Case 2:18-cv-02217-WB Document 273 Filed 03/12/21 Page 1 of 16
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF PENNSYLVANIA
`
`
`AETNA INC., AETNA HEALTH, INC.,
`AETNA HEALTH MANAGEMENT LLC,
`AND AETNA LIFE INSURANCE
`COMPANY,
`
`Plaintiffs,
`
`
`v.
`
`MEDNAX, INC., PEDIATRIX MEDICAL
`GROUP, INC., AND MEDNAX
`SERVICES, INC.,
`
`Defendants.
`
`CIVIL ACTION
`
`
`
`
`NO. 18-2217
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`
`
`MEMORANDUM OPINION
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`
`
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`Plaintiffs are affiliated health insurance companies Aetna Inc., Aetna Health, Inc., Aetna
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`Health Management LLC, and Aetna Life Insurance Company (collectively, “Aetna”) which
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`allege that Defendants Mednax, Inc., Pediatrix Medical Group, Inc., and Mednax Services, Inc.
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`(collectively, “Mednax”), affiliated companies that provide management and financial operations
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`services to physician groups, fraudulently inflated insurance claims for services rendered in
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`neonatal intensive care units (“NICUs”). After fact discovery closed, Aetna produced the report
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`of its damages expert, Dr. Michael Cragg (the “Cragg Report”), which calculated damages
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`arising from two sources: (1) the amount Mednax fraudulently induced Aetna to pay Mednax,
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`approximately $58.3 million; and, (2) the amount Mednax fraudulently induced Aetna to pay
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`hospitals in which Mednax physicians practiced, approximately $102.7 million.
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`Mednax now moves to strike the second damages theory pursuant to Federal Rule of
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`Civil Procedure 37(c)(1). For the following reasons, Mednax’s motion will be granted.
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`I.
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`BACKGROUND
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`Aetna’s suit, for fraud, negligent misrepresentation, money had and received, unjust
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`enrichment, and civil conspiracy, alleges that Mednax engaged in “a scheme to defraud Aetna”
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`in which Mednax “intentionally and systematically overbilled Aetna” by “fraudulently inflating
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`the severity of the clinical condition of their newborn patients on bills that Mednax submit[ted]
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`to Aetna for reimbursement,” and requiring Mednax physicians to “designat[e] infants as being
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`sicker than they truly were so that it appeared as if the infants required more intensive treatment
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`than was truly the case.” In support of its allegations, the Complaint relies on a statistical
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`analysis of “tens of thousands of claims submitted by Mednax to Aetna for reimbursement,”
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`which the Complaint alleges “shows unequivocally that Mednax billed for services in a manner
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`that far exceeded comparable non-Mednax physician groups” even after “adjust[ing] for or
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`rul[ing] out” factors that could account for the differences in Mednax’s billing. Among other
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`factors, the Complaint explains, Aetna “adjusted for or ruled out” the “Severity of [the] Patient’s
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`Condition,” stating, “Mednax patients’ conditions are not more severe than non-Mednax patients,
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`nor did Mednax patients have longer length of stay.”
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`The Complaint alleges that “[u]pcoding and billing of unnecessary tests by Mednax
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`resulted not only in excessive payments to Mednax, but also in inflated payments to hospitals in
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`which tests were performed and NICUs were housed.” As a result of Mednax’s fraud, the
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`Complaint summarizes, “Aetna has paid more than $50 million more than it should have to
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`Mednax. Aetna brings this action to recover these overpayments.”
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`At the outset of the litigation, as required by Federal Rule of Civil Procedure
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`26(a)(1)(A)(iii), Aetna disclosed to Mednax its “computation of each category of damages
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`claimed,” stating that “[w]ithout limitation, Aetna seeks damages in the amount still to be
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`determined, but exceeding $50 million, representing the overpayments that Defendants
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`fraudulently induced Aetna to make.” Mednax proffers without contradiction by Aetna that
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`Aetna has not served a supplemented version of its Rule 26 damages disclosures.
