Sanctions Result in Axed Theory of Damages for Aetna

On Friday, the court issued an opinion in the case brought by Aetna Inc. against Mednax Inc. and affiliated companies. The case, filed in the Eastern District of Pennsylvania, concerns allegations by Aetna that Mednax systemically and fraudulently overbilled medical services provided for newborns in a facility billing and physician billing context. The opinion granted a motion to exclude a theory of damages regarding physician inpatient billing as a sanction for Aetna’s actions during the discovery process.

The complaint alleged theories of fraud, negligent misrepresentation, unjust enrichment, and civil conspiracy in the billing practices of Mednax Pediatric medical group for treatments provided for newborns. Aetna alleged that under the basic theory that it is statistically unlikely that patients treated by the group would all be sicker than other newborns, Mednax’s levels of care and numbers of tests ordered showed a consistent pattern of upcoding for the sake of greater reimbursement. Aetna specifically alleged that the longer amount of time coded for NICU level of care led to higher facility payments, but it also led to higher physician payments during the stay.

Mednax moved to strike the second theory of damages regarding the higher physician as a sanction for Aetna’s conduct during the discovery process. While Aetna alleged that they had included broad language in their complaint regarding hospital claims and also timely disclosed the expert witness report regarding those damages, Mednax argued that Aetna’s conduct and representations during the fact discovery process directly contradicted those claims. Specifically, Aetna’s witnesses repeatedly claimed during the deposition process that they were only concerned with the hospital billing and that the physician billing was outside of the scope of the investigation. Aetna also objected to requests for production from Mednax for the documentation of reviews performed on the physician billing, stating that the documents did not exist and if they did they were outside of the scope of the case.

The court noted Rule 37 penalties, especially those involving excluding a claim or type of damages, are a harsh penalty on a party, which can be avoided by showing that the failure to comply with Rule 26 discovery was justified or harmless. However, the court noted that Aetna’s actions in discovery denying the need for the documents and specifically indicating that they were not pursuing the type of damages they later sought were directly prejudicial to the defendants as they prevented the basic discovery that could have led to new defenses or new case arguments. They also noted that attempting to cure the defects by reopening discovery would disrupt the trial process, would be of limited benefit to cure as the parties had already made arguments based on the current scope of discovery, and showed distinct bad faith on the part of Aetna.

The plaintiffs are represented by Elliott Greenleaf & Siedzikowski P.C., The Law Offices of Howard Pierce, and Robins Kaplan LLP. The defendants are represented by Robbins, Russell, Englert, Orseck, Untereiner & Sauber LLP, Quinn Emanuel Urquhart & Sullivan LLP, Conrad O’Brien, and Lash & Goldberg LLP