Federal Court Approves Deferred Prosecution Of Hospital Subject to Criminal Investigation

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By Peyton M. Sturges  

deferred prosecution agreement accepted by a federal court Feb. 8 requires a nonprofit North Carolina health system to pay $8 million and comply with the terms of a five-year corporate integrity agreement (CIA) to avoid additional sanctions (United States v. WakeMed , E.D.N.C., No. 5:12-cr-398, agreement approved 2/8/13).

The U.S. District Court for the Eastern District of North Carolina, citing the need to balance the “seriousness of defendant's offense against the potential harm to innocent parties that could result should this prosecution go forward,” concluded that granting the government's request to defer prosecution of WakeMed, d/b/a WakeMed Health and Hospitals, was warranted. Deferring prosecution will allow the system to avoid the threat of exclusion from federal health care programs.

The court reviewed the evidence gathered by the government, and memorialized in a statement of facts included as part of the settlement. The evidence documented a pattern of falsely billing federal programs, including Medicare, between 2003 and 2006, for inpatient care provided to patients at WakeMed's Wake Heart Center in Raleigh, N.C., who were, in fact, treated on an outpatient basis.

The billing of outpatient services as inpatient services occurred in multiple administrative offices but did not jeopardize patient care, the court noted.

In addition to the penalty and five-year CIA, the court noted that other requirements of the agreement that supported approval were a stipulation that the wrongdoing set forth in the statement of facts actually occurred and that WakeMed agreed it was responsible for the actions of its officers, directors, and those in its employ. The court also pointed to the fact that the statement of facts could be used against WakeMed at trial in the event of a breach of the deferred prosecution agreement during the two years the agreement will remain in effect.

It also noted that WakeMed agreed to be monitored under the CIA for five years by an independent review organization that will report to the Department of Health and Human Services. In addition, WakeMed agreed to continue to cooperate with the government through ongoing investigations and to not make public statements contradicting the agreed upon statement of facts, it said.

The agreement also requires the health system to continue the compliance efforts it initiated after the billing problems were first documented by a program integrity contractor in 2007.

Cardiac Procedures.

According to the court, the deferred prosecution agreement relates to the billing practices for cardiac and other procedures performed at WakeMed only during an unspecified time period. It in no way prevents the government from investigating and prosecuting individuals involved in the false billing or any parties with respect to other fraud or misstatement discovered to have occurred in any other WakeMed facility or department, the court said.

“The Court has also considered the equities at issue, including the impact of defendant's actions on the primary victims in this matter--the Medicare program and the taxpayers who contribute to it. Such consideration must also include, however, the protection of defendant's employees and healthcare providers who are blameless but who would suffer severe consequences should defendant be convicted and debarred as a Medicare and Medicaid provider,” the court said.

“Moreover, 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,” the court said.

The agreement calls for dismissal of the criminal action if, after the two-year period has elapsed, the health system has complied with all of its obligations and has engaged in no additional criminal conduct.

WakeMed was represented by Maureen D. Murray, with Smith Moore Leatherwood LLP, Greensboro, N.C., and Stephen W. Petersen, with Smith Moore Leatherwood LLP in Raleigh, N.C. The government was represented by William M. Gilmore, with the U.S. Attorney's Office in Raleigh.

By Peyton M. Sturges  

The court's decision approving the settlement is athttp://www.bloomberglaw.com/public/document/USA_v_WakeMed_Docket_No_512cr00398_EDNC_Dec_19_2012_Court_Docket. The deferred prosecution agreement is at http://op.bna.com/hl.nsf/r?Open=psts-94tsxd. The statement of facts is at http://op.bna.com/hl.nsf/r?Open=psts-94tsxe. A civil settlement agreement is at http://op.bna.com/hl.nsf/r?Open=psts-94tsxf. The corporate integrity agreement is at http://op.bna.com/hl.nsf/r?Open=psts-94tsxg.

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