Jefferson Health Sues Aetna Over Medicare Advantage Reimbursement Policy
Jefferson Health has filed suit against Aetna, challenging its Medicare Advantage inpatient payment policy.
Why it matters: This lawsuit signals mounting legal friction between providers and insurers over Medicare Advantage reimbursement rules. For healthcare legal teams and in-house counsel, the case could set important precedents affecting contract negotiations and compliance strategies.
- Jefferson Health filed the lawsuit on April 6, 2026, in the U.S. District Court for Eastern Pennsylvania.
- Aetna's policy, effective January 1, 2026, allows severity reviews and can downcode many inpatient stays.
- Jefferson argues the policy violates Medicare's two-midnight rule for inpatient admission coverage.
- The American Hospital Association has called for the policy to be rescinded, citing transparency and provider concerns.
Jefferson Health sued Aetna on April 6, 2026, in the U.S. District Court for the Eastern District of Pennsylvania, taking aim at Aetna’s 'level of severity inpatient payment policy' for Medicare Advantage beneficiaries. The suit highlights escalating legal pushback against insurers’ reimbursement tactics impacting provider operations and patient care.
- Aetna’s policy, effective January 1, 2026, mandates a clinical severity review for hospital stays of one to four midnights. If Aetna deems the stay 'low severity,' reimbursement may be reduced to the outpatient observation rate, which providers argue falls short of actual costs incurred.
- Jefferson Health contends the policy violates the federal two-midnight rule, which requires Medicare coverage as an inpatient admission when a physician expects a stay of at least two midnights. The complaint alleges Aetna’s approach “resulted in administrative burden, financial strain and confusion at the Hospitals, resulting in time spent in dealing with Aetna’s 'policy' instead of providing patient care.”
- The American Hospital Association has also called for the policy’s withdrawal, warning it undermines transparency for patients and the authority of providers in clinical decision-making.
- For its part, Aetna maintains its policy “complies with all applicable federal law and regulations and with the terms of our provider contracts.”
This dispute is unfolding in the context of broader scrutiny: in March 2026, Aetna agreed to pay $117.7 million to resolve unrelated allegations around inaccurate Medicare Advantage coding.
Legal observers say the outcome could influence future contract terms and the regulatory landscape for Medicare Advantage plan reimbursement nationwide.
By the numbers:
- $117.7 million — Aetna's March 2026 settlement for False Claims Act allegations on Medicare Advantage coding
- January 1, 2026 — Effective date of Aetna's severity review policy for inpatient stays
- 1-4 midnights — Length of inpatient stays subject to Aetna's severity review
Yes, but: Details on how Aetna determines 'low severity' and the actual financial impact on Jefferson Health remain unclear.