Aetna, owned by CVS Health, plans to implement a new Medicare Advantage (MA) inpatient payment policy that changes how urgent and emergent inpatient claims are paid.
Beginning Nov. 15, the insurer will implement a "level of severity inpatient payment" reimbursement approach under which emergency and urgent inpatient admissions of more than one midnight will be automatically approved.
But if the patient does not meet inpatient criteria according to Milliman Care Guidelines (MCG) inpatient criteria, Aetna will only reimburse the hospital at the rate for observation services, which is a reduced rate.
According to some legal experts, the new policy fundamentally changes how Aetna handles inpatient claims under MA plans. "Traditionally, if Aetna disagreed with the level of care, they would issue a formal denial that hospitals could appeal. Now, they’re essentially saying, 'We’ll pay you immediately, but at a lower rate,' and because it shows as 'payment in full' on the remittance advice, hospitals lose their appeal rights. It’s a silent downgrade that bypasses normal review processes," Elizabeth Purdy, J.D., an associate attorney, wrote in an Aspirion blog post.
According to a notice to providers, Aetna said the new payment structure enables hospitals to "get reimbursed faster for inpatient admissions that are initially denied."
"You'll receive faster payment and still be allowed to appeal for a higher payment," the insurer wrote in an update to providers.
Aetna did not respond to a request for comment at press time.
The American Hospital Association (AHA) sent a letter to Aetna's president, Steve Nelson, calling for the insurer to rescind the policy.
"This policy could erode the transparency consumers rely on to make informed decisions about their care, undermine important regulatory protections that safeguard patients’ coverage, and jeopardize the ability of hospitals to provide high-quality, accessible care to all who need it," Richard Pollack, AHA president and CEO, wrote.
This policy will take the place of Aetna’s (and essentially every other insurer’s) longstanding approach of denying inpatient stays it deems medically unnecessary and then, in most instances, downgrading them to outpatient observation status. "Instead, Aetna will approve these inpatient stays but reimburse hospitals at a lower rate it determined unilaterally outside of the good faith contract and rate negotiation process," the AHA wrote.
This policy only will apply to Aetna’s MA and dual eligible lines of business.
The AHA noted that the policy could "distort data that have direct bearing on Aetna’s performance on several measures that make up the Medicare Advantage Star Ratings Program."
The policy also appears to circumvent established regulatory standards regarding coverage for MA beneficiaries. "Under current practice, the decision by Aetna to deny an inpatient claim and cover it as observation is subject to federal regulations that, among other requirements, require plans to use Centers for Medicare & Medicaid Services [CMS] coverage rules and disallows use of proprietary criteria to determine whether care is medically necessary and should therefore be covered," Pollack wrote.
The new payment approach also will further stress "an already financially unstable health care system at a time when hospital costs for caring for patients continue to rise," Pollack wrote.
"Without an official denial, it is unclear how hospitals will know that an underpayment has occurred, something that is done today through established standard denial codes. Hospitals likely will need to invest in staff and financial resources to identify these claims and then adjudicate any disputes not through the standard appeals process, but rather through the dispute resolution mechanisms under their contracts," he wrote in the letter.
In most cases, this pay disputes will be settled through arbitration, "a more costly and burdensome endeavor than traditional appeals and the outcomes of which almost always go undisclosed," the AHA wrote.
The Hospital and Healthsystem Association of Pennsylvania wrote in a letter to Aetna that the new policy appears to circumvent the CMS’ “two-midnight benchmark.”
"The new policy proposes to replace this criteria with MCG criteria. Federal regulation, however, asserts that the admitting physician makes the determination for inpatient status. The admitting physician—not an administrator, algorithm, or AI tool—determines when a patient is expected to require hospital care that crosses two-midnights," the association wrote.