United States District Court, W.D. Texas
AETNA INC. and AETNA LIFE INSURANCE COMPANY, Plaintiffs,
THE PEOPLE'S CHOICE HOSPITAL, LLC, et al., Defendants.
Inc. and Aetna Life Insurance Company (collectively,
“Aetna”) allege that Defendants engaged in a
widespread $21 million health care billing fraud scheme.
Specifically, Aetna claims that Defendants were part of a
scheme that wrested control of Newman Memorial Hospital
(“Newman”), a small hospital in rural Oklahoma.
Defendants allegedly paid off doctors around the country to
refer specimens for testing to various labs that were part of
the scheme. Defendants would then submit false claims to
Aetna, claiming that the tests were performed at Newman.
According to Aetna, Defendants misrepresented the location
where medical tests and services were performed because Aetna
paid a higher contract rate for services performed at Newman
than at the various locations where the tests and services
were actually performed. Defendants than diverted the funds
paid by Aetna.
have filed a number of motions to dismiss. Mission
Toxicology, LLC, Mission Toxicology II, LLC, Mission
Toxicology Management Company, LLC, Sun Clinical Laboratory,
LLC, Sun Ancillary Management, LLC, Integrity Ancillary
Management, LLC, Michael Murphy, and Jesse Saucedo, Jr. have
filed a motion to dismiss, or in the alternative, to transfer
venue under 28 U.S.C. § 1404(a). The People's Choice
Hospital, LLC, PCH Management Newman, LLC, and PCH Lab
Services, LLC filed a motion to dismiss or to transfer venue.
Dr. Seth Guterman and David Wanger filed a motion to dismiss
for lack of personal jurisdiction, or in the alternative, for
failure to state a claim.
has raised serious allegations of significant and
far-reaching fraud. However, upon reviewing the record, the
Court is convinced that this case should not be litigated in
this District. Accordingly, the Court will transfer this
matter to the Western District of Texas.
The Entities and Individuals in the Litigation
are Aetna, Inc., and Aetna Life Insurance Company. Aetna,
Inc., through its affiliated companies, provides health
insurance and administrative services throughout the United
States. (Compl. ¶ 5.) Aetna Life Insurance Company is
one of Aetna Inc.'s affiliates; it provides health
insurance and administrative services throughout the United
States. (Id. ¶ 6.) The People's Choice
Hospital, LLC is located in Illinois. (Id. ¶
7.) Seth Guterman is the sole member and manager of The
People's Choice Hospital, LLC. (Id.) PCH
Management Newman is an Oklahoma limited liability company.
(Id. ¶ 8.) PCH Lab Services, LLC is an Illinois
limited liability company. (Id. ¶ 9.) PCH Labs,
Inc. is a Delaware corporation. (Id. ¶ 10.)
Mission Toxicology, LLC, Mission Toxicology II, LLC, and
Mission Technology Management Company, LLC, are all Texas
limited liability companies. (Id. ¶¶
11-13.) Sun Clinical Laboratory, LLC and Sun Ancillary
Management, LLC, are also Texas limited liability
companies. (Id. ¶¶ 15-16.)
Integrity Ancillary Management, LLC (“Integrity”)
is also a Texas limited liability company. (Id.
individual Defendants are: (1) Dr. Seth Guterman, a citizen
of Illinois; (2) David Wagner, an Arizona citizen and the
interim CEO of Newman; (3) Dr. Michael Murphy, a Texas
citizen and a principal for the Sun Defendants; and (4) Jesse
Saucedo, Jr., a Texas student and the founding partner of
Integrity and a principal of the Mission Defendants.
(Id. ¶¶ 20-23.)
is located in Shattuck, Oklahoma, a town with fewer than 2,
000 residents. (Id. ¶ 60.) In 2000, Aetna U.S.
Healthcare, Inc. contracted with Newman, making Newman a
participating provider with Aetna. (Id. ¶ 55.)
“Aetna remits payment to Newman when Aetna receives a
claim form bearing Newman's name and billing information,
which is only to be used for medical services provided by and
at Newman for Aetna members who were Newman patients.”
(Id. ¶ 56.) Between 2013 and 2015, Aetna paid
Newman Memorial Hospital an average of $91, 000 annually.
(Id. ¶ 60.) After Defendants entered the
picture, Newman submitted approximately 834 lab claims per
month-up from an average of six claims per month-totaling
over $21 million in claims. (Id. ¶ 61.)
is an in-network provider, which means that it provides
services to Aetna members pursuant to an agreement.
(Id. ¶ 49.) Aetna agrees to issue payment, and
the provider must accept the contracted rate negotiated
between Aetna and the provider. (Id. ¶ 50.)
Aetna is not necessarily contractually obligated to pay
claims by out-of-network providers. (Id. ¶ 51.)
Moreover, even if a member's plan provides out-of-network
benefits, such benefits are often limited, with the member
required to pay for a larger share of the costs.
(Id.) Non-participating providers are also subject
to additional administrative reviews and scrutiny for
appropriateness of the services and amounts they are charging
members. (Id. ¶ 52.)
typically reimburses rural hospitals like Newman Memorial
Hospital at a higher rate to ensure that Aetna members in
rural America who may have minimal access to medical
facilities are able to get care from professionals whose
quality and credentials were vetted by Aetna. (Id.
sums up the scheme as follows: In 2016, The People's
Choice Hospital, PCH Management Newman, PCH Lab Services, and
PCH Labs gained control of Newman with promises to help the
financially struggling hospital. (Id. ¶¶
31, 62.) Subsequently, these Defendants acquired complete
control over the management, operations, and finances of
Newman Memorial Hospital. (Id. ¶ 63.) Once they
gained control, The People's Choice Hospital and PCH
Management Newman entered into agreements with PCH Lab
Services, PCH Labs, and the Lab Defendants that defrauded
Aetna. (Id. ¶¶ 32, 65.) According to the
Complaint, certain Defendants paid and induced doctors
throughout the country to send urine and blood specimens to
the Lab Defendants. (Id. ¶ 33.) Under one such
agreement, the Sun Defendants and the Mission Defendants
received 70% of the monthly revenues not exceeding $4 million
that Newman got from Aetna for lab-related services, ...