Prepare for Aetna to change inpatient payment policy in november
By Eileen Sullivan, MSN, CMAC, CCM, ACM-RN
Effective November 15, 2025, Aetna will implement a new Level of Severity Inpatient Payment Policy for Medicare Advantage (MA) and Medicare Special Needs Plan (SNP) members.
Key Points:
Automatic Approval: Urgent and emergent inpatient admissions will be automatically approved for MA/SNP members.
Payment Determination: Admissions that do not meet MCG inpatient criteria will still be approved as inpatient but reimbursed at a lower-severity inpatient rate, not outpatient or observation.
Reimbursement: These cases will be paid as inpatient (IP) downgrades, similar in concept to DRG downgrades.
No Denials: These are not considered medical necessity denials; therefore, no member or provider appeal rights are triggered under denial protocols.
Provider Notification:
Hospitals will receive concurrent notification of downgrades.
A physician-to-physician “discussion” will be available during the concurrent review process (not labeled as peer-to-peer/denial-related).
No Member Impact: MA members will not be notified of the downgrade, and their cost-sharing/copayment will not be affected.
Observation Status: These cases are not reclassified as observation and will not be reimbursed at observation rates.
CARC Code: A specific Claim Adjustment Reason Code (CARC) will identify these downgrades.
Appeals: If the concurrent discussion does not resolve the issue, providers may submit a formal appeal, following a process similar to DRG downgrade disputes.
Aetna will issue detailed guidance on October 15, 2025, outlining:
The review methodology (e.g., AI, nurse, or physician-driven)
Readmission handling
Specific reimbursement models/rates
Outstanding Questions & Clarification Needed:
Reapplication of MCG Criteria:
Will Aetna reapply MCG criteria during the course of the stay (e.g., for extended lengths or complications), or is the initial level-of-severity determination final regardless of hospital course?
CMS Regulatory Compliance:
According to 42 CFR § 422.566(d), CMS requires written notice of appeal rights to both beneficiaries and providers when services or payments are partially denied.
Definition of Medical Necessity:
CMS guidance explicitly states that denial terminology includes "medical necessity" and any substantively equivalent term (e.g., severity). Can Aetna bypass peer review and appeal processes simply by avoiding the term “medical necessity”?
Policy vs. Compliance Conflict:
In CMS Final Rule 4201-F, CMS clarified that payers may not avoid denial requirements by recasting medical necessity decisions as payment integrity issues. Does Aetna’s new policy conflict with this rule?
Contractual Reimbursement Terms:
Can Aetna legally apply this payment downgrade policy without amending DRG-based reimbursement terms in existing provider contracts?
Aetna’s upcoming Level of Severity Inpatient Payment Policy represents a significant operational and regulatory shift in how inpatient services for Medicare Advantage and SNP members are classified and reimbursed. While the policy aims to streamline approvals and reduce outright denials, it raises substantial compliance questions under CMS regulations regarding medical necessity determinations, appeal rights, and contractual payment terms. Hospitals should prepare for potential impacts on reimbursement integrity, utilization review workflows, and payer relations by reviewing their contract language, monitoring Aetna’s forthcoming implementation guidance, and seeking clarification from regulatory or legal experts to ensure alignment with federal requirements and patient protection standards.