A 2007 audit initiated by a Medicare Program Safeguard Contractor (PSC) discovered that a North Carolina provider had a high incidence of inpatient billings for patients who did not stay in the hospital overnight. The PSC's three-year sampling of hospital records identified WakeMed Health and Hospitals (WakeMed) as having the largest percentage of "zero-day stay" billings in the state. Subsequent investigations by federal authorities found that WakeMed staff had routinely billed the Medicare program for inpatient stays for cardiac patients either without a physician's order or in contravention of physician orders directing that patients be treated on an outpatient basis. The determination to classify a patient as an inpatient, in some cases, was based either upon whether Medicare would pay for the procedure only on an inpatient basis or if the procedure was listed on an InterQual listing of procedures deemed appropriate for inpatient treatment.
In response, the government sought both civil penalties and -- for the first time against a hospital -- criminal charges for making false statements to Medicare. WakeMed agreed to pay a civil settlement of $8 million based upon an allegation that WakeMed received at least $1.2 million in improper Medicare reimbursement as a result of the scheme. As part of the civil settlement, WakeMed also entered into a five-year corporate integrity agreement (CIA).
With respect to the criminal charges, the federal district court issued an order deferring WakeMed's prosecution for a 24-month period conditioned upon WakeMed's full compliance with the CIA and complete payment of the settlement amount. To that end, the government agreed to dismiss the criminal charges and refrain from pursuing WakeMed's debarment from federal healthcare programs.
In approving deferred prosecution, the court balanced the "seriousness of defendant's offense against the potential harm to innocent parties that could result should this prosecution go forward." The considerations included (1) the impact on the Medicare program and taxpayers; (2) the need to protect WakeMed's employees and healthcare providers "who are blameless but who would suffer severe consequences if WakeMed were convicted and debarred," as WakeMed is the largest employer in the county; (3) the likely interruption in the provision of essential healthcare services to nearly 600,000 patients seen annually by WakeMed; and (4) the needs of the underprivileged in the surrounding area for whom services would be "drastically and inhumanely curtailed."
Had Wakefield been convicted of a felony related to the provision of federally-funded healthcare services, the Centers for Medicare and Medicaid Services (CMS) would have been required to exclude the North Carolina hospital system. Effectively, exclusion is a death sentence for providers, because most hospitals cannot afford the loss of revenue from government-sponsored healthcare programs.