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`Following closure of fact discovery Aetna timely served on Mednax the Cragg Report
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`which purports to “calculate the excess payments Aetna paid as a result of Mednax’s overbilling
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`for the treatment of newborn children,” ultimately calculating that Aetna is owed approximately
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`$161 million from the two sources of damages noted above. First, the Cragg Report focused on
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`Mednax’s use of evaluation and management (“E/M”) medical procedure codes, which divide
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`medical procedures for newborn patients into four categories: newborn, hospital, intensive, and
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`critical. The Cragg Report found damages of approximately $58.3 million from two forms of
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`E/M code overbilling: (1) “for a NICU stay of a given length . . . Mednax bills more intensive
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`and critical E/M procedures as opposed to less expensive newborn and hospital E/M
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`procedures”; and, (2) “Mednax keeps newborns in the NICU longer on average,” which “also
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`results in Mednax billing more E/M procedures.” Second, the Cragg Report calculated damages
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`from “extra payments to hospitals resulting from the overly long NICU stays for newborns under
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`Mednax’s care.” The Cragg Report explained, “Aetna’s payments to hospitals compensate the
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`hospitals for providing care and resources to the newborn via revenue codes. . . . Since hospital
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`payments are larger the longer a newborn spends in the NICU, Mednax’s behavior of extending
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`NICU stays resulted in Aetna paying more to hospitals than it otherwise would.” By the Cragg
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`Report’s calculations, Mednax’s fraud caused Aetna to overpay hospitals $102.7 million.
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`Mednax now moves to strike this second damages theory as sanction for Aetna’s failure
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`to timely disclose it. According to Mednax, not only did Aetna fail to timely disclose that it was
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`seeking damages for the amounts it paid to hospitals, but it also repeatedly denied during fact
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`discovery that it sought such recovery and refused to respond to Mednax’s discovery regarding
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`the same. Aetna contends that sanction is unwarranted, citing its broad Rule 26 disclosure, the
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`Complaint’s allegation that Aetna overpaid hospital claims, and Aetna’s repeated representations
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`to Mednax that, per Aetna’s brief in opposition, it “intended to support its claim with an
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`emphasis on expert reports.” As set out below, however, the crux of the instant dispute lies in
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`Aetna’s representations during fact discovery that payments made to hospitals were not relevant
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`to the case.
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`A. Deposition of Richard Harris
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`During discovery, Mednax requested pursuant to Rule 30(b)(6) that Aetna designate a
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`corporate representative to testify about the damages in excess of $50 million claimed in Aetna’s
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`Complaint and initial disclosures, “includ[ing] but [] not limited to the method for calculating
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`those amounts, . . . [and] whether and how Aetna’s calculation of its claimed damages has
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`changed since the filing of the Complaint.” Aetna objected on, among other grounds, that the
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`request was “overbroad” and “seeks information that is not relevant . . . to the needs of the case.”
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`The parties took their dispute to the Special Discovery Master1 who recommended that Aetna
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`“produce a witness to testify about the basis for the damages figures in its complaint and initial
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`disclosures,” but cautioned that “questioning regarding the details of the damages methodology
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`likely would be inappropriate.” Aetna designated one Richard Harris as their 30(b)(6) witness
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`who at deposition when asked by Mednax if he was “prepared to offer any testimony” on
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`Mednax’s damages, stated in relevant part, “[a]ll I can say is this analysis was prepared by an
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`outside expert. It has been produced. And anything that has not been produced is privileged.”
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`B. Mednax Requests for Production (“RFPs”) 108 and 110
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`During the course of the litigation, Aetna produced a dataset with information for all of
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`Aetna’s NICU claims from 2009 to February 2019 (the “August Data”). Mednax subsequently
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`1 The Court appointed Bruce Merenstein, Esquire, as Special Master after it became clear that almost every aspect
`of discovery was to be hotly contested.
