Tennessee Supreme Court Holds Cap On TennCare’s Reimbursements To Contracting Physicians

  • Thursday, May 25, 2023

The Tennessee Supreme Court held Thursday that a cap imposed by the Division of TennCare on reimbursements to certain healthcare providers is a “rule” within the meaning of the Uniform Administrative Procedures Act that should have been implemented through notice-and-comment rulemaking.

As part of a broader effort to reduce spending, TennCare imposed a $50 cap on reimbursements to emergency-department physicians for non-emergent services they provide to TennCare enrollees. Emergency Medical Care Facilities, P.C., a professional corporation made up of private healthcare professionals who provide emergency-department services to TennCare enrollees, filed suit challenging the cap. Emergency Medical sought a judgment declaring that the $50 cap was void and of no effect because it constitutes a “rule” under the Act and therefore should have been implemented through the notice-and-comment process, which allows the public an opportunity to weigh in. Both Emergency Medical and TennCare moved for summary judgment.

The trial court agreed with Emergency Medical. The court concluded that the $50 cap is a “rule” because it is a statement of general applicability.  And it rejected TennCare’s argument that the cap falls within the Act’s internal-management exception, which excludes from the definition of “rule” any agency statements concerning only the internal management of state government and not affecting private rights, privileges, or procedures available to the public.

TennCare appealed, and the Court of Appeals reversed. It agreed with the trial court that the $50 cap is generally applicable, reasoning that it applies to all emergency-department physicians across the state who provide care to TennCare patients. But the court reached a different conclusion about the internal-management exception. The Court of Appeals held that the $50 cap falls within that exception because it does not address or bear on procedures available to the public or affect entities other than those in contractual privity with TennCare.

The Supreme Court granted Emergency Medical’s application for permission to appeal. The Court first considered whether the $50 cap is a “rule” under the Act. The Court held that the cap is a statement of general applicability because it applies or is capable of being applied to an entire class or category—all emergency-department physicians who have agreements with TennCare and treat TennCare enrollees. The Court further held that the Act’s internal-management exception does not apply because the cap regulates reimbursements to private emergency-department physicians who are not “internal” to state government. The Court clarified that the mere existence of a contractual relationship with a regulated entity does not free agencies from the Act’s rulemaking requirements. After concluding that the $50 cap is a “rule” within the meaning of the Act that should have been implemented through notice-and-comment rulemaking, the Court next considered TennCare’s argument, not addressed in the courts below, that Tennessee Code Annotated section 71-5-102(d), a statute that grants TennCare the authority to implement cost-control measures, exempted the $50 cap from the Act’s otherwise-applicable rulemaking requirements. The Court held that it does not.

To read the Court’s unanimous opinion, authored by Justice Sarah K. Campbell, visit the opinions section of TNCourts.gov.

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