In August, CVS Health’s insurance arm Aetna announced a new reimbursement approach for its Medicare Advantage (MA) and Special Needs Plans.
Right now, when an emergency lands a patient in the hospital for one or more nights and a provider submits a claim for inpatient reimbursement, Aetna either denies or approves it based on whether it deems the stay medically necessary.
Starting Nov. 15, Aetna said in an announcement it will automatically approve claims and do “severity” reviews instead for many of its approximately 4.2 million MA members. Rather than denying a claim it feels is inappropriate, it will just pay less for inpatient stays of lower “severity.”
Health systems have long complained about excessive MA denials. This automatic approval would appear to, in theory, reduce them.
So why, then, has the professional and lobbyist group the American Hospital Association (AHA) put out a letter saying it is “deeply concerned” by this shift?
Glad you asked.
Advocates told us this rule makes it harder for hospitals to fight unfairly low payments and may even break federal policy that guides inpatient-level reimbursement.
Reading between the lines. Under the current system, when Aetna denies an inpatient care claim, providers can choose to appeal or resubmit it at a lower rate.
This new rule would still allow providers to request a “review and discussion with Aetna,” dispute the decision, or appeal for the full inpatient rate, Aetna spokesperson Phillip Blando told us.
But it’s harder to identify and appeal underpayments than denials, Becky Greenfield, a partner at law firm Wolfe Pincavage, which represents hospitals and health systems, told us.
“If you had a straight-up denial, it’s really easy to see when the claim has been denied. You’re going to have zero pay,” Greenfield said, adding that providers might need additional resources to spot underpayment cases, like built-in codes in electronic health records or staff dedicated to the task.
Faced with an underpayment rather than denial, hospitals will likely need to go through the dispute resolution process laid out in their contracts with insurers rather than the traditional appeals process, the AHA’s Sept. 15 letter read.
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“In most cases, this will be arbitration, a more costly and burdensome endeavor than traditional appeals and the outcomes of which almost always go undisclosed,” the AHA wrote.
The two-midnight rule. This policy may also violate the Centers for Medicare and Medicaid Services (CMS) two-midnight rule, the Healthcare Association of New York State alleged in an Aug. 20 letter to CMS head Mehmet Oz.
CMS did not respond to a request for comment before publication.
CMS issued the two-midnight rule for traditional fee-for-service (FFS) Medicare in 2013. MA plans have been officially required to follow it since 2024. The rule generally requires insurers to approve claims at an inpatient payment rate if the admitting physician thinks the patient’s condition is severe enough to require more than two midnights of care.
Aetna’s policy could result in lower outpatient-like rates being applied to these patients, Greenfield said.
“This—in my mind and in the minds of many hospital executives and many people that represent hospitals—is Aetna’s way of skirting the two-midnight rule,” she said.
Greenfield said CMS hasn’t done much enforcement against plans violating this rule.
On the flip side, a 2024 federal report found Medicare—traditional FFS, at least—isn’t great at enforcement against hospitals, either. The report found from 2017 to 2021, FFS Medicare paid $23.9 billion in “improper payments” to hospitals for inpatient stays, $7.8 billion of that for short inpatient stays.
The big picture. Aetna’s new policy is set to take effect less than five months after a controversial drug policy for infusion centers began July 1.
Aetna’s move also follows another policy change by Cigna to reduce reimbursement. Effective Oct. 1, the payer will downcode (i.e., reduce reimbursement) for providers that it has identified as having “a consistent pattern” of upcoding routine services such as treatment for an earache or sore throat.
Cigna estimates “almost 99% of all in-network providers will not be affected,” according to a Sept. 9 release.