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Northeast Georgia Health System close to buying Dahlonega hospital embroiled in billing scandal, lawsuit
Chestatee hospital
Chestatee Regional Hospital in Dahlonega

Northeast Georgia Health System is close to purchasing the Chestatee Regional Hospital in Dahlonega, which is freshly embroiled in a billing scandal and a lawsuit.

The hospital on Mountain Drive in Dahlonega was purchased in 2016 by Florida lawyer and medical laboratory owner Aaron Durall. Last week, a report from CBS claimed the hospital has been a farm for high-dollar insurance reimbursements tied to drug testing services — some of which were never performed at the hospital, according to the report.

The Northeast Georgia Health System has been interested in Lumpkin County for years. In 2015, it purchased 57 acres at the end of Ga. 400 as a site for a future complex in Lumpkin. The scandal around Chestatee Regional has county residents welcoming news the Gainesville-based system is pursuing a buyout of the Dahlonega facility — even if it means the Dahlonega hospital could be closed for up to 12 months.

“Rural hospitals across the state and nation are suffering,” said Chris Dockery, chairman of the Lumpkin County Board of Commissioners. “We certainly think the hospital is moving in the right direction and it’s a good thing for our community, and we’re excited that Northeast Georgia is soon to be involved with health care in Lumpkin County.”

Sean Couch, spokesman for Northeast Georgia Health System, said in an email Friday, March 30, the system had no advance notice of problems at Chestatee Regional.

“DL Investment Holdings approached NGHS last fall to gauge our interest in purchasing Chestatee, and we were not aware of any allegations involving Chestatee until that news broke earlier this week,” Couch said. “Under the terms of the agreement, Chestatee is required to notify federal regulators of plans to close the hospital later this year — which is necessary to assure existing liabilities are not tied to future owners or operators.”

Meanwhile, it’s not just media targeting Chestatee Regional. Eighteen subsidiaries of national insurance provider Anthem Inc. have filed a lawsuit against the hospital, its owners and their companies: Durall Capital Holdings, Reliance Laboratory Testing, Medivance Billing Service, Jorge Perez and Neisha Carter Zaffuto.

Kelly Smallwood, a 13-year employee of Chestatee Regional Hospital who worked in its billing department, told CBS that large reimbursement checks from insurance providers started rolling into the hospital after Durall purchased the facility in 2016. The checks were from bills charged to people from all over the United States.

In an email to The Dahlonega Nugget, Durall denied the allegations in the CBS report.

“The hospital billed only for any services performed by hospital staff at the hospital and the payers correctly paid the hospital for those services,” he told the newspaper. “The hospital expects to be successful in any dispute related to the issue. We remain advocates for our patients and staff, and vow to provide the highest standard of care.”

Though Durall maintains the hospital hasn’t done anything wrong, Northeast Georgia Health System plans to close Chestatee Regional this year as part of its due diligence before a purchase.

“We remain advocates for our patients and staff, and vow to provide the highest standard of care through this transition,” Cathy Sanford, chief operating officer for the Dahlonega hospital, said in an announcement Friday. “We’re pleased this agreement provides the community and NGHS a fresh start to address the challenges facing small, rural hospitals.”

About half of all ambulance transports in Lumpkin County already go to a Northeast Georgia Health System facility, Dockery said, and more than 60 percent go to a hospital other than Chestatee Regional.

“When we take a med unit and we transport someone to Northeast Georgia, then that med unit is out of our county,” Dockery said. “That round trip is going to take a minimum of two hours.”

Lumpkin County EMS staff, county administration and Northeast Georgia administration are working to find a solution for emergency care while the hospital is closed.

“Since we are a very rural and poor community, we need emergency care and we need good, dependable health care. We think Northeast Georgia will be able to fill that bill,” Dahlonega Mayor Sam Norton said. “We just look forward to a good transition and are encouraged that a reputable hospital is coming to town.”

The health system announced the conditional agreement with DL Investment Holdings LLC in the announcement. Should the purchase go through, it would mark the second hospital purchased by NGHS in the past 18 months. The move comes after the health system acquired Barrow Regional Medical Center in December 2016.

The acquisition would bring NGHS to a total of four hospitals, including Northeast Georgia Medical Center Gainesville and NGMC Braselton. The Braselton hospital opened in April 2015.

The health system said “the agreement is contingent upon the results of a due diligence period.” 

“Chestatee Regional Hospital has been a vital resource for Lumpkin County and an integral part of health care in the region for more than 40 years,” health system President and CEO Carol Burrell said in the announcement. “We look forward to working with the community to better understand what care it needs and collaborating to create a plan to meet those needs in the future.”

A specific closing date will be determined. The Northeast Georgia fiscal year ends Sept. 30.

“We anticipate due diligence will last several months,” Couch said. “The seller has been transparent about limitations in providing some information related to due diligence, some of which is tied to current technology and systems.”

 

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