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Anthem BCBS Sues California Hospital and Florida Toxicology Lab Over Alleged Billing Fraud

NEW YORK (360Dx) – Anthem Blue Cross Blue Shield has filed a lawsuit against Sonoma West Medical Center and a Florida lab, alleging they conspired to establish a fraudulent toxicology billing organization at the hospital.

The lawsuit alleges that in the spring of 2017 Aaron Durall, owner of Reliance Laboratory Testing in Florida, contacted Sonoma West Medical Center, which had recently emerged from bankruptcy protection, with a proposal to set up an operation in the hospital that would bill for lab tests performed by Reliance lab. While claims submitted from Reliance were capped at $32 per test by Anthem's professional fee schedule, the hospital would be able to increase that amount to $3,500 per claim because hospitals are paid as a function of their billed charges, the suit alleges.

The lawsuit, filed on June 1 in US District Court for the Central District of California, names Reliance Labs, Durall, medical billing company Medivance Billing Services, and its Founder and CEO Neisha Carter Zaffuto, and two other organizations set up by Durall, as co-defendants in the suit along with Sonoma West Medical Center.

According to the suit, in the 18 months prior to its partnership with Reliance, Sonoma West Medical Center submitted a total of 50 claims for urine toxicology testing. In the first nine months after the partnership, the suit alleges that Sonoma West submitted more than 15,000 claims. The partnership between the companies netted $16 million in payments, the suit alleges. The partnership began on or around April 2017, and lasted until January 2018 when Anthem implemented a "zero pay" system edit into its claims software for toxicology claims coming from Sonoma West Medical Center, the suit states.

Approximately 90 percent of the toxicology claims submitted to Anthem by Sonoma West Medical Center originated in Orange County, which is 500 miles from the hospital, and the remaining 10 percent of the claims originated in states outside California, according to the suit. The toxicology tests were performed at the Reliance lab facility in Florida, the suit alleges.

While initially, a company named Durall Capital managed insurer billing, that role was soon given to Medivance Billing Services, according to the suit. Anthem alleges that Medivance, under the direction of Zaffuto, "took numerous steps to mislead Anthem" about the claims that were being submitted.

Anthem began investigating the hospital when a health plan member from Missouri called the insurer to report that she received a statement from Sonoma West Medical Center, but she had never been to California, according to the suit. Subsequent audits conducted by the insurer found that patients listed on claims submitted by the medical center were never patients at the hospital, the suit alleges. In addition, several physicians interviewed by the insurer stated that they had never ordered tests from Sonoma West Medical Center, but had ordered tests from Reliance Labs or other labs, the lawsuit states.

The suit accuses the defendants of fraud, fraudulent concealment, negligent misrepresentation, violation of California's unfair competition law, and tortious interference with Anthem's contracts with its members. The insurer is seeking restitution and declaratory and injunctive relief.

Sonoma West Medical Center and Medivance Billing Service did not return calls for comment. The number listed for Reliance Laboratory Testing was not in service.