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`served RFPs 108 and 110, seeking more information about the August Data. Specifically, it
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`requested that Aetna produce documents and data related to Aetna’s “Clinical Claim Review”
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`and “Utilization Review” – processes in which Aetna monitors, assesses, and authorizes care for
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`insured patients – of claims reflected in the August Data. Aetna objected that such discovery
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`was “overly broad, unduly burdensome, and not proportionate to the needs of the case,” and that
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`Mednax “is requesting information that it possesses” because Mednax “is aware of how its
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`claims are adjudicated.” It subsequently objected (by way of letter) to production of the
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`documents and data on the grounds that “Aetna does not perform utilization review or clinical
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`review” of physician E/M codes. “[T]hose reviews,” Aetna’s letter explained, “are focused on
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`facility claims” – that is, claims hospital facilities submitted to Aetna – and “[t]hus, claims at
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`issue in this case will not have been the focus of utilization review or clinical review.” Aetna’s
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`letter continued, production of “information regarding any time Aetna has reviewed medical
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`records from hospital facilities that somehow implicate care provided [by a] Mednax physician”
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`would be “extremely disproportionate to the needs of the case, and for records that are not
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`relevant to the issues in this matter.”2
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`C. Mednax RFPs 103 and 104
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`Mednax also served RFPs 103, 104, and 107, which requested production of Aetna’s
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`policies, guidelines, and procedures for the medical coding of NICU claims and Aetna’s review
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`2 The record indicates that Aetna did ultimately produce at least some records responsive to RFPs 108 and 110. On
`July 20, 2020, Mednax requested that the Special Master recommend that Aetna be compelled to produce documents
`relating to Aetna’s review of hospital and physician claims submitted in connection with the medical care of patients
`Aetna alleged were the subject of “upcoded” Mednax claims. Mednax contended that such records were responsive
`to RFPs 108 and 110, inter alia, and relevant to show whether “Mednax’s billing for these patients was appropriate”
`and “Aetna should have detected (or did detect) the alleged upcoding of these claims earlier,” noting that “[w]hile
`Mednax has information concerning Aetna’s final adjudication of claims it submitted, it does not have . . . [Aetna’s]
`communications made directly with the hospital facilities.” In a letter to the Special Master, Aetna ultimately agreed
`to produce Mednax’s requested materials for four patients, although Aetna explained that it “stands by its
`objections.”
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`of such claims. Aetna also objected to these requests as being “overly broad and unduly
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`burdensome” and “not relevant to the parties claims and defenses.” It also asserted that it had
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`already “produced those policies regarding its review and payment of invoices submitted by
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`Mednax.” Mednax took the matter to the Special Master, requesting that Aetna be ordered to
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`produce documents “concerning Aetna’s processes, guidance, and standards for evaluating the
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`clinical appropriateness and utilization of NICU coding.”3 Aetna reiterated its position that such
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`“discovery is not relevant, as it relates to Aetna’s review of services rendered by the hospital (not
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`by a Mednax physician).” Because “Aetna does not perform utilization review or clinical
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`review” of E/M codes used by Mednax physicians, but only of “facility (i.e. hospital) claims,”
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`Aetna explained, “claims at issue in this case will not have been the focus of utilization review or
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`clinical review.”
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`The Special Master was unmoved by Mednax’s arguments and, on July 29, 2020,
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`recommended (the “July 29 Recommendation”) that Aetna produce “processes, guidance, and
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`standards for evaluating the clinical appropriateness and utilization of NICU coding,” including
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`those Aetna relies on “for evaluating whether clinical decisions or coding determinations that are
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`part of Aetna’s claims in this case (e.g., admission of a patient to a NICU, discharge of a patient
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`from or continued hospitalization in a NICU) are appropriate, and whether, as a result of such
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`review, a claim should be paid (in full or in part).” Aetna produced only three documents
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`responsive to the Special Master’s recommendation, explaining in its transmittal e-mail that
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`“[n]otably, these do not directly bear on the claims at issue in this case, however, because they
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`3 It bears noting that although Mednax’s letter asserted several reasons why the requested discovery was relevant,
`including to show “how Aetna reviews the coding and clinical aspects of claims submitted by Mednax and other
`neonatal providers,” “Aetna’s reliance and the timing of its discovery of the alleged fraud,” and for “potential
`impeachment of Aetna’s clinical and expert witnesses who will address coding by Mednax-affiliated physicians,”
`Mednax did not argue that such discovery was relevant to limit Mednax’s potential liability for Aetna’s hospital
`payments.
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`focus on the review of the facility claim and not the provider’s claim.”
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`D. Deposition of Kay Rooker, R.N.
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`During discovery Mednax deposed Kay Rooker, R.N., a manager in Aetna’s Clinical
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`Claim Review Department, about Aetna’s clinical claim review processes. Rooker testified that
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`Aetna has one clinical claim review divisions that conducts “live claim review of [medical]
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`services,” and a second division that reviews claims submitted by hospitals that use “DRG”
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`billing codes. Among other details, Rooker testified that Aetna maintains a list of DRG codes
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`that are excluded from Aetna’s “prepay review” process. After the deposition, Mednax
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`requested that Aetna produce documents that Mednax explained it learned of “for the first time”
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`during Rooker’s deposition, including, inter alia, the “DRG exclusion list, and documents
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`“sett[ing] out the work flow and criteria” used in clinical review of hospital claims for NICU
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`services.
