Erlanger sues TennCare, claims state Medicaid program puts insurers before safety-net hospitals

Morgan Haefner - Print  | 

Chattanooga, Tenn.-based Erlanger Health System filed a lawsuit against Tennessee's managed Medicaid program, claiming TennCare underpays safety-net hospitals for emergency care to "enrich insurance companies."

In 2007, the Tennessee General Assembly directed TennCare to require that managed care health insurers pay noncontract hospitals the average in-network rate for Medicaid beneficiaries' emergency care. However, the lawsuit, filed Aug. 24 in the Chancery Court for Davidson County, Tenn., alleges the insurers ignored the directive and instead paid the lowest in-network rate.

Erlanger accused TennCare of "purposefully siphoning money from hospitals who treat Tennesee's neediest citizens, in order to favor the insurance companies that TennCare employees routinely work for after leaving state government." One of the managed care insurers' CEOs, J.D. Hickey of BlueCross BlueShield of Tennessee, served as a TennCare director from 2004-06.

Erlanger's latest lawsuit follows another complaint the health system filed against one of the managed care insurers in 2009 to recover rates. In 2015, the Tennessee Supreme Court said Erlanger would have to take that case through the administrative challenge system. Erlanger's Aug. 24 lawsuit claims in the administrative challenge system, TennCare determined it lacked jurisdiction to move to invalidate the rates.

As a result, Erlanger claims the continuing "rates have created a windfall for profit-driven [managed care organizations] on the backs of out-of-network hospitals like Erlanger that have no choice but to provide emergency care to Tennessee's neediest citizens."

TennCare told Becker's Hospital Review by email it does not comment on active litigation.

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