If neither the hospital or the collection agency can present you with a legitimate bill at this point in time, you don't owe anyone anything (in my opinion) and they are required by law to delete the adverse information. Personally, I wouldn't recommend you pay ANYTHING unless you have a demand for payment in hand and acknowledge the debt is in fact yours. Paying off the collection now does in fact imply responsibility, and regardless of whether it's paid off or not, the collection itself will have an impact on your wife's credit report. This kind of credit "black mark" is pretty common; thousands are reported in error on a regular basis, and unless you take steps to clear this up on your own, will remain on record for up to 7 years.

The decision, of course, is up to you. Good luck.