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`Aetna refused to provide the documents, explaining that “when a facility’s NICU claims
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`are submitted, the physician’s claims are not subject to review at that time[,]” and reiterating that
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`the “DRG exclusion list . . . has nothing to do with this case” because “[o]nly facilities submit
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`claims to be paid base upon a ‘DRG’ rate,” and only the E/M codes Mednax submitted for
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`reimbursement of physician claims “are at issue in this litigation.” Mednax disputed that Aetna’s
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`review of hospital claims was irrelevant, responding that the Special Master had, in his July 29
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`Recommendation, “concluded that discovery into Aetna’s review of facility claims for NICU
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`services was relevant.” Aetna nevertheless refused Mednax’s supplementary requests for
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`production, arguing that Mednax mischaracterized the July 29 Recommendation:
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`[The Special Master] did not [] “conclude” that Mednax was entitled to engage in
`broad discovery into “Aetna’s review of facility claims for NICU services” as it
`now attempts to do here. Mednax does not submit facility claims. Aetna does not
`seek to recover[] facility claims in this lawsuit. . . . As such, Aetna objects to
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`Mednax’s efforts to expand the scope of discovery.
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`Despite this disavowal, on October 26, 2020, Aetna served the Cragg Report, which calculated
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`that Aetna’s damages for hospital claims were $102.7 million. When Mednax requested that, in
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`light of the Cragg Report, Aetna produce documents concerning its review, processing, and
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`payment of NICU hospital claims, Aetna refused the request as an “attempt[] to reopen discovery
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`months after the close of document discovery.”
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`II.
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`DISCUSSION
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`“Strategic manipulation of the discovery process, especially with regard to such critical
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`disclosures as the theory of damages is the ill toward which Rule 26 and Rule 37 are aimed.”
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`Mercedes Benz USA LLC v. Coast Automotive Grp. Ltd., 2008 WL 4378294, at *5 (D.N.J. Sept.
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`23, 2008) (citation omitted). Pursuant to Federal Rule of Civil Procedure 26, a party must
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`“provide to the other parties . . . a computation of each category of damages claimed by the
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`disclosing party,” and supplement this disclosure “in a timely manner if the party learns that in
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`some material respect the disclosure . . . is incomplete or incorrect, and if the additional or
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`corrective information has not otherwise been made known to the other parties during the
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`discovery process or in writing.” Fed. R. Civ. P. 26(a)(1)(A)(iii), 26(e)(1)(A). Under Rule 37,
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`“[i]f a party fails to provide information . . . as required by Rule 26(a) or (e), the party is not
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`allowed to use that information . . . to supply evidence on a motion, at a hearing, or at a trial,
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`unless the failure was substantially justified or is harmless.” Fed. R. Civ. P. 37(c)(1).
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`“Rule 37 is written in mandatory terms, and is designed to provide a strong inducement
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`for disclosure of Rule 26(a) material.” Newman v. GHS Osteopathic, Inc., Parkview Hosp. Div.,
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`60 F.3d 153, 156 (3d Cir. 1995) (internal quotation marks and citations omitted). It is an
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`“automatic sanction” designed to laser focus a party’s attention on the production of “material”
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`that the party “would expect to use as evidence.” Fed. R. Civ. P. 37(c)(1) (Advisory Committee
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`notes to 1993 Amendments). The Rule does, however, provide some discretion to ameliorate its
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`potentially harsh effects. Specifically, a party can overcome Rule 37 sanctions by demonstrating
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`that a Rule 26 contravention was “‘substantially justified or . . . harmless.’” Lamb v.
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`Montgomery Twp., 734 F.App’x 106, 110 (3d Cir. 2018) (quoting Fed. R. Civ. P. 37(c)(1)). For
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`example, justice may not be served should the inadvertent omission from a Rule 26(a)(1)(A)
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`disclosure of the name of a potential witness known to all parties or the failure to list as a trial
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`witness a person so listed by another party be used as a reason to preclude that witness’s
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`testimony. Fed. R. Civ. P. 37(c)(1) (Advisory Committee notes to 1993 Amendments).
