Wakemed’s im­pact

Tough penalty has pros­e­cu­tors avoid­ing sim­i­lar cases

Modern Healthcare - - THE WEEK IN HEALTHCARE - Joe Carl­son

The penalty to health sys­tems for crim­i­nally de­fraud­ing Medi­care is so ex­treme—sud­den clo­sure of a com­mu­nity hospi­tal—that it ac­tu­ally pre­vents pros­e­cu­tors from fil­ing more cases like the one seen in North Carolina re­cently.

“The only hospi­tal that would ever get crim­i­nally pros­e­cuted is a hospi­tal whose dis­ap­pear­ance would not af­fect the pub­lic health,” said Jesse Wit­ten, a part­ner with Drinker Bid­dle & Reath in Washington. “It’s a game of chicken when the government threat­ens a hospi­tal with pros­e­cu­tion, be­cause the hospi­tal doesn’t want to be ex­cluded (from Medi­care) and the government doesn’t want it to be ex­cluded.”

That’s what hap­pened in Raleigh this month, when a fed­eral judge there con­cluded that forc­ing WakeMed Health & Hos­pi­tals to go to trial for a felony count of mak­ing ma­te­rial false state­ments to Medi­care for med­i­cally un­nec­es­sary car­diac hos­pi­tal­iza­tion could force the clo­sure of a 628-bed med­i­cal cen­ter, harm­ing un­told num­bers of pa­tients and em­ploy­ees.

So in a move more com­mon in the phar­ma­ceu­ti­cal in­dus­try and among large U.S. cor­po­ra­tions in gen­eral, U.S. District Judge Ter­rence Boyle granted pros­e­cu­tors’ re­quest to let WakeMed en­ter a de­ferred­pros­e­cu­tion agree­ment that will erase the felony charge af­ter two years of suc­cess­ful com­pli­ance with the law.

Scott Taebel, an at­tor­ney with Hall Ren­der in Mil­wau­kee, said the hospi­tal in­dus­try is likely to see more such agree­ments in the fu­ture in “ex­treme sit­u­a­tions.”

“I would hope, though, that … those sit­u­a­tions re­main very rare, be­cause, really the po­ten­tial con­se­quences are far be­yond the hospi­tal,” Taebel said.”

At the heart of the sit­u­a­tion is Sec­tion 1320a-7 of the So­cial Se­cu­rity Act, which re­quires the CMS to re­voke a hospi­tal’s abil­ity to care for Medi­care pa­tients if the provider is con­victed of a felony re­lated to the pro­vi­sion of fed­er­ally funded health­care ser­vices.

“You get ex­cluded, and that is ef­fec­tively

the death sen­tence, be­cause hos­pi­tals can’t op­er­ate with­out fed­eral pro­gram monies,” said Michael Clark, an at­tor­ney with Duane Mor­ris in Hous­ton.

WakeMed, for ex­am­ple, re­ceived $263 mil­lion from Medi­care in 2011—that was 42% of all the rev­enue the sys­tem re­ceived for hospi­tal care that year, ac­cord­ing to the pub­licly avail­able IRS tax fil­ings for the not-for­profit health­care provider.

Thomas Walker, the U.S. at­tor­ney in Raleigh, said pros­e­cu­tors ought to be able to wield that kind of lever­age in sit­u­a­tions that re­quire a greater de­ter­rent than civil set­tle­ments, which are far more com­mon in hospi­tal cases and typ­i­cally do not re­quire the provider to ad­mit wrong­do­ing.

“Health­care providers should rec­og­nize that their Medi­care ticket is not guar­an­teed and be­yond re­proach,” Walker wrote in an e-mail. “Af­ter all, it is the tax­pay­ers’ money, and the in­tegrity of the health­care sys­tem that is ul­ti­mately at stake.”

In ad­di­tion to WakeMed’s twoyear de­ferred pros­e­cu­tion agree­ment, the sys­tem agreed to pay $8 mil­lion in a False Claims Act set­tle­ment and en­ter into an ex­ten­sive five-year cor­po­rate in­tegrity agree­ment with HHS’ in­spec­tor gen­eral.

Pros­e­cu­tors and le­gal ex­perts said the WakeMed case is the first time a com­mu­nity hospi­tal has been charged crim­i­nally with mak­ing false state­ments to Medi­care. How­ever, it was not the first hospi­tal crim­i­nal case re­solved through de­ferred pros­e­cu­tion agree­ment.

The Univer­sity of Medicine & Den­tistry of New Jersey in Ne­wark re­ceived such an agree­ment in 2005 af­ter it ad­mit­ted to know­ingly dou­ble-billing for cer­tain ser­vices, as did Los An­ge­les Doc­tor’s Hospi­tal last year, af­ter the hospi­tal was charged with paying kick­backs to re­cruit pa­tients for med­i­cally un­nec­es­sary ser­vices.

Clark said the agree­ments may be a kind of “in­ter­me­di­ate sanc­tion” that will be used more fre­quently, fall­ing be­tween civil penal­ties that don’t hold any­one ac­count­able and crim­i­nal cases that can close down a hospi­tal. But ul­ti­mately, the agree­ments point to flaws in the law, he said.

“At some point, you have to kind of ques­tion the law, and does it need to be that far-reach­ing?” Clark said. “If it’s too far­reach­ing, and we have to find ways not to use it, then it makes you won­der if we’ve gone too far.”

Walker: Providers’ “Medi­care ticket is not guar­an­teed.”

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