Philadelphia-based health system Jefferson Health is suing Aetna, claiming the payer is unfairly reducing payments for some hospital stays under Medicare Advantage. Aetna said that it has done nothing wrong.
The complaint — filed Monday by Jefferson and co-plaintiff Lehigh Valley Physician Hospital Organization — centers on Aetna’s “level of severity inpatient payment policy” for Medicare Advantage beneficiaries, which took effect on January 1.
Under this policy, some hospital stays that are technically approved as inpatient are paid at a lower “observation-level” rate if Aetna decides the patient wasn’t sick enough. This mainly applies to hospital stays lasting between one and four midnights, even when a physician has admitted the patient as an inpatient.
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In the lawsuit, the plaintiffs described a situation from earlier this year in which Aetna deemed the following patient as “low severity”: a 72-year-old who came to the hospital with altered mental status, a prior stroke and hypoxia — who then required intubation and developed acute renal failure after admission.
“After the patient’s second midnight in the hospital, Aetna determined the patient was ‘low severity,’ even though the patient was intubated in an ICU, had acute renal failure, and was administered broad spectrum IV antibiotics for multifocal pneumonia. The admitting physician determined the patient’s inpatient stay was medically necessary, but Aetna decided the patient was not ‘severe’ enough to qualify for payment at an inpatient rate,” the complaint read.
Jefferson argued that this effectively “downcodes” legitimate inpatient care, therefore reducing hospital revenue and creating additional administrative burdens for providers to deal with as they appeal the lower payments. The health system also said that Aetna unilaterally created a new payment tier that was never negotiated as a part of their shared Medicare Advantage contract.
The complaint also claims that the policy violates CMS’ two-midnight rule, which requires Medicare to cover hospital stays as inpatient when a physician expects the patient to need care for at least two midnights. It asserts that Medicare Advantage plans must follow the same standard.
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Overall, Jefferson contends that by paying some qualifying inpatient stays at the lower rate, Aetna is ignoring federal guidelines, breaching its provider contracts and shifting financial risk onto hospitals. The health system is seeking an injunction stopping Aetna from using the policy, as well as compensation for legal fees and damages.
Aetna is defending its policy, according to a statement a company spokesperson shared with MedCity News.
“Aetna’s policies, including the Level of Severity Inpatient Payment Policy, 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 statement read.
This lawsuit touches on a broader national fight between hospitals and Medicare Advantage insurers — one in which hospitals say MA plans apply stricter medical-necessity criteria than traditional Medicare and often reduce payments through post-claim reviews, and payers argue they’re preventing unnecessary admissions and managing their spending.
If Jefferson wins the case, the ruling could limit how Medicare Advantage plans adjust hospital payments for short stays.
Photo: One Punch, Getty Images