Texas hospital closes, allegedly owes Cigna and Aetna $43M

It has been an eventful week for Bay Area Regional Medical Center in Webster, Texas. The hospital officially closed its doors, laid off about 700 employees and plans to seek bankruptcy protection. Also, a lawsuit filed against Bay Area Regional Medical Center this week by a lab testing company revealed the hospital may owe Cigna and Aetna a combined $43 million.

Bay Area Regional Medical Center announced plans last week to shut down. Although the news release said the hospital would cease operations May 10, the facility officially closed over the weekend when the last patients were transferred out, a Bay Area Regional spokesperson told Fox 26

According to a lawsuit filed in Texas district court May 7 by ESA Toxicology, a Houston-based lab testing company, the shuttered hospital may owe Cigna and Aetna a total of $43 million.

In May 2015, the hospital contracted with ESA for lab services for DNA genetic specimens and urine toxicology specimens. Under the agreement, ESA claims it was responsible for preparing and collecting the bills and statements for all laboratory services provided by ESA to Bay Area Regional Medical Center, and the hospital was responsible for monitoring all payer agreements for compliance.

ESA alleges the hospital failed to comply with many of its obligations under the agreement. Specifically, the lab company claims Bay Area Regional Medical Center stopped making full payments to ESA in July 2016. ESA further alleges the hospital failed to monitor payer agreements.

According to the lawsuit, Bay Area Regional Medical Center's contracts with Aetna and Cigna prohibited the hospital from outsourcing laboratory services. In December 2017, Aetna sent the hospital a letter demanding it return $26.1 million in overpayments the insurer allegedly made as a result of the hospital improperly submitting claims for lab services performed by independent laboratories. In January, Cigna sent Bay Area Regional Medical Center a letter demanding $17.4 million for the same reason.

On April 9, Bay Area Regional Medical Center sent a letter to ESA demanding indemnity for the demands by Aetna and Cigna. ESA claims it is not responsible.

"Aetna's and Cigna's demands against BARMC result from BARMC's violations of its contacts with Aetna and Cigna, contracts to which plaintiff was not a party, and the terms of which were deliberately concealed from plaintiff," ESA wrote in its motion for declaratory judgment.

Bay Area Regional Medical Center did not immediately respond to Becker's request for comment.

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