Jefferson Health Sues Aetna Over MA 'Downcoding' Policy, Escalating Payer-Provider Payment Disputes
Philadelphia-based Jefferson Health filed a federal lawsuit against Aetna over the insurer's "level of severity inpatient payment policy," effective January 1, 2026.
Under the policy, Aetna approves urgent inpatient stays of one to four midnights for MA beneficiaries but pays hospitals at a lower observation-level rate unless the claim meets Aetna's internal severity criteria — creating a two-tier reimbursement structure outside the negotiated contract.
Jefferson argues the policy violates CMS's decade-old two midnights rule and the federal requirement that MA plans match traditional Medicare coverage. The health system cited a 72-year-old stroke patient requiring ICU care and intubation whom Aetna classified as "low severity."
The lawsuit seeks an injunction blocking the policy. This dispute is part of a broader escalation in payer-provider payment conflicts — Jefferson's Lehigh Valley network went out of network with UnitedHealthcare’s Medicare Advantage plans in January, and other insurers have introduced similar unilateral downcoding policies.