Jefferson sues Aetna over 'downcoding'

Jefferson Health sued Aetna in federal court on April 6, saying the insurer has been cutting payment on some Medicare Advantage hospital stays even after Jefferson doctors admitted patients as inpatients. The case was filed in the U.S. District Court for the Eastern District of Pennsylvania. (healthcaredive.com) The fight is over a billing move called “downcoding,” which is the insurance version of changing a full hotel room charge into a shorter, cheaper stay after the guest already checked in. Jefferson says Aetna is taking claims billed at the higher inpatient level and paying them as lower-acuity cases instead. (fiercehealthcare.com) Aetna’s policy has a formal name: the “level of severity inpatient payment policy.” Aetna told providers the policy would apply to urgent or emergent Medicare Advantage admissions that last at least one midnight, and later narrowed it to stays of at least one midnight but less than five midnights. (aetna.com, healthcarefinancenews.com) Jefferson’s argument is that Medicare Advantage plans are not supposed to invent their own stricter test for whether an inpatient admission counts. Since January 1, 2024, federal Medicare Advantage rules have required plans to follow traditional Medicare coverage rules for inpatient admissions. (beckerspayer.com, cms.gov) The key Medicare rule is called the “two-midnight rule.” It says an inpatient admission is generally appropriate when the admitting physician expects the patient to need hospital care that crosses two midnights, based on the patient’s symptoms, risks, and medical history. (ecfr.gov, cms.gov) Jefferson says Aetna’s policy lets the insurer pay less even when the hospital followed that federal standard and the patient was properly admitted. Becker’s reported the lawsuit directly challenges whether Aetna’s policy complies with the Centers for Medicare and Medicaid Services two-midnight rule. (beckershospitalreview.com) Hospital groups have been warning about this for months. In November 2025, the American Hospital Association said Aetna’s policy could weaken consumer transparency and threaten hospitals’ ability to provide care, and Aetna delayed the rollout from November 15, 2025 to January 1, 2026 after the backlash. (aha.org, fiercehealthcare.com) This is not a small provider picking a symbolic fight. Jefferson is a 32-hospital system with 5,830 licensed beds, more than 700 sites of care, and more than 8.8 million hospital and outpatient visits a year. (jeffersonhealth.org) That scale matters because short inpatient stays are common, and those are exactly the claims Aetna singled out for extra severity review. When the disputed stays are one to four midnights long, even a small change in coding can move a lot of money across a system Jefferson’s size. (aetna.com, jeffersonhealth.org) Aetna told Healthcare Dive it disagrees with Jefferson’s allegations. Jefferson says the policy breaches both federal law and its contract, so the next fight is likely to be over whether Medicare Advantage plans can call a stay “covered” for the patient while still paying the hospital as if the admission never really qualified. (healthcaredive.com)