution agreement being proposed, Boyle said, was used “99.9 percent of the time” in that federal court district for teenagers caught with marijuana at national seashore parks such as Cape Hatteras.

Boyle was irked that no criminal charges had been filed in the case. He ended the hearing by telling the prosecutor either to fold his briefcase or take it to a federal grand jury for official indictments.

“There are lots of corporations that steal from the government,” Boyle said. “Most of them are convicted, fined and banished.”

After the hearing that turned their work on its head, none of the lawyers involved – Assistant U.S. Attorney William M. Gilmore or WakeMed attorneys Stephen W. Peterson and Maureen D. Murray – responded to questions.

Boyle said he would reconsider their case Feb. 5.

Billing for overnight care

The case centered on WakeMed’s practice of billing Medicare for millions of dollars worth of expensive overnight care when patients had been treated and released the same day.

The investigation of the nonprofit hospital stems from a 2007 audit done for federal regulators assigned to root out Medicare fraud. WakeMed had the highest rate in North Carolina and the seventh-highest rate in the country of “zero-day stay” billings, or bills to Medicare for inpatient hospital stays that lasted less than a day, according to the audit.

Federal investigators got involved after the auditors had difficulty reconciling the data with hospital admission policies and details that WakeMed managers provided in subsequent interviews. All the billing cases investigators flagged were from WakeMed’s heart center, which has long served as the hospital’s big money maker.

Federal investigators subpoenaed hospital records and conducted further interviews as they worked to build the criminal case that the district’s top prosecutor heralded in December as a caution to other health care organizations.

The federal investigators contend that WakeMed’s Patient Access staff routinely ignored doctors’ orders about how to classify patients at the cardiac center. Sometimes doctors sent orders without classifying a patient, and nurses took it upon themselves to decide whether Medicare should be billed for the pricier inpatient services.

Why come to court?

Under the settlement proposal, prosecutors had agreed to defer prosecution against WakeMed for two years. No individuals have been charged in the case, but hospital officials acknowledged that the government could seek charges against individuals. WakeMed also agreed to pay $8 million, a small portion of which was for the inaccurate billing investigators discovered.

“Why are you coming to court if you tell me you don’t need me?” Boyle asked Gilmore, the prosecutor who rose before him Thursday. “I’m just window dressing in this case.”

“Why not take a guilty plea, defer imposition of the judgment and sentence, and come back in two years later and take a post hoc dismissal?” Boyle asked later.

Boyle lamented the increased number of health care fraud cases across the country.

“Who are the victims in this case?” Boyle asked before answering his own question. “Every American wage earner and every American citizen.”

Boyle continued: “It’s very difficult for society and the court to differentiate between the everyday working Joe or Jane who goes to prison and the nonprofit corporate giant who doesn’t go to jail, who gets a slap on the hand and doesn’t miss a beat.”

If WakeMed, as a corporation, were convicted of a felony, Boyle pointed out, it could be ineligible for Medicare and Medicaid. Such a conviction, Boyle said, would be a death sentence for the 52-year-old hospital, and Gilmore agreed.

No defendant present

The 870-bed hospital system is the largest in Wake County. WakeMed has more than 8,300 employees, making it one of the county’s largest private employers. In 2012, the hospital reported nearly a million patient encounters.

Boyle, who’s been a federal judge for 28 years, also criticized WakeMed for failing to send a top administrator or a board member to answer his questions. It’s rare for a criminal case to be resolved without a defendant at the defense table.

Deb Laughery, a WakeMed spokeswoman, said after the hearing that none attended because the board approved a resolution earlier in the week supporting the proposed settlement.

“The reason we were not in attendance is that we have a very capable legal team representing WakeMed and we worked very closely with them to ensure WakeMed’s interests were well represented,” she said.

WakeMed CEO Bill Atkinson and board members declined further comment.

Blythe: 919-836-4948

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