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`Similarly, if there is a “substantial justification” for failure to abide by the disclosure
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`requirements of the Rules, the Court has discretion to lift the mandatory sanction.
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`Whether the exercise of such discretion is appropriate is determined by considering the
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`following five factors: “(1) the prejudice or surprise of the party against whom the excluded
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`evidence would have been admitted; (2) the ability of the party to cure that prejudice; (3) the
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`extent to which allowing the evidence would disrupt the orderly and efficient trial of the case or
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`other cases in the court; [] (4) bad faith or willfulness in failing to comply with a court order or
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`discovery obligation,” Nicholas v. Pa. State Univ., 227 F.3d 133, 148 (3d Cir. 2000) (citation
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`omitted); and, (5) “the importance of the evidence to the proffering party,” Hill v. TD Bank, NA,
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`586 Fed. App’x 874, 879 (3d Cir. 2014). The Third Circuit has cautioned that “exclusion of
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`critical evidence is an extreme sanction, not normally to be imposed absent a showing of willful
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`deception or flagrant disregard of a court order by the proponent of the evidence.”
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`Konstantopoulos v. Westvaco Corp., 112 F.3d 710, 719 (3d Cir. 1997) (internal quotation marks
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`and citations omitted). However, “[e]ven if there is no evidence of bad faith, where an oversight
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`is not rationally explained and is surely prejudicial, exclusion is appropriate.” Mercedes Benz
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`USA LLC, 2008 WL 4378294, at *4 (citations omitted).
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`Applying the Third Circuit’s five-factor test here, Aetna has not explained why its failure
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`to timely disclose that it sought to recover damages for hospital payments was harmless nor
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`provided a substantial justification for why it failed to disclose this information. Neither the
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`Complaint, which focuses near-exclusively on Mednax’s claims for reimbursement and its
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`associated misconduct, nor Aetna’s initial disclosures, which broadly stated that Aetna sought to
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`recover “the overpayments that Defendants fraudulently induced Aetna to make,” nor Aetna’s
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`Rule 30(b)(6) witness called to testify about damages, Richard Harris,4 specified that Aetna
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`sought to recover hospital payments. During discovery, Aetna repeatedly maintained that
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`hospital claims were irrelevant to the case. Aetna objected to Mednax RFPs 108 and 110 on the
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`grounds that Aetna’s clinical claim and utilization review processes “focus[] on” only hospital
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`claims, which were not “claims at issue in this case,” and the records sought were “not relevant
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`to the issues in this matter.” Aetna similarly objected to RFPs 103, 104, and 107 on the grounds
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`that the “discovery is not relevant, as it relates to Aetna’s review of services rendered by the
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`hospital (not by a Mednax physician).” At the close of fact discovery, Aetna refused Mednax’s
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`production requests following the Rooker Deposition on the grounds that “Mednax does not
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`submit facility claims” and “Aetna does not seek to recover[] facility claims in this lawsuit.”5
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`4 Aetna’s conduct is “especially troubling” in part because Mednax specifically pursued information about Aetna’s
`damages calculation through a Rule 30(b)(6) deposition, which Aetna opposed. Design Strategy, Inc. v. Davis, 469
`F.3d 284, 295 (2d Cir. 2006). Aetna contends that Mednax simply failed to ask Aetna’s witness, Richard Harris,
`“how Aetna’s damages calculations may have changed since the filing of the Complaint” or “seek further testimony
`or information from Aetna regarding damages.” The deposition transcript suggests Mednax’s questioning of Harris
`concerning Aetna’s damages was brief, but it at least shows that Harris was asked about deposition “Topic 24,”
`which pertained to Aetna’s damages calculation and how Aetna’s damages computation had changed since the
`Complaint was filed. If the computation had morphed it was Aetna’s obligation to timely disclose it. See Armenian
`Assembly of Am., Inc. v. Cafesjian, 746 F.Supp.2d 55, 71 (D.D.C. 2010) (“Defendants cannot be faulted for failing
`to compel Plaintiffs during the discovery period to produce more specific evidence about a type of damages that was
`not explained to them in Plaintiffs’ initial disclosures . . . or in Plaintiffs’ answers to Defendants’ questions at their
`depositions”).
