Aetna Discontinues Unpopular Observation Notification Policy- But There’s a Catch

By: Emily Blizzard, Esq., Associate Attorney, The Law Offices of Fotheringill & Wade, LLC

In the March 2018 Edition of the Aetna OfficeLink Update, Aetna announced a major change to their observation notification policy. Effective July 1, 2018, Aetna will “no longer require notification for observation greater than 24 hours.”

This change will come as a relief to many hospitals. The soon-to-be phased out Aetna policy, in practice, caused Aetna to refuse observation notification until 24 hours had elapsed, but then after the 24 hour mark would require notification within the inpatient notification timeframes. This differs from most insurers, who would require observation notification for observation care of any length, or not require observation notification at all. Aetna’s policy proved to be difficult to operationalize for many facilities, and in our experience, led to denials. For example, we have seen administrative denials under this policy for lack of notification because facility tried to notify after only 23 hours.

However, there is a catch. With the change to no longer require notification for observation over 24 hours, Aetna has also stated that it will “no longer cover observation services that extend beyond 48 hours.” We expect that this hard cap on observation hours will prove challenging for many hospitals, particularly for the rare occasion when a patient meets neither discharge nor inpatient admission criteria after 48 hours in observation.

We recommend a two-pronged approach to address hard caps on observation.

  1. Addressing existing denials through the appeals process:
    1. Tell an effective story of why your patient required observation care over 48 hours. Why specifically did your patient meet neither discharge or inpatient criteria?
    2. Cite to the insurer’s own clinical policy: Does the insurer’s clinical policy forbid admitting a patient inpatient under your circumstances? Does the insurer’s clinical policy discuss situations in which observation stays of over 48 hours would be considered medically necessary?
    3. Use your best facts: Did the insurer approve observation care for longer than 48 hours? Does state law, federal law, or your contract dictate coverage under these circumstances?
  2. Preventing new denials:
    1. Contract around the policy: If a policy like this has proven costly for your facility, have you considered working modifications to the policy into your contract?
    2. Scrutinize your internal administrative and utilization review protocols: Are you conducting regular, documented reviews against a major criteria set? Are patients being upgraded to inpatient or discharged when appropriate?

Given this change effective 07/01/18, facilities should make sure that their utilization review and case management staff is aware of this change so that it is incorporated into their practices. As with anything in the insurance world, an ounce of prevention equals a pound of cure. We encourage providers to take action now so that their facilities are prepared for these new policies when they go into effect.

SOURCE: Aetna March 2018 OfficeLink Update

Emily Blizzard, Esq. is an associate attorney at The Law Offices of Fotheringill & Wade, LLC.  Ms. Blizzard represents healthcare providers in the appeal of denied and underpaid claims and has experience with both governmental and third party payers. Ms. Blizzard graduated magna cum laude from Michigan State University College of Law and is admitted to the Maryland Bar.