- Erlanger Health System filed a lawsuit last week against the state’s Medicaid program, TennCare. The Hamilton County, Tennessee-based nonprofit system alleges that TennCare is “purposefully siphoning money from hospitals who treat Tennessee’s neediest citizens” to the benefit of insurance companies where some TennCare employees work after they leave state government.
- Erlanger argues that state officials are ignoring a 2007 statute requiring TennCare to pay the average in-network contract rate to out-of-contract hospitals that provide emergency services to Medicaid beneficiaries. Instead, the suit claims, TennCare knowingly adopted a static rate approximating the lowest in-network contract rate in 2008 and in 2010, creating a windfall for profit-driven managed care organizations at the expense of out-of-network hospitals.
- The court filing is the latest in an ongoing lawsuit, TennCare representative Sarah Tanksley told Healthcare Dive via email. “The state clearly has an entirely different position on the issues being litigated and will provide a written response to the court disputing the allegations raised by the plaintiffs,” she said. Neither TennCare nor a legal representative for Erlanger had further comment on the active litigation.
Tennessee Medicaid contracts with managed care organizations by granting them a capitation payment for each enrollee. The insurer then assumes the risk and responsibility of paying for that patient’s covered medical expenses.
The potential for profits comes when the insurer’s price tag for a patient is less than the overall capitation payment it receives from the government. TennCare’s MCOs have earned billions of dollars in profits, according to the lawsuit, which calls out UnitedHealthcare Plan of the River Valley for earning more than $125 million in profit from 2017 alone.
Friday’s filing is the latest in litigation that stretches back to 2009, when Erlanger — the 10th largest public healthcare system in the U.S. — previously sued to recover rates from an MCO, with little luck. In 2015, the Tennessee Supreme Court held that Erlanger must exhaust all administrative remedies before further challenging TennCare rules in court.
In April 2017, Erlanger followed up on that ruling and sought to invalidate two rules that TennCare used to justify their rate coding, but the administrative proceeding didn’t bear fruit. Therefore, the multi-hospital health system, which treats more than 600,000 people a year, is now suing TennCare.
The two rules in question are referred to in the suit as the “74% SPA” and the “57% SPA,” both of which were submitted as state plan amendments to CMS in 2008 and 2010, respectively, and subsequently approved.
Both lowered the rate for out-of-network providers of covered outpatient emergency services, first to a static rate of 74% of 2006 Medicare rates, then to 57% of 2008 Medicare rates, approximating the lowest in-network rates paid by TennCare MCOs both times.
Erlanger requests the court to find both the 74% and 54% SPAs “invalid, unenforceable, unlawful, and unconstitutional,” given that those static rates are drastically lower than the lowest in-network rates applicable today.
The lawsuit also stresses that many former TennCare employees now work for “the very insurers they once regulated.”
TennCare offers health insurance to more than 1.4 million low-income citizens, and partners with four insurers in west, middle and east Tennessee: AmeriGroup, BlueCare, UnitedHealthcare and TennCare Select.
The litigation comes on the heels of a July OIG report finding that MCOs and states need to be doing a lot more to stop billions of dollars lost to waste, abuse and fraud, as program integrity in Medicaid hasn’t received the same attention as Medicaid fee-for-service.
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