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` 5
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` Though Aetna accuses Mednax of relying on “cherry-picked communications,” Aetna at no point addresses its
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`Aetna cannot plausibly contest surprise on this record.6
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`Aetna’s conduct prejudices Mednax. Because Aetna failed to timely disclose its damages
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`computation and stonewalled Mednax’s efforts to discover information regarding payments to
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`hospitals, Mednax was deprived of an opportunity to obtain relevant discovery that could
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`potentially limit its liability for such payments. Mednax also proffers that because it did not
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`know to seek third-party discovery from non-party hospitals, the factual record is silent as to
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`various issues relevant to determining whether Mednax is solely responsible for Aetna’s
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`payments of hospital claims. Mednax could have sought these records before the close of fact
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`discovery, or pursued discovery it was previously denied with arguments focused on its liability
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`for Aetna’s hospital payments, if Aetna had timely disclosed its damages computation.
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`Aetna disputes any prejudice, arguing that Aetna timely produced the Cragg Report and
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`its supporting evidence, as well as “considerable discovery” concerning Aetna’s review of
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`hospital claims. These arguments are not persuasive. It does not follow from Aetna’s
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`disclosures that Mednax had adequate opportunity to develop the factual record to defend itself.
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`Aetna notes that it produced Aetna’s policies and guidelines for review of hospital claims,
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`examples of specific utilization and clinical reviews, and that Mednax deposed two corporate
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`representation at the close of fact discovery that Aetna “does not seek to recover[]” hospital payments. It is pure
`sophistry for Aetna to argue, as it does, that it objected to Mednax’s request for documents regarding hospital claims
`because the question “at issue” in this litigation is whether Mednax’s physician claims were fraudulently overbilled
`not whether hospital stays were fraudulently overbilled. The fact that Aetna seeks to recover on hospital claims
`ineluctably renders them “at issue.”
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` 6
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` Aetna contests surprise on the grounds that consequential damages are “well-recognized” as damages attainable for
`fraud, the Complaint alleged that Mednax’s fraud “resulted . . . in inflated payments to hospitals,” and Mednax was
`aware that Aetna would support its damages analysis with expert reports and seek to recover for Mednax’s improper
`extension of the length of patients’ stay in the NICU. In light of the ample record showing that Aetna did not
`disclose, and actually refuted, that it sought to recover hospital payments, these points do not undermine the
`conclusion that the Cragg Report’s announcement of Aetna’s pursuit of hospital payments was a surprise. Further,
`because a NICU patient’s prolonged length of stay could result in overpayments to both Mednax and hospitals,
`Mednax’s awareness that length of stay was a factual issue in the case does not mean that Mednax had notice of
`Aetna’s hospital payments damages theory. Indeed, the Cragg Report identified length of stay as a source of
`Aetna’s overpayments for both of Aetna’s damages theories.
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`representatives about utilization and clinical reviews. This discovery mitigates prejudice to some
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`small degree, but it is not up to Aetna to mete out in discovery what it thinks Mednax should
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`have. Moreover, the prejudice Mednax suffers in not obtaining the information it requested from
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`Aetna regarding hospital claims is amplified by the complexity of the factual and legal issues
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`involved in this case.
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`Next, the second and third Nicholas factors also support exclusion. Mednax cannot cure
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`prejudice without reopening fact discovery, but fact discovery has long since closed. While
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`Aetna’s production of materials used for the Cragg Report may inform Mednax’s rebuttal expert
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`report, any such report necessarily would rely on an artificially limited factual record. See
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`Ghulam v. Strauss Veal Feeds, Inc., 2002 WL 34381146, at *2 (M.D. Pa. Nov. 5, 2002) (finding
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`prejudice where plaintiff’s conduct “hinder[ed] the preparation of expert reports in rebuttal”).
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`Reopening fact discovery is not appropriate here where it would expose Mednax to substantial
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`expense as it revisits discovery requests regarding hospital claims that it previously sought from,
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`but which were roundly rebuffed by, Aetna.
