Raleigh, N.C. — A federal judge criticized prosecutors Thursday for not pursuing a criminal case against WakeMed for fraudulent Medicare billing practices.

Federal investigators said WakeMed routinely billed Medicare for inpatient stays by people who had undergone cardiac treatments, even if they were discharged the same day as the treatment and never spent a night in the Raleigh hospital. Physician orders to discharge patients also were frequently overwritten so Medicare could be billed, according to federal court documents.

WakeMed agreed last month to pay $8 million to settle the federal investigation. Prosecutors charged the hospital system with making material false statements relating to health care matters and with aiding and abetting but deferred prosecution of the case for two years.

If WakeMed complies with all provisions set out in the settlement agreement during that time, the charges would be dismissed.

Instead of approving the settlement during a Thursday court hearing, U.S. District Judge Terrence Boyle asked prosecutors why WakeMed and some of its employees weren't indicted.

Prosecutors said they were confident they would prevail if the case went to trial, but a conviction could devastate WakeMed by possibly barring them from participating in the Medicare and Medicaid programs.

Boyle said it's not right to use a "too big to fail" argument for the hospital system, noting individuals charged with similar crimes are sent to prison. Everyone who pays into the Medicare system was hurt by the fraudulent billings, he said.

Instead of deferring prosecution, he said, authorities could have obtained a guilty plea and deferred sentencing.

Prosecutors argued that the settlement agreement serves as a deterrent to others, but Boyle wasn't too happy with the deal and delayed a decision in the case for two weeks.

Dr. Bill Atkinson, WakeMed president and chief executive, said last month there was never any intent to defraud the government. He attributed the fraudulent billings to mistakes in interpreting complex Medicare rules.

WakeMed backtracked on some of those comments this week, issuing a statement noting that it knew the rules and was bound to follow them.

The hospital system also corrected Atkinson's initial statement that fewer than 150 cases included questionable billing. Prosecutors said they may never know the exact number of cases involved.

WakeMed has already hired a firm to conduct independent compliance audits, has revised its billing policies and procedures and has reworked its executive and board structure to place more emphasis on reporting compliance.

Federal regulators also will monitor WakeMed's practices regarding Medicare for five years as part of a corporate integrity agreement. The agreement spells out the hospital's conduct for submitting claims, training employees and reviewing policies and sets up a method for workers to disclose any future problems with Medicare billing.