Anthem sues California hospital over alleged toxicology lab fraud scheme

Anthem and its affiliates from nine states filed a lawsuit against Sebastopol, Calif.-based Sonoma West Medical Center June 1, accusing the hospital's toxicology program of engaging in fraud and fraudulent concealment, among other charges, according to the Sonoma West Times & News.

Here are five things to know:

1. Anthem filed the lawsuit in U.S. District Court for the Central District of California June 1. In the lawsuit, the insurer accused the hospital and several other organizations of nine counts of fraud, fraudulent concealment, negligent misrepresentation and restitution under the Employee Retirement Income Security Act, according to the report. The Palm Drive Health Care District, which maintains a management contract with the hospital, was not named in the lawsuit.

2. The lawsuit states SWMC was approached by Aaron Durall in 2017 about a plan to improve its finances. As part of the plan, Mr. Durall would obtain urine samples "through a network of marketers and physicians from around the country[.] He would consolidate that urine through a toxicology lab in Florida that he owned[,] and [Sonoma West] would bill insurers for the testing even though other labs had been ordered to perform it. With that simple but deceptive scheme, [Sonoma West] could increase the insurance payments for those services up to 100 fold," the lawsuit states.

3. The governing board of SWMC and the Palm Drive Health Care District approved the creation of the toxicology lab in June 2017. Mr. Durall's shell company, Durall Capital Holdings, reportedly loaned the hospital $2.1 million to finance the purchase of necessary equipment for the lab. The Sonoma West Times & News reports the toxicology lab provided the hospital with a "multi-million dollar revenue stream."

4. However, SWMC suspended the lab's operations after Anthem sent hospital officials an intent to sue letter in early February claiming SWMC was involved in a lab testing scheme that resulted in more than $13.5 million in improper payments to the medical center.

5. SWMC staff confirmed to the Sonoma West Times & News June 5 the hospital had begun accepting urine samples for testing from Mr. Durall's toxicology lab in Florida again in May. However, Barbara Vogelsang, MSN, RN, COO and chief nursing officer of SWMC, told the publication June 6 the hospital would no longer accept samples from Mr. Durall's lab.

"There is no question we were doing the test," she said. "I think they are more interested in [Mr.] Durall."

To access the full report, click here.

Editor's note: Becker's Hospital Review reached out to Sonoma West Medical Center for comment and will update the report as more information becomes available.

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