08/18/2025

Recent RAC Monitor Article

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SPECIAL NEWS ALERT: Aetna Payment Policy Change Disregards Two-Midnight Rule Obligations, Necessitating Provider Action
January 2024 marked a significant change for the application of the Two-Midnight Rule for Medicare Advantage (MA) plans, when the Centers for Medicare & Medicaid Services (CMS) codified in 42 CFR 422.101 that MA plans must follow all provisions of the Rule.

As many of us know, the MA plans, even now in 2025, continue to have difficulty counting midnights and recognizing when hospital care is medically necessary. Hospitals therefore expend significant effort attempting to justify inpatient admission with the MA plans, arranging peer-to-peer phone calls and filing detailed formal appeals in order to get inpatient admission approved, resulting in an appropriate payment.

It was probably only a matter of time until one of the payers figured out a way around the regulation, and that payer is Aetna. In an OfficeLink Update, Aetna has provided notice that effective Nov. 15, 2025, they will start approving all inpatient admissions that encompass at least one midnight.

Now, don’t celebrate just yet.

Because what Aetna will do next for those inpatient admissions is run the MCG criteria on the case. If the case meets MCG inpatient criteria, they will pay the hospital at their contracted inpatient rate.

But, if the case does not meet the MCG inpatient criteria, they will continue to allow inpatient admission, but will only pay the hospital at “a lower level of severity rate,” comparable to the hospital’s contracted rate for observation services. This is in stark contrast to the current process, wherein an admission that does not meet the MCG inpatient criteria is either denied, with the hospital able to appeal or engage in a peer-to-peer discussion, or the case will be referred to a payer medical director for review. 

There will be no denial, nor will there be an opportunity for a peer-to-peer discussion; there will simply be a payment made to the facility that will be indicated as payment in full on the hospital’s 835. As a result, the difference between the payment and billed amount will be seen by the billing system as a “contractual adjustment,” and simply posted just as a contracted full inpatient admission.

This policy change is catastrophic. 

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States and Industry Guiding Healthcare AI Use in the Absence of Federal Regulation
As artificial intelligence (AI) becomes increasingly embedded in the U.S. healthcare system, the lack of comprehensive federal regulation has created something of a vacuum – one that some industry leaders are stepping in to fill.

And with growing concerns about things like patient safety, inherent bias, and ethical boundaries, states such as Illinois are establishing their own standards for responsible AI use.

But despite AI’s rapid expansion into clinical workflows, diagnostics, patient-facing tools, and back-office processes like billing and payment, there is no single or predominant federal law governing its use in healthcare.

Agencies like the Food and Drug Administration (FDA) have issued guidance on AI-based medical devices, and the Office of the National Coordinator for Health Information Technology (IT) has promoted transparency in AI in the past – such as proposed criteria for developers of federally certified health IT to ensure clinical users can access consistent information about the AI algorithms they use – but these efforts fall short of comprehensive governance.

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