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`The record suggests that Aetna failed to comply with its discovery obligations in bad
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`faith. As discussed, Aetna objected to Mednax’s RFPs on the grounds that the requested
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`documents concerned hospital, not physician, claims, and explicitly represented that it did “not
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`seek to recover[] facility claims in this lawsuit.” While there is no sure indication that Aetna
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`intentionally misrepresented its damages computation during fact discovery, it is an unavoidable
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`conclusion that Aetna knew when it served the Cragg Report that the Report contradicted its
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`representations during fact discovery. At a minimum, the factual record offers “no reasonable
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`explanation” for Aetna’s failure to timely disclose that it sought to recover hospital payments,
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`nor why Aetna explicitly refuted this theory of recovery only to adopt it a fewer short months
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`later. Mercedes Benz USA LLC, 2008 WL 4378294, at *4.7
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`The final factor, the importance of the evidence sought to be excluded, does not weigh
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`clearly against or in favor of exclusion. The Cragg Report’s calculation of Aetna’s hospital
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`payments is undoubtedly important to Aetna’s recovery of all payments that it alleges Mednax’s
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`fraud induced Aetna to make to any party. However, Aetna will still be able to seek recovery of
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`the damages at the heart of this case: the money it was fraudulently induced to paid to Mednax.
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`Cf. ZF Meritor, LLC v. Eaton Corp., 696 F.3d 254, 299 (3d Cir. 2012) (expert testimony critical
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`because “without additional damages calculations, . . . Plaintiffs will be unable to pursue
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`damages”). Although the Third Circuit has referred to “exclusion of critical evidence” as “an
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`extreme sanction,” Konstantopoulos, 112 F.3d at 719, here exclusion merely binds Aetna to its
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`own long-espoused theory of its case, which it repeated to Mednax’s detriment during discovery.
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`Accordingly, the Court will not exercise its discretion to lift the mandatory sanction of
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`Rule 37. In light of the foregoing, the appropriate sanction for Aetna’s failure to comply with
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`Rule 26 is to preclude Aetna from introducing evidence in support of any recovery of hospital
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`payments.
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`Mednax has, however, requested more in its motion than just the preclusion of
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`“evidence” regarding hospital claims. It specifically seeks to strike any theory that calculates
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`damages for alleged overpayments that Aetna made to hospitals at which Mednax-managed
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`physician groups were stationed. Aetna argues that this request is improper in that Rule 37(c)(1)
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`7 Aetna argues here that it was “transparent” that it would “articulate its claims through its experts, and that its
`regression analysis would be refined and expanded upon beyond that alleged in its complaint by those experts.” If
`Aetna is arguing that it always knew it would announce its pursuit of hospital payments in an expert report, then
`Aetna’s failure to timely disclose this damages theory seems willful. And if Aetna did not know until after fact
`discovery that it would seek such damages, Aetna’s expectation that it would rely on future experts does not explain
`why Aetna refuted during fact discovery the damages theory its expert adopted shortly thereafter. Further, the
`Complaint’s statistical analysis, which “adjusted for or ruled out” Mednax patient’s longer length of stay to explain
`Mednax’s inflated billing, does not focus on hospital payments. Accordingly, the Cragg Report is not fairly
`characterized as an expansion or refinement of the Complaint’s statistical analysis.
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`only permits the sanction of the preclusion of evidence, not the exclusion of a legal theory.
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`As a preliminary matter, although the parties are not wrong as a general matter to
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`describe Aetna’s pursuit of hospital payments as a damages theory, it is for purposes of Rule
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`26(a) a damages computation, which Aetna was required to timely disclose or risk sanction for
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`“fail[ure] to provide information . . . as required by Rule 26(a) or (e).” Fed. R. Civ. P. 37(c)(1).
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`Quite separately, Mednax’s specific request for relief is not dispositive as to what
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`sanction ultimately will be appropriate. See Bowers v. Nat’l Collegiate Athletic Ass’n, 475 F.3d
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`524, 538 (3d Cir. 2007) (“any determination as to what sanctions are appropriate [is] entrusted to
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`the discretion of the district court”); Reed v. Binder, 165 F.R.D. 424, 431 (D.N.J. 1996) (“the
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`language of Rule 37(c)(1) gives the court broad discretion to fashion a remedy”); see also, e.g.,
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`Nicholas, 227 F.3d at 148 (affirming district court’s sanction precluding plaintiff “from
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`introducing any evidence of future lost earnings at the damages phase” of trial). Indeed, even
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`where a party does not explicitly move for the imposition of alternative “appropriate sanctions”
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`pursuant to Rule 37(c)(1)(C), Rule 37 permits the award of such alternative sanctions sua sponte.