Erlanger Lawsuit: Tenncare Continues To Underpay Hospitals

NASHVILLE, Tenn. (AP) — Chattanooga-based Erlanger Health System is once again suing Tennessee's Medicaid program, known as TennCare, arguing that the state continues to underpay some hospitals that treat the neediest patients.

The complaint, filed earlier this month, is the third lawsuit Erlanger has filed against TennCare since 2009 alleging that Tennessee officials have continued to ignore a 2007 state law regarding how some hospitals are paid. The latest lawsuit says TennCare is paying Erlanger, an out-of-network hospital, the lowest rates for in-network hospitals when it should be paid the average in-network contract rate to out-of-network hospitals that provide emergency services to Medicaid enrollees.

The complaint requests that a Tennessee judge reverse TennCare's decision on Sept. 20 to reject Erlanger's petition claiming that the payment rules were invalid.

A spokesperson for TennCare said in an email that the agency doesn't comment on pending litigation.

Erlanger previously sued to recover rates from a managed care organization in 2009. But in 2015, the state Supreme Court 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.

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. Erlanger has previously alleged that 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.