If you have not been following the WakeMed Medicare claims scandal, you missed plenty of legal fireworks. But outside of the courtroom drama and intrigue, this case should serve as a cautionary tale for all healthcare providers who may be playing fast and loose with Medicare regulations.

The case began following a 2007 audit of WakeMed Health & Hospitals, a large not-for-profit provider in North Carolina. Federal investigators uncovered millions of dollars in outpatient claims of  Medicare recipients that allegedly should have been reported as less-lucrative inpatient procedures. The story played out for weeks in the Charlotte News & Observer. At first WakeMed denied the charges, but eventually agreed in December to an out-of-court agreement that included a hefty fine of $8 million and regular auditing by the feds. The case became a sensation in healthcare circles when U.S. District Judge Terrence Boyle last month refused to sign the deal. Last week, however, the judge agreed to accept the settlement.

The case in many respects was an aberration, but for healthcare providers, WakeMed’s role in the alleged fraud and its handling of the case provides several valuable lessons on what not to do:

  1. If your numbers are too good to be true, they probably are. WakeMed allegedly was filing inpatient claims on behalf of patients treated in its lucrative cardiac center in numbers that far outstripped their healthcare provider peers. Medicare fraud hunters are grading on the curve, and this unusual activity was what tipped federal investigators to investigate. Making sure your Medicare claim numbers are comparable to other similar-sized providers should be the responsibility of everyone involved in the revenue cycle. If your number of claims is unusual, investigate immediately, because it is guaranteed the feds will.
  2. If you are in the business office and are “tweaking” claims, you may be personally liable for criminal action. Prosecutors in the WakeMed case blamed by name the recently retired director of patient access for the alleged upcoding. McAfee reportedly no longer works at WakeMed and has not responded to the media about the accusations. Prosecutors in the case have said that their investigation is not over and that there could be criminal charges filed in the future.
  3. Judges may not be willing to quietly rubber-stamp out-of-court settlements in the future. The action by Judge Boyle was highly unusual, but it may be a signal that the courts are losing patience with healthcare providers accused of upcoding and other fraudulent practices within the Medicare system. While the judge eventually agreed to sign the settlement, his actions generated tremendous publicity that will no doubt damage WakeMed’s future effectiveness as a healthcare provider. The consequences on the bottom line will far exceed the $8 million fine.
  4. If you’re caught defrauding Medicare, you better be big. One reason Judge Boyle’s actions in this case were so unusual is that taking criminal action against large healthcare providers potentially puts patients and employees, and therefore an entire community, at risk. “The Court has considered the threat that the provision of essential health care 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,” Boyle wrote. While it is a sad commentary based on the Wall Street scandals of a few years ago and the “too big to fail” mantra, it appears that large healthcare corporations are immune from criminal prosecution.
  5. If you’re planning to defraud Medicare, don’t do it in North Carolina. The Charlotte New & Observer has broken several stories on alleged fraud and questionable practices by large healthcare providers, including a lengthy investigative series  last year. The newspaper’s coverage of the WakeMed scandal has been top notch, and should be required reading for all providers. Many of the articles can be found here.