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Lawsuit: TennCare favors insurers over hospitals for needy

August 28, 2018

NASHVILLE, Tenn. (AP) — A large hospital system in Tennessee has sued the state’s Medicaid program, TennCare, saying it’s purposefully siphoning money from hospitals that treat the neediest patients in order to favor insurance companies that often employ former TennCare employees.

Erlanger Health System in Chattanooga says Tennessee officials are ignoring a 2007 state law in terms of how it pays some hospitals. The lawsuit, which was filed Friday, says that for-profit managed care organizations contracted by TennCare are required to pay the average in-network contract rate to out-of-network hospitals that provide emergency services to Medicaid enrollees, but instead are paying the lowest rates for in-network hospitals.

Erlanger’s lawsuit says TennCare executives have “acted to enrich insurance companies at the expense of Tennessee medical providers,” creating a “windfall for profit-driven MCOs 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 spokeswoman Sarah Tanksley said TennCare cannot comment on ongoing litigation.

TennCare operates through agreements with managed care organizations that receive a capitation payment for each enrollee, and then the organization assumes the risk of paying for their covered health care expenses, the lawsuit explains. If a managed care organization pays less for enrollees’ health care than the amount it receives in capitation payments, the organization stands to earn a profit, and TennCare’s managed care organizations have earned billions of dollars in profits, the lawsuit adds.

Erlanger mentions that many former TennCare employees “now work for the very insurers they once regulated.”

Erlanger previously sued to recover rates from a managed care organization in 2009, then the state Supreme Court in 2015 ruled that the hospital system had to go through the administrative challenge system. In that process, which began in April 2017, TennCare determined that it lacks jurisdiction to issue an order invalidating the rates, the lawsuit says.

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