Aetna, one of the Nation’s largest Medicare Managed Care Organizations (MCOs), has announced a significant change to its inpatient payment policy, set to take effect November 15, 2025. This update, known as the “one midnight” rule, has the potential to impact hospital reimbursement and increase administrative burdens for healthcare providers.
What’s Changing?
Under the new policy, when a patient is admitted to a hospital from the emergency department or urgent care setting, Aetna will automatically approve the inpatient status without conducting a medical necessity review.
However, while the admission will be approved as an inpatient, Aetna will pay the claim at an observation rate rather than an inpatient rate. The difference is significant – observation rates are typically far lower than inpatient reimbursement rates, leading to potential underpayments for hospitals.
The Financial and Operational Impact
This shift poses several challenges for hospitals and health systems:
- Lower reimbursement: Claims that qualify for inpatient payment may instead be paid at the observation level, creating a reimbursement gap.
- Administrative burden: Hospitals will need to identify cases where stays exceed “one midnight” and ensure timely appeals to recover underpayments.
- System limitations: Many billing systems may not be equipped to automatically flag these payment downgrades in real time.
- Potential for missed appeals: In many cases, discrepancies are discovered later by underpayment review vendors – often after the appeal window has closed.
For hospitals with a high volume of Aetna patients, this “one midnight” change could lead to significant revenue loss unless proactive measures are taken.
Will Other MCOs Follow?
A key question remains: Will other Medicare Managed Care Organizations adopt a similar approach?
If additional payers follow Aetna’s lead, hospitals could face even greater challenges in monitoring and managing these reimbursement downgrades across multiple systems.
What Hospitals Can Do Now
Hospitals should begin preparing now for Aetna’s policy change. Recommended actions include:
- Review current processes for identifying observation versus inpatient payment discrepancies.
- Work with billing teams and vendors to ensure systems can flag stays exceeding one midnight for review.
- Monitor Aetna claims more frequently to allow enough time for appeals, rather than relying solely on post-payment audits.
- Communicate with Aetna representatives to clarify how the change will be implemented and how appeals should be handled.
Staying Ahead of Change
As payer policies evolve, staying proactive is key to protecting your organization’s revenue. Dean Dorton’s healthcare consulting and reimbursement teams help hospitals navigate complex payer changes, optimize billing processes, and recover lost revenue.
If you’d like to discuss how this change may affect your organization or explore strategies to safeguard reimbursement, contact Dean Dorton’s healthcare team today.
