Judge raises more questions about WakeMed Medicare settlement

Judge says settlement over Medicare fraud doesn’t go far enough to serve the public good

ablythe@newsobserver.comFebruary 5, 2013 

— U.S. District Judge Terrence Boyle adopted a prosecutorial tone on Tuesday as he once again reeled off a long and pointed list of concerns about a settlement agreement hashed out between federal prosecutors and WakeMed over false Medicare billings.

Was all the wrongdoing uncovered? Will patients be repaid? Will the prosecutors and WakeMed regularly report back to the judge? Is this deal in the public interest?

Boyle said Tuesday that he hadn’t decided whether to approve the arrangement, but if he does, he will write the order and add his own conditions.

The judge appeared to make history after refusing twice – once in January and again Tuesday – to rubberstamp the plea deal and $8 million settlement crafted over several years.

“I’ve never seen it happen,” said Brandon Garrett, a University of Virginia law professor writing a book on corporate plea deals. “As far as I know, every one has been approved pro forma after a short hearing.”

Garrett should know: He maintains a database of all corporate deferred prosecutions on his university website.

“I’ve long written that judges should serve as a monitor of these agreements, with ongoing supervision,” Garrett said. “This is a big deal.”

WakeMed officials and prosecutors declined to answer questions after the court hearing, saying the case was still ongoing.

The investigation into WakeMed’s billing practices began after a 2007 federal audit hunting for Medicare fraud. The audit showed that 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.

All the cases flagged by investigators were from WakeMed’s heart center, which has long served as the hospital’s big money maker.

WakeMed routinely billed Medicare patients for more expensive inpatient care when doctors’ orders classified them as outpatients. In other cases WakeMed billed them as inpatients without doctors’ orders.

Prosecutors blamed problems on Heidi McAfee, the former director of patient access. McAfee has not responded to requests for comment.

Boyle’s pointed questions

Boyle, a federal judge for 28 years who was appointed to the bench by President Ronald Reagan and has a reputation as a demanding, independent judge, pressed the prosecutors on whether the buck stopped with a mid-level manager.

“The people at the top, you’re not charging them,” Boyle said. “You say they were ignorant of the wrongdoing.”

“The investigation is not complete, but we have no indication of that,” said William Gilmore, the lead prosecutor.

“Then how did the people in the middle benefit from it?” Boyle asked. “It’s not like they get a bonus.”

“To impress her bosses,” Gilmore responded. “She wanted WakeMed to make as much money as possible.”

“Why would they do that?” Boyle asked. “It’s irrational.”

Boyle also questioned whether the settlement, which focused on inpatient bills from the heart center, was broad enough.

“How do you know you’re not just getting the tip of the iceberg?” Boyle asked. “You already told me they have a criminal mindset. If they practice easy theft in one area, why don’t we think they may be doing it in other areas?”

Who should get refund?

Boyle was concerned that the agreement contained no relief for falsely billed patients. He said it’s possible that patients who had been wrongly classified as staying overnight might have paid more than if they were billed for being released the same day.

“How likely is it that John Smith who lives in Garner is going to come in and sue?” Boyle asked. “Why can’t WakeMed, who has the medical records, go back and refund them?”

Gilmore said it’s difficult to determine what the patients should have paid. Gilmore said nurses would have to go through each case line by line to see how an outpatient would be billed, a laborious and time consuming task.

“That’s not the patient’s fault,” Boyle said. “The patient wasn’t involved in that fraud.”

The judge was curious how the false billing was confined to Medicare and did not affect privately insured patients.

Gilmore explained that private insurers insist on approving inpatient procedures in advance. The federal government does not.

“So what you’re saying is Blue Cross doesn’t get cheated, but the government does,” Boyle said. “So the government operates on the honor system, and Blue Cross Blue Shield and their competitors operate on the prove-it-to-me process, and that makes it even more insidious.”

At the January hearing, Boyle criticized WakeMed for not having any officials present. On Tuesday, WakeMed’s lawyers told Boyle that board Chairman Tom Oxholm was present at the defense table. Boyle thanked him for his appearance but did not ask any questions. WakeMed CEO Bill Atkinson was also in the audience.

Boyle did not say when he would make his decision.

Blythe: 919-836-4948

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