Background
CMS‑4201‑F (effective January 1, 2024) was intended to curb inappropriate Medicare Advantage (MA) denials by clarifying MA plans must follow Traditional Medicare coverage rules —including National Coverage Determinations (NCDs), Local Coverage Determinations (LCDs), the Two‑Midnight Rule, and the Inpatient‑Only List. Despite the Center for Medicare and Medicaid Services (CMS) mandate, denials remain widespread. In this edition, we break down the reason the denials are still occurring, and mechanisms to curb them.
Why Denials Continue and The Impact to Health Care Providers
MA payer plans operate under capitated, risk‑based payments, meaning they retain savings when utilization is reduced. Denials, especially initial denials continue to be a cost‑containment tool, even when payerss expect many will be overturned since even overturned denials delay payments and improve payer cash flow.
Although CMS‑4201‑F restricts MA plans from using more restrictive criteria than Traditional Medicare Fee for Service, payers still (1) apply internal utilization management algorithms, (2) rely heavily on AI driven auto denial processes and (3) require documentation beyond Medicare standards. For example, Aetna introduced a policy that became effective in 2026 requiring all inpatient hospitalizations crossing one midnight of care to meet Milliman Care Guidelines (MCG) for severity. All other claims will be paid at observation rates. While a lawsuit is requesting an injunction against the Aetna policy, and the American Hospital Association (AHA) has also pushed back on the policy, it currently remains in effect.
With the increasing population of Medicare beneficiaries enrolled in MA plans, the inappropriate payer tactics significantly increase providers’ administrative costs to fight denials. And even when denials clearly violate Medicare rules, hospitals face barriers, short submission timelines, plan-specific appeal workflows and inconsistent application of Independent Review Entity (IRE) decisions, thereby limiting the practical impact of CMS-4201-F. Further, MA payers are also cognizant that many hospitals lack the resources to appeal these denials and while appeals for providers are essential to change MA behavior, they remain costly.
Current Government Oversight
CMS‑4201‑F largely codified existing guidance rather than introducing real‑time enforcement mechanisms with CMS primarily enforcing compliance through audits, complaints, post‑payment reviews, and star ratings adjustment creating a lag between MA noncompliance and consequences.
While the denials continue, there is effort via CMS and the Office of the Inspector General (OIG) to monitor MA plans. Beginning on January 5, 2026, CMS created the MA complaint form that went directly to the Health Plan Management System Complaints Tracking Module. These complaints are triaged by CMS prior to assigning them to plans. Along with the complaint form, CMS initiated a voluntary MA pilot program for 2026 titled “Service‑Level Data Collection for Initial Determinations and Appeals” to collect service level data on initial coverage determinations and appeals outcomes so CMS can better identify patterns of inappropriate denials across MA plans. CMS’s intent is to expand this data collection on a mandatory basis beginning in 2027.
Additionally, the OIG began a project series “Medicare Advantage Organizations’ Use of Prior Authorization for Post Acute Care” in 2024. Both unnamed projects are currently in progress with estimation of completion in FY 2026.
How Providers Can Fight (and Prevent) MA Denials
To affect change in the industry, providers must take a proactive approach to appealing claims and utilize the platforms CMS has developed to report payers which are not following Medicare coverage criteria, as outlined below
1. Denial Triage
Assign ownership to determine claims for appeal:
Capture denial category (medical necessity, level of care, lack of authorization, etc.) and the exact rationale quoted by the payer along with the appeal deadlines.
Confirm the governing rule for the service: Medicare Benefit Policy Manual language, Two‑Midnight Rule , etc.
Determine cases for fast escalation (e.g., inpatient downgrades with clear Two‑Midnight support, denials citing proprietary criteria without Medicare basis, etc.).
2. Ensure Documentation Supports Medicare Standards
Ensure documentation clearly states:
Rationale for the inpatient service, to include clinical uncertainty and why inpatient resources were needed.
Physician’s expectation of length of stay and the reasonableness of that expectation at the time of admission, even if the patient improves sooner.
Discharge summary presents what was done, why it could not safely be managed as outpatient/observation, and what changed that allowed discharge.
3. Prior Authorization and Concurrent Review
Evaluate services with high levels of denials and develop protocols to proactively monitor:
Supporting Medicare rule(s) or NCD/LCD is cited.
Same day concurrent review for admissions likely to be challenged.
Deploy physician advisor review for borderline status cases to minimize later downgrades.
4. Formal Appeals
Ensure appeals are structured so as to enable the reviewer to overturn the denial:
Clearly outline the applicable Medicare authority that supports coverage along with a statement regarding the requirement that MA payers follow Traditional Medicare coverage rules.
State the issue precisely (e.g., “Inpatient admission denied as not medically necessary; request reversal and DRG payment”).
Summarize the clinical facts in a timeline and explain the risk and required intensity.
Attach only the most relevant records and highlight dates/times that support Two‑Midnight reasoning.
If appeals are denied, escalate with the payer and report to the CMS MA data collection. In addition:
Request the payer identify the specific Medicare rule supporting the denial.
Coordinate with compliance/legal when broad downgrades occur and for cases that may support broader payer discussions.
Despite CMS-4201-F, MA providers continue to bear the brunt of MA payer denials. Understanding how to fight these denials is key to maintaining continuity of patient care and protecting provider revenue.
SunStone offers solutions specifically geared toward developing programs to appeal MA denials. If you have any questions, please contact Vonda Moon, Senior Principal at vondamoon@sunstoneconsulting.com, Joli Fitzgibbons, Senior Director at jolifitzgibbons@sunstoneconsulting.com, or Laura Ehrlich, Senior Clinical Specialist at lauraehrlich@sunstoneconsulting.com.