Aetna's Policy Shift: How "Approved" Inpatient Claims Could Cost You Millions

The expansion of the Two-Midnight Rule into Medicare Advantage plans was supposed to be a win for hospitals. When CMS mandated (in 42 CFR 422.101) that MA plans follow the same inpatient admission criteria as traditional Medicare, revenue cycle leaders were cautiously optimistic. The rule promised to level the playing field: If the stay spans two midnights, or is expected to, it qualifies as inpatient.

And for a brief moment, it worked. Inpatient admissions rose 3.9% year-over-year. Hospitals saw long-overdue reimbursement for the care they were already providing. Finance leaders across the country noted the shift. But now, Aetna may have found a way around it.

On November 15, 2025, Aetna automatically approved inpatient admissions for emergent or urgent Medicare Advantage cases that span at least one midnight. That might sound like progress: no more front-end denials and no more endless peer-to-peer calls.

But there's a catch, if the case doesn’t meet the Milliman Care Guidelines (MCG) for inpatient criteria, it’ll still be automatically approved...but only paid at observation-level rates.

And perhaps most importantly, there's no formal denial to appeal. No peer-to-peer. No notification. Just a payment quietly marked "complete" on your 835. The underpayment will simply appear on your remittance advice, and the billing system will treat the shortfall as a “contractual adjustment”—treating it as if the inpatient claim was fully reimbursed.

In other words, the revenue loss won’t even trigger your standard denial workflows. It will silently undermine reimbursement without raising red flags.

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Table of Contents

Industry-Wide Implications: Masking Underpayment as Compliance

The Financial Impact: What Revenue Cycle Leaders Need to Know

The Road Ahead: Preparing for Payment Model Evolution

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Industry-Wide Implications: Masking Underpayment as Compliance

Aetna frames this as a move toward efficiency: avoiding delays, reducing provider burden, and removing the need to rebill as observation. But functionally, it enables plans to approve admissions while paying less, all while sidestepping the intent of the Two-Midnight Rule: protecting hospitals from inappropriate denials and revenue leakage.

This approach replaces transparency and due process with automation and opacity. It takes the fight out of the front end and buries the underpayment in your back-end reporting.

For finance and revenue leaders, this is a significant concern. The difference between full inpatient reimbursement and observation rates is not trivial. And when that gap is recorded as a contractual adjustment, it won’t surface in typical denial or variance reporting. You’ll only see it if you’re actively reconciling expected versus actual payment at the claim level.

This concern is amplified by the broader financial pressures facing hospitals today. With many facilities at risk of closure or service reduction, payment policies that erode reimbursement for legitimate inpatient care could have far-reaching consequences, not just for revenue cycle performance, but for access to care and quality outcomes across the board.

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The Financial Impact: What Revenue Cycle Leaders Need to Know

While this policy currently only applies to Aetna's Medicare Advantage and Special Needs Plans, if other MA plans adopt similar approaches, the impact will be felt nationwide, as 1.3% of inpatient revenue could vanish. Roughly 17% of MA inpatient claims are initially denied, and while 60% of those are currently overturned, that revenue will no longer be easily recovered. What was supposed to protect hospital reimbursement becomes a framework for systematic underpayment.

Key Financial Risks:

• Flag high-risk claims: Modify billing systems to surface inpatient MA claims that are approved but paid at observation-level rates. These won’t show up in typical denial workflows but must be treated as financial exceptions.

• Strengthen documentation: Make sure providers and case managers understand MCG criteria and how to clearly document inpatient-level care. When appeals are no longer available, documentation becomes your only line of defense.

• Review payer contracts: Understand your dispute rights and escalation paths under Aetna’s policies. Prepare managed care and legal teams for payment challenges, not just denial rebuttals.

• Monitoring and Analysis: Track the financial impact systematically to build a compelling case for policy reversal and to inform future contract negotiations.

• Object directly to Aetna and CMS before this becomes precedent for other payers
  

And most importantly, don’t assume approved = appropriate. The absence of a denial doesn’t mean the payment is correct.

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The Road Ahead: Preparing for Payment Model Evolution

This policy represents a significant shift in how MA plans may approach payment, even when following CMS regulations on admission criteria. The key to protecting revenue is proactive preparation.

This new payment approach doesn't come with a press release or a denial letter. It shows up quietly on your 835, marked "paid in full," but falling far short of what's owed. The time to prepare and protect your revenue is now, before this approach becomes widespread.

Success in this environment requires:

• Vigilant monitoring of payment accuracy beyond traditional denial tracking

• Exceptional documentation that proactively meets clinical criteria

• Strong contract language protecting payment accuracy rights

• Cross-functional collaboration between clinical, financial, and legal teams

• Industry engagement to advocate for transparency and fair payment practices

  
  

The healthcare reimbursement landscape continues to evolve, and revenue cycle leaders must adapt their strategies to protect legitimate reimbursement while maintaining focus on patient care quality.