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.

(27) comments


It's clear that this paper has an agenda to shut down the hospital. I wouldn't put it past them to have called Blue Cross to stir things up. It seems that these people think that saving a little bit of money on their property tax bills is worth shutting down a medical facility that could save lives in the event of an emergency. The charitable thing to do for your community would be to work together to help this hospital become self sufficient, instead of trying to tear it down.


Exactly tigobar. And what's with all the name calling being allowed? I guess it sells.


For the record, the newspaper did not call Anthem, or any other insurance company, to "stir things up." The first we heard of the Anthem issue was when we heard about it from the healthcare district. We understand that the health of the hospital is a strong concern, one that we share, but our duty is to report the news, not to create it.


I live in the detached area ... it was not about saving a few bucks on my tax bill, it was putting a stop to (at the time) of 14 years of fiscal irresponsibility. It's now 18 years of the same, if not worse irresponsibility. If the hospital can survive on its own two feet in a legal and responsible manner ... have at it. Right now, the tax dollars mean diddley squat - but the remaining taxpayers in the district beware ... the debt continues to mount and while the detached area may still pay for ten or fifteen years, your grandchildren and their grandchildren will be paying for their lifetimes.


So let's set the record straight. The quality control lady spoke during public comment at the Board meeting yesterday and showed her complete ignorance. Apparently, she thinks that the open meeting laws of California are a problem and implies that someone has reported confidential information is a bad "parent". She is insulting and wrong. Same situation for the CNO who slanders a Board member and shows her ignorance.


I attended the public comment portion of today's closed meeting .. I was meet with staff holding little signs WE love SWMC! I think they have misplaced their loyalty.. I called for the resignation of Director Thomas and Director Colthurst... because this isn't a lab issue. the lab is
doing accurate safe testing is a billing issue a decision made by SWMC and allowed by the district.. Director Thomas has chided the public when we question the legitimacy of this scheme and Director Colthust does seem to get the important of over pricing these tests.. Anthem is not
the only insurance company that has questioned this practice.. they have fended off others ..
now they think they can fend off Anthem... They don't believe the letter is accurate .. we shall


I just attended the close meeting.. public comments are allowed before closed meeting .. what greeted me was the staff with little signs we love SWMC staff support for the board ... I support there loyalty but they have misplaced it.. this is not a lab issue the people in the lab are doing acute careful testing... this is an administration, board issue when they were desperate to keep the hospital open they contracted with Durral .. it is the billing of these tests using the hospitals Charge Master at much higher rates that needed that is the crux of the issue...
here are my comments at the meeting:

Given this present situation I call on those directors who without conscience or compunction accepted Durall’s toxicology scheme as legitimate and scolded the public when we questioned their judgment … to RESIGN, specifically Director Thomas , who has scolded the public forquestioning the legitimacy of the toxicology lab and Director Colhurst who doesn't seem to get the seriousness of the allegations ..
The district needs directors who have clear ,objective judgment not clouded by their personal desire to see the hospital remain open at any cost by any means….. did they know about the character of the contracts entered into? Who reviewed these contracts.. because when they
came out to the public it was clear to us that the hospital was at great risk because you were using the hospital’s charge master to bill people who were not your patients .. I personal
pleaded this issue at least twice to this board … the new district members also need to question
why district counsel did not know that this practice was illegal in California..many of us
questioned the ethics of this practice and were told it was legal… well as it turns out it is neither ethical nor legal

I wish you luck in resolving this issue but you have no credibility in this community unless we see some resignations and some objective appointees. I truly hope we can save the district but I know there are some on this board that would sacrifice the district to save the hospital… you have put our community is a very tenuous situation.


I'm glad you're involved now Sandra, but remember in 2014 when you and Marsha Sue could have killed the MSA?


"Anthem filed a notice"--?? Where the heck is a "notice" filed? That is implying that there is a court case, but, there is no mention of a court anywhere at all. I kept reading and looking for a court document being cited until I realized that this article says nothing. Every insurance carrier will find ways not to pay for services if they can get away with it. (I know, because it's happened to me big time).

I hope that little hospital sticks it right back to them. Insurance companies are legal scammers that brainwash you into thinking you are safe--until you need them.


You confuse me bluesharp. In one comment you talk about "Sacramento buy offs" and in this one you sound like a Kool Aid drinker. If you know anything at all about what's been happening with this hospital for the past four years (or have taken the time to attend the meetings like many of the commenters on this thread) you would know that grasping at straws with shady characters is what passes for a business plan. This scam has been taking place all over the country (particularly in Florida) and unfortunately in this country it takes the insurance companies getting pissed for anything to happen. It's ridiculous this hospital and this half-assed group of grifters ever even sniffed relicensing and reopening.
And AlarmingME. Anybody who has gone to the meetings or followed this farce knows what's going on. Did you just get hired to work here from southern California? The Kool Aid is delicious, I guess.


