Aetna's Policy Under Scrutiny: Implications for Medicare Compliance and Hospital Payments

As the Centers for Medicare & Medicaid Services (CMS) continue to provide clarity on Medicare policies like the Two-Midnight Rule, Medicare Advantage (MA) organizations have been adopting various payment methodologies. Notably, Aetna's Level of Severity Inpatient Payment Policy has faced criticism from entities like the American Hospital Association due to its impact on hospital payments. Dr. Ronald Hirsch, in an article for RACmonitor, highlighted that the Two-Midnight Rule allows for certain admissions to be classified as inpatient. However, the Aetna policy involves approving urgent and emergent hospital stays for one-night admissions as inpatient, which generally are not eligible for Medicare Part A payment unless they span at least two midnights as per CMS guidelines. Aetna claims their policy benefits hospitals by reducing the need for appeal processes in case of inpatient denial. Nonetheless, hospitals are required to appeal if they disagree with Aetna's level-of-severity assessment to secure full payment. This can place additional administrative burdens on hospitals, which traditionally did not have to handle such categorization for inpatient admissions under Medicare criteria. MCG Criteria and Payment Implications The policy uses MCG severity criteria to determine payment levels for inpatient stays lasting fewer than five midnights. If an admission meets MCG criteria, it is paid at a higher rate; otherwise, it aligns with observation rates, creating an intermediate category not recognized in Medicare regulations. Moreover, CMS guidelines emphasize that inpatient admission decisions should largely depend on physician judgment rather than external screening tools like MCG criteria. Aetna's approach is seen as potentially conflicting with this guidance, as it imposes additional hurdles for payment when services are provided in good faith by healthcare providers. Implications for Regulatory Compliance The policy effectively introduces criteria beyond those set by Medicare for inpatient admissions, which could be viewed as an attempt to alter established standards inexplicitly. The usage of MCG criteria, as pointed out by experts, diverges from traditional Medicare practices where severity of patient condition is assessed using the Medicare Severity Diagnosis-Related Groups (MS-DRG) payment system. This methodology was developed to ensure that inpatient payment considers the intensity of care required. While MA plans have contractual leeway in setting payment rates, they must adhere to CMS-defined criteria for inpatient payments. Aetna's policy raises concerns about compliance with the Two-Midnight Rule. This approach might incentivize other payers to adopt similar tactics, exacerbating tensions between hospitals and MA plans. Hospitals considering their options might determine that terminating agreements with Aetna could allow for reimbursement according to Traditional Medicare payment standards. This remains a decision for individual hospitals, pending CMS's reassessment of such payment policies and their adherence to established Medicare regulations.