Insurance giant wants $13.5 million in toxicology payments returned
Anthem Blue Cross and its affiliates Blue Cross and Blue Shield have filed a notice against Sonoma West Medical Center and Palm Drive Health Care District claiming the hospital and the district engaged in an improper lab test billing scheme.
The insurance giant alleges the scheme resulted in more than $13.5 million in payments to SWMC and is requesting the funds be returned immediately.
The claim states, “Sonoma West appears to have conspired with several third parties to fabricate or misrepresent claims for toxicology testing services that were improperly billed to Anthem.”
The toxicology program was hastily approved last June as a last resort to save the financially drowning hospital. The governing board of SWMC and PDHCD approved management and lab management agreements with Durall Capital Holdings Inc., a Florida-based company owned by Aaron Durall.
Under the laboratory management agreement, Durall Capital Holdings, Inc., loaned SWMC $2.1 million to meet immediate financial needs and to purchase toxicology laboratory equipment. According to SWMC staff reports, the hospital performs initial toxicology screening tests sent by Durall from individuals in drug rehabilitation programs from throughout the country. When further testing is necessary, those urine samples are sent to Reliance Labs, a Florida laboratory where Aaron Durall also serves as president.
Anthem alleges the scheme has been conducted as follows: health care providers from California as well as outside states send their patient’s urine specimens to Reliance Labs in Florida. Reliance then distributes those samples to various labs (including SWMC) for screening.
Anthem alleges that Reliance Labs keeps at least a portion of the specimen and conducts testing on it, while purportedly passing on a portion of the sample to SWMC for additional testing. The claim states that SWMC bills Anthem for some or all of this testing, representing that it performed services it had not.
Anthem’s review of insurance claims submitted found that most of the urine samples for which SWMC billed Anthem were collected from patients who had no connection whatsoever with SWMC and by doing so, Anthem alleges SWMC’s conduct is a violation of California law, “which declares it unlawful for any health facility to charge, bill, or otherwise solicit payment from any patient, client, or customer for any clinical laboratory service not actually rendered by the person or clinical laboratory under his, her, or its direct supervision.”
Anthem requested medical records for 50 claims submitted by Sonoma West for urine drug testing. According to Anthem, SWMC personnel informed Anthem that the hospital held no records for any of the sample claims, even though SWMC submitted all 50 claims to Anthem.
According to the Anthem notice, the company was then contacted by Neisha Carter Zaffuto, who represented herself as an employee of SWMC and offered to provide the requested records. Later, Anthem learned Zaffuto is actually the president of Medivance, a billing company in Florida.
The PDHCD board called for a special meeting on Friday morning to discuss the claim sent from Anthem Blue Cross Senior Associate General Counsel Steven M. Cohen. The document is dated Feb. 9, 2018. The document was made available to the newspaper on Feb. 20.
Anthem is also denying in full all urine testing claims submitted by SWMC as of Jan. 22. This would add a month’s worth of toxicology insurance claims to the already substantial monetary request of $13.5 million. The notice states Anthem is prepared to initiate litigation to recover funds, but no legal action against SWMC has been pursued as of now.
SWMC Chief Executive Officer, John Peleuses, said he wasn’t aware of any plans to shut down the toxicology program. He said he expects the governing board to address the issue in Friday’s special meeting.
At the Feb. 5 PDHCD board meeting, just days before the Anthem claim was sent out, PDHCD board member Jim Horn cautioned other board members about the toxicology program and the risk being taken by the hospital and the district.
Several members made it apparent that they didn’t consider details of the toxicology program’s money flow and contracts to be the business of the district. Horn adamantly disagreed.
“You can’t just throw up your hands and say that’s SWMC’s business,” Horn said at the meeting.
Sonoma West Medical Center is a community hospital owned by Palm Drive Health Care District and funded in part through taxpayer funds.