My initial comment was addressed to the topic of the article. Insurance companies attempt to limit or with hold payment regularly if they can---they do this on a scale from an individual claim all the way up.

My second comment was in response to a post asking where the state regulators are and who was paid to look the other way. I am familiar with the way that this hospital has been portrayed as barely getting buy--in which case payoffs to look the other way are unlikely.

Thank you for responding to my posts, I hope that these clarifications end your confusion.


FAKE info...really AlarmingME! Sounds just like Trump before the facts came out last Friday with the 13 indictments from Mueller. Nice try AlarmingME. You don't know an honest board member when you see one.

Consumer's watch

As we watch, we wait. Just how will the district and hospital respond to Anthem's request for answers when the exe. director couldn't even pass along those same answers to other directors asking the same questions. Like, please pass along all the contracts... when the original contract put in place was withdrawn 30 days after initiated and for the last 8 months Sonoma West has been managed by Durall without a contract! Okay Mr. Durall, how will you get out of this one? Like the last time when management was in court and Medivance was being sued? They make $20 million off the scheme, pay your attorney's $1million and you settle with the insurer for 50% and walk away with the rest. You think we don't see what's coming? The taxpayers wait and watch...


Does anyone here know the details of what went down?
FAKE info was deliberately given to Anthem by someone determined to close the hospital. Guess who that was! Anybody know a board member who wants the hospital closed?? Of course Anthem is required to investigate. The hospital just has to respond and will be okay.


Come on AlarmingME, anyone who has been soberly watching this show saw the writing on the wall. The governing board recently admitted they knew this scheme was just a temporary bridge and the bubble would burst. What is in that Kool Aid you people drink anyway?


I hate to say I thought this was going to happen. I, however, thought it was going to be Medicare clawing back the payments to the hospital. What has happened very simply is fraud, and sadly, the District Directors are amoung the perpetrators. This is not to say they knowingly participated but instead failed in their duties to protect the taxpayers.
Regardless, of who is to be blamed, the hospital must close and do it now, not continue to build more debt that ultimately will be passed on to the taxpayers (in some form).


Lock em up.


During his 1956 presidential campaign, a woman called out to Adlai Stevenson, "Senator, you have the vote of every thinking person!" Stevenson called back , "That's not enough madam. We need a majority!" So let's all show up for the Friday 10AM Board meeting. We need a majority!!


Hopkins heard about this mess at the LAFCO meeting on Feb. 7. She recognized the distrust of the District by the public but, still the final decision by LAFCO was to have staff continue to monitor the District and report every 6 months. Hopkins also stated that she was very concerned of the potential breaking of the "firewall" between SWMC and the District. She made it clear that if the District considers that option, she wanted County Consel to weigh in. This news should prompt LAFCO to realize that further delay is costly to taxpayers.

Monte Poodle

These folks are worst than the Trump Administration= at least its not hard to think Trump etc might be crooks. But corruption in Sebastopol amongst good feeling and obviously over their head hippies and progresives! This is why we have Trump, cause the average voter sees just stupdity and greed amungst the headlines and votes anti any goverment. Sad we dont have a Free Clinic sans hospital. We will loose it all with attorneys and judgements.


Anthem might only be the tip of the iceberg. I don't know the payer mix of the lab test patients but it might be reasonable to assume other payers could get in line behind Anthem looking for $$$'s and denying future payment. If Medicare were to get involved......they can really get nasty.


Where is Hopkins in this mess?
Where are other California state regulators?
Who is getting paid to look the other way while financial chaos rules the 'hospital'?
Hopkins better connect her precious homeless funding to this rotten core of a hospital and provide West County Citizens with some relief knowing there is an adult in charge.


??? "paid to look the other way"? If you believe the papers the hospital is lucky to have kept the lights on. Either Sacramento buy offs are really cheap, or those little pink lady volunteers are having back to back bake sales, LOL..


So Mr. Horn's questions and concerns were well founded eh? Thank you Sir for being the voice of reason in all that noise.


Wowsers ... no one saw this coming LOL!!! Wonder what kind of spin Thomas and Colthurst (Durall's biggest cheerleaders) are going to put on this one.


Dog and Pony and others, myself included, have been alarmed at the matter and writing about here in the SonomaWest publication, which happens to provide actual journalism is you can believe it still exists.
Welcome to the party BLD, please join the effort to fix the corruption issues surrounding the alleged 'hospital', which is not a hospital but instead a paper entity with a license to steal from taxpayers. Party on dude.


Oh, I've been at this party for a long time and have been very vocal and critical of the Kool Aid drinking board majority.

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