Aetna’s New Automatic Algorithm for Paying Doctors Less

Despite paying $117.7 million to settle allegations it inflated Medicare Advantage diagnoses, Aetna still uses automated software to downcode ER claims without reviewing medical records.

New Depths of Hypocrisy:

A smart man once said, “Hypocrisy is the audacity to preach integrity from a den of corruption.”

After working in health care and with health insurance companies for almost 40 years I mistakenly thought that I had seen the very pinnacle of hypocrisy. Unfortunately, every time I think insurers can’t do anything worse, they say, “Hold my beer” and prove me wrong.

In a world of delay and deny, there is a new tactic that big insurance companies like Aetna are using to avoid paying for the health care their members need. This new tactic is called automated downcoding. If you aren’t in this industry let me explain how this works. Since I am a big fan of the series “The Pitt”, with its realistic portrayal of life in a busy ER and the dedicated professionals who spend their shifts helping humanity when we need it most, I am going to use the show as an example.

Let’s say you find yourself brought into Dr. Robby’s ER in an ambulance. You are unconscious and Dr. Robby and his team meet you at the door. Very quickly the team assesses you and starts ordering tests and imaging to figure out what’s going on. They don’t check your insurance or your ability to pay; they just get to work saving your life. After diagnosing your issue, they then move on to a course of treatment or referral to a specialist like a surgeon. This story is a happy one and the great Dr. Robby and his team address your problem, so you get to go home and live to see another day.

At this point most people not in this industry wouldn’t believe how little Dr. Robby and the other doctors that worked on you get paid for helping you. We all know that ER visits are expensive, but most people don’t realize that the doctors get very little of that money.

When you show up at an ER the doctor that treats you gets paid based on the level of severity that you presented with. There are different levels based on the severity of your situation and the services and care that is provided to you. In our scenario where you arrived in an ambulance and Dr. Robby had to run several tests and order imaging while making complex medical decisions before finally deciding on the right course of treatment, we’d most likely be looking at a Level 5 visit. While every health insurance contract is different, your insurance company is probably going to pay Dr. Robby and the other doctors who worked on you between $200 and $500 for saving your life. Think about that for a minute. The average plumber’s visit runs between $100 to $400 dollars. Now this is not a slight on plumbers, because I think their labor is worth a great deal. But if a plumber can charge $400, I don’t think it’s too much to ask that ER doctors get paid that much to save your life.

Ok, back to our scenario. You go home better and happy. Dr. Robby’s group bills your insurance company and waits for their payment. Instead of getting the $400, they are told by your insurance company that the claim has been “downcoded” to a Level 4 so the payment will only be $250. This is where things start to get bad.

The insurance company hasn’t looked at any medical records. They don’t know what Dr. Robby did to diagnose you or the medical decision-making that he went through to come up with your course of treatment. They don’t know how long he worked on you or how many other doctors were involved. All they know is that he billed a Level 5 and they don’t want to pay that much.

Judge, jury and executioner all in one

This tactic is a relatively new development. Several insurance companies, including Aetna, have purchased some black box software that automatically downcodes some claims. They pay the lower amount and then tell Dr. Robby that he can appeal if he wants the extra $150. To appeal this decision, Dr. Robby must jump through a bunch of administrative hoops set up by the payer, submit his medical records and hope for the best. What’s that? Who is he appealing to? That’s a great question. Well, he submits the appeal to the very company that downcoded him in the first place. The insurance company “considers” the information that Dr. Robby presents and they decide if they are going to overturn their original decision. That’s right, the insurance company is judge, jury and executioner all rolled up in one.

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At this point most people would be outraged and justifiably so. However, this isn’t the worst part. This isn’t the reason why I think Aetna in particular has reached a new low point in hypocrisy. To really understand the depths of hypocrisy from Aetna you need to know the rest of the story.

Aetna claims that its program of automatic downcoding without even reviewing a chart is to combat upcoding by doctors. They claim that some doctors code at higher levels than they should and that they do this because of profit motivations. Ok, hold that thought.

Agreeing to disagree (and pay millions) to avoid a trial

Earlier this month, as HEALTH CARE un-covered reported, Aetna agreed to pay $117.7 million to settle a 2026 Department of Justice lawsuit. What did that lawsuit allege? You guessed it. The lawsuit alleged that Aetna submitted inaccurate diagnosis codes to Medicare Advantage to boost revenue. The suit included claims of invalid “upcoding,” including false obesity diagnoses and failure to correct records.

In a recent interview an Aetna spokesperson said that the insurer “Continues to disagree with the DOJ’s industry-wide allegations, and this settlement should not be seen as an acknowledgment of liability.”

“Instead, we are now able to avoid the uncertainty and further expense of prolonged litigation, as we maintain our focus on delivering first-in-class member experience across our Medicare Advantage plans.”

While it’s true that Aetna was never proven to have done anything wrong, paying out a settlement of over $100 million dollars and then trying to claim innocence is almost laughable. It’s a little bit like if your wife asks to see your phone because she thinks you are cheating on her and your response is “I will just agree to a divorce and give you everything.”

“Hypocrisy is the audacity to preach integrity from a den of corruption.”

I just can’t imagine being Dr. Robby and coming off a shift only to be told that a nameless, faceless, for-profit insurance company like Aetna, which makes billions of dollars and pays its CEO $20 million a year has unilaterally decided that you billed them $150 more than you deserve when you saved a patient’s life. If that isn’t enough to make your blood boil, how would you feel when you read that the very insurance company that accused you of upcoding without any evidence had to settle a lawsuit and pay over $100 million dollars for doing the very thing they accused you of.

“Hypocrisy is the audacity to preach integrity from a den of corruption.”