Hamilton Herald Masthead


Front Page - Friday, November 13, 2015

Tennessee Supreme Court: Erlanger Hospital must seek resolution from TennCare before suing health care company

The Tennessee Supreme Court has held that a Chattanooga hospital’s lawsuit against a TennCare managed care organization (MCO) involves a challenge to certain TennCare regulations, meaning the hospital must first give the Bureau of TennCare the opportunity to rule on its own regulations before the lawsuit can be considered by a court.

The Chattanooga-Hamilton County Hospital Authority, doing business as Erlanger Health System, did not renew their contract to provide medical services to TennCare recipients enrolled with AmeriChoice, a TennCare MCO. However, federal law required the hospital to continue to provide emergency medical services to the MCO’s TennCare enrollees, even without a contract specifying how much the hospital would be paid.

A dispute arose between Erlanger and AmeriChoice about how much the MCO owed the hospital for the emergency medical services. As a result, the hospital filed this lawsuit against the MCO, seeking money damages for the amounts it claimed it was due. The hospital took the position that it was entitled to receive its average contract rate for the emergency services, citing state and federal statutes, while AmeriChoice asserted that the payment should be calculated as set out in TennCare regulations.

AmeriChoice also argued that the hospital was required to file a petition with the Bureau of TennCare before filing suit. Under Tennessee’s Uniform Administrative Procedures Act, a complainant who seeks to challenge the validity or applicability of agency regulations must file a petition with the agency before a court is allowed to issue a declaration on the subject. This is called “exhaustion of administrative remedies.” AmeriChoice argued that, even though Erlanger had not mentioned the TennCare regulations in its complaint, Erlanger was in effect challenging the regulations as either invalid or inapplicable.

The trial court agreed with AmeriChoice. It dismissed the hospital’s lawsuit because the hospital had not “exhausted its administrative remedies” with TennCare before filing suit. Erlanger appealed, and the Court of Appeals reversed. The Court of Appeals held that the hospital was not required to exhaust its administrative remedies before filing the lawsuit, so it reinstated Erlanger’s lawsuit. The MCO was then granted permission to appeal to the Tennessee Supreme Court.

The Court first noted that Tennessee’s Uniform Administrative Procedures Act prohibits a trial court from issuing a declaration regarding the validity or applicability of agency regulations unless the party who seeks to challenge the regulations has exhausted its administrative remedies. The Court recognized that Erlanger did not state explicitly that it sought to challenge TennCare regulations, and it did not ask the trial court to issue a declaration as to the validity or applicability of the regulations. The Court explained that, to decide whether a party is required to exhaust its administrative remedies before filing a lawsuit, the court must look beyond the face of the parties’ pleadings and consider the substance of their dispute.

Looking at the substance of the dispute between Erlanger and AmeriChoice, the Court found that the trial court would necessarily have to issue a declaration on the validity or applicability of the TennCare regulations before it could resolve the hospital’s underlying claims. For that reason, the Court agreed with the trial court that the hospital was required to exhaust its administrative remedies – in this case file a petition with TennCare – before initiating a suit.

The Supreme Court also held, however, that the trial court was not required to dismiss the hospital’s claims for money damages, because TennCare would not address those in any administrative proceedings. So the Supreme Court directed the trial court to delay the parties’ damages claims until the conclusion of the administrative proceedings.

To read the opinion, authored by Justice Holly Kirby, go to the opinions section of TNCourts.gov.

Source: Tennessee Supreme Court