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Aetna's Suit Alleging Medical Group Inflated Bills Cleared to Proceed

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Insurance giant Aetna's lawsuit against a medical group over allegations that it inflated bills for neonatal care can proceed, a federal judge has ruled.

U.S. District Judge Wendy Beetlestone of the Eastern District of Pennsylvania denied defendant Mednax's motion to dismiss Aetna's claims. Beetlestone held that Aetna's claims were not barred by the statute of limitations and presented issues of fact to be determined by a jury.

Aetna accused Mednax of "upcoding," or making infant patients out to be sicker than they were so that the bill for services could be increased, according to Beetlestone's opinion.

"As alleged by Aetna, this 'upcoding' scheme permeated Mednax’s operations. Mednax trained and required physicians to engage in 'upcoding,' and encouraged physicians to perform unnecessary services to support higher billing rates. Further, Mednax would sometimes inflate the codes itself, above the level indicated by physicians, before submitting the forms to Aetna," Beetlestone said.

Mednax argued that Aetna's claims fell outside of the two-year statute of limitations, but Aetna countered that its claims are timely under the continuing violations doctrine and the discovery rule.

"As alleged, the 'upcoding' scheme began in 2009 and continued through at least September 2016. This suit was initiated in November 2017—accordingly, any wrongful acts that took place in 2016 fall within the two-year limitations period. Nevertheless, because Aetna has alleged an ongoing scheme that persisted into the limitations period, it is not appropriate to resolve at the pleadings stage whether the continuing violations doctrine allows Aetna to maintain suit for actions that occurred prior to the limitations period. Further, because Mednax allegedly concealed the falsity of its claims, it is possible that the discovery rule applies as well. In short, it is not 'apparent on the face of the complaint' that the statute of limitations bars Aetna’s claims," Beetlestone said.

The judge also said Aetna made sufficient fraud claims to proceed, contrary to Mednax's argument. "Though the 'hypothesis' of fraudulent activity put forward by Aetna 'could be challenged'—and, indeed, ultimately shown to be unfounded—the allegations setting forth the tortious practices 'certainly suffice to give the defendant notice of the charges against it.'"

Additionally, Aetna plausibly alleged that it justifiably relied on the upcoded forms when paying reimbursements.

"It may be shown, as Mednax asserts, that Aetna had access to certain documents regarding Mednax’s claims, and that Aetna often investigates claims or denies coverage in such a way as to render its reliance on Mednax’s forms unjustifiable," Beetlestone said. "But that question turns on issues of fact—such as Aetna’s access to documentation underlying each claim—and is not appropriately resolved on a motion to dismiss."

Aenta's counsel, Frederick P. Santarelli of Elliott Greenleaf, and Mednax's counsel, Luke Nikas of Goldman of Quinn Emanuel Urquhart & Sullivan, did not respond to requests for comment.