Dive Brief:
- Pennsylvania-based health system Jefferson Health has sued insurer Aetna, claiming a new “downcoding” policy from the CVS-owned insurer regarding inpatient admissions for Medicare Advantage beneficiaries violates federal law.
- The lawsuit, filed in federal court Monday, says Aetna’s “level of severity inpatient payment policy” violates Medicare policy by reducing reimbursement for some inpatient hospital stays.
- Jefferson, along with co-plaintiff Lehigh Valley Physician Hospital Organization is asking a judge to stop Aetna from implementing the policy. A spokesperson for Aetna told Healthcare Dive its policy complies with federal law and that it disagrees with Jefferson’s allegations.
Dive Insight:
Aetna says its new policy, which went into effect at the start of the year, is meant to more quickly approve payment for inpatient hospital stays.
But providers say Aetna has decided to unilaterally pay less for hospital stays than were agreed upon during contract rate negotiations between insurers and providers.
Under the policy, Aetna will approve urgent inpatient hospital admissions for MA beneficiaries who stay between one and four midnights without reviewing the claim for medical necessity, but it will pay hospitals at a lower rate comparable to an observation stay. Aetna will only pay the negotiated inpatient rate if it finds the claim meets internal guidelines. Stays lasting five midnights or more will be paid at the higher rate.
In its lawsuit, Jefferson says the policy violates Medicare’s two-midnight rule, which determines coverage for inpatient and observational stays. It also violates federal policy that requires MA plans to cover all medically necessary services that traditional Medicare covers, according to the lawsuit.
“Aetna is able to tell its Medicare Advantage members (and CMS) that it is ‘covering’ the inpatient admission, while simultaneously paying the Hospitals for the equivalent of outpatient observation care,” the lawsuit says.
In one case, Jefferson said Aetna classified a 72-year-old stroke patient admitted to hospital as “low severity,” and therefore subject to a lower payment rate, even after being intubated in the ICU and suffering from renal failure. Aetna eventually classified the case as “high severity” after the hospital stay extended past five days and Jefferson followed up with the insurer and presented more clinical information, according to the nonprofit.
The inpatient policy also violates Jefferson and Aetna’s reimbursement contract, the nonprofit health system said, because Jefferson agreed to one payment rate for inpatient services — not a two-tiered system. Aetna can’t change its negotiated rates by issuing policy, the lawsuit says.
An Aetna spokesperson said its policies “comply with all applicable federal law and regulations and with the terms of our provider contracts.”
“Aetna disagrees with the allegations in the lawsuit and will respond in the appropriate forum,” the spokesperson said.
The policy, which was announced in August, faced immediate pushback from providers and trade groups. The policy “appears to circumvent established regulatory standards regarding coverage for Medicare Advantage beneficiaries,” the American Hospital Association said in a September letter it sent to Aetna.
