PHILADELPHIA – The parent company of Lehigh Valley Health Network (LVHN) is suing Aetna over reimbursements tied to certain Medicare Advantage patients.

Jefferson Health filed the lawsuit against the health insurer earlier this week in the U.S. District Court for the Eastern District of Pennsylvania.

Also named as a plaintiff is Lehigh Valley Physician Hospital Organization, Inc. (LVPHO), also known as Valley Preferred, a physician-hospital organization that is a partnership between Lehigh Valley Health Network and the Greater Lehigh Valley Independent Practice Association.

LVHN joined Jefferson Health in 2024, but Valley Preferred remains a separate entity.

The lawsuit alleges that Aetna is violating federal law with its new Level of Severity Inpatient Payment Policy, which was implemented at the start of 2026.

Specifically, Jefferson and LVPHO say Aetna is not following the standards of the Two Midnight Rule, which defines what inpatient services the Medicare program covers.

The Two Midnight Rules boils down to inpatient care vs. outpatient care; inpatient admissions would generally be covered if the doctor expected the patient to require a hospital stay that crossed two midnights.

The lawsuit alleges that Aetna is effectively creating a two-tiered rate structure by telling its Medicare Advantage members that it is covering the inpatient admission, while only paying hospitals for the equivalent of outpatient care.

Aetna denies violating the Two Midnight Rule. In its explanation of the Level of Severity Inpatient Payment Policy, the company said, “the policy is a claims payment policy that determines reimbursement based on the severity level of the inpatient admission.”

But it is Aetna that is determining whether an inpatient stay is medically necessary, which sometimes conflicts with a doctor’s assessment, the lawsuit alleges.

Jefferson and LVPHO are asking the court to stop Aetna from implementing the policy without a contractual amendment.

Other legal entanglements 

LVHN and Aetna have squared off before.

In 2022, prior to its affiliation with Jefferson, LVHN said it would drop Aetna as an in-network insurance provider.

At the time, the health network said it was ending the relationship because of unpaid bills dating back several years; it also accused Aetna of routinely denying and delaying claims.

But the two sides were able to reach an agreement.

LVHN is currently locked in a dispute with UnitedHealthcare (UHC). 

The Medicare Advantage contract between LVHN and UHC was terminated on January 26, ending in-network access to LVHN providers for more than 5,400 UHC policyholders.

LVHN patients with employer-sponsored UHC commercial plans will face the same reality on April 26, when that contract is scheduled to end.

Those enrolled in the Veteran Affairs Community Care Network (VACCN) would also lose in-network coverage.

According to an update posted on UHC’s website, the two sides are still negotiating.

Jefferson Health clinicians remain in-network for patients with UnitedHealthcare coverage.