UPDATE: Aetna announced significant revisions to its inpatient payment policy days before the originally proposed implementation date. Hear from our legal experts about the details of the revised policy and what it means for hospitals here.
Aetna’s recent announcement of a policy change under Medicare Advantage and Medicare Special Needs plans is causing significant concerns across hospital systems. We sat down with Rikki Ashkin, J.D., Director Legal COE, and Elizabeth Purdy, J.D., Associate Attorney, to break down what this means for healthcare providers.
Q: Can you explain what Aetna’s new Level of Severity Inpatient Payment Policy actually does?
Rikki Ashkin: Starting November 15, 2025, Aetna is fundamentally changing how they handle inpatient claims under Medicare Advantage plans. Instead of issuing formal denials for emergent or urgent inpatient stays that go beyond one midnight, they’re automatically approving these stays but paying them at reduced rates—often at observation-level reimbursement—unless the admission meets Milliman Care Guidelines (MCG) inpatient criteria.
Q: How does this differ from the traditional approach to claim processing?
Elizabeth Purdy: 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.
Q: What’s the significance of the “one midnight” threshold?
Rikki Ashkin: This is where it gets problematic. For stays less than one midnight, Aetna will still conduct medical necessity reviews using Centers for Medicare and Medicaid Services (CMS) guidelines. But for stays of one or more midnights, they automatically approve as inpatient status—which sounds good—but then apply their own MCG criteria for payment levels, potentially undermining the CMS Two-Midnight Rule protections.
Q: Why are hospital systems so concerned about this change?
Elizabeth Purdy: There are several alarming aspects. First, these underpayments will appear as standard contractual adjustments, making them easy to miss in normal denial workflows. Second, hospitals lose the opportunity for peer-to-peer reviews or structured appeals. Third, this approach may directly conflict with CMS’s Two-Midnight Rule requirements that all Medicare Advantage plans must follow.
Q: How can hospitals identify claims affected by this new policy?
Rikki Ashkin: Since traditional denial triggers won’t exist, hospitals need to be proactive. We recommend creating custom system rules to flag Aetna claims where the billed level of care doesn’t match the paid level. Use contract variance tracking tools, train your teams to recognize these “silent downgrades,” and conduct retrospective audits to identify patterns.
Q: What options do providers have to push back against this policy?
Elizabeth Purdy: There are several avenues, though success isn’t guaranteed. Direct engagement with Aetna provider relations to request continued downgrade notices is one approach. Contract review is crucial—examine your provider agreements to see if this violates notice or appeal provisions. We also recommend regulatory feedback to CMS and state insurance departments, highlighting how this undermines Two-Midnight protections.
Q: Are there any compliance concerns with this approach?
Rikki Ashkin: Absolutely. This policy appears to sidestep CMS’s Two-Midnight Rule requirements, which were specifically reaffirmed for Medicare Advantage plans beginning January 1, 2024. The rule was designed to ensure appropriate reimbursement when criteria are met, and Aetna’s approach seems to undermine that intent while maintaining technical compliance through automatic “approval.”
Q: What’s the bottom line for hospitals dealing with this change?
Elizabeth Purdy: Hospitals need to act quickly and strategically. Flag affected claims internally, escalate concerns to leadership, track financial impacts, and coordinate with other providers for collective pushback. The reality is that many hospitals accept lower payments because appealing costs almost as much as they’d recover. That’s why automated solutions that can handle these appeals cost-effectively or partnering with experienced vendors who have the tools and expertise to successfully meet these challenges are becoming essential for pushing back against unfair downgrades without breaking the bank.
Q: What should hospitals do right now to prepare?
Rikki Ashkin: Start immediately with workflow changes. Train your billing, coding, utilization review, and appeals teams about this policy so they can recognize the silent downgrades. Implement custom reporting to catch discrepancies between expected and actual payments. Most importantly, don’t let these adjustments slip through as routine contractual write-offs—they represent real money that you may be entitled to under existing regulations and contracts.
For hospitals seeking to navigate these challenging policy changes, proactive identification and systematic response strategies will be crucial to protecting revenue and patient care standards. Contact Aspirion today to learn how we can help.
