Emergency Medical Care Facilities, P.C. v. Division Of Tenncare ( 2021 )

10/07/2021
IN THE COURT OF APPEALS OF TENNESSEE
AT NASHVILLE
August 4, 2021 Session
EMERGENCY MEDICAL CARE FACILITIES, P.C. V. DIVISION OF
TENNCARE ET AL.
Appeal from the Chancery Court for Davidson County
No. 18-1017-II Anne C. Martin, Chancellor
No. M2020-01358-COA-R3-CV
This appeal involves a reimbursement limitation that TennCare imposed on “non-
emergent” medical services provided by emergency department physicians. TennCare
informed its managed care organizations of the reimbursement limitation via email without
engaging in rule-making procedures outlined in the Uniform Administrative Procedures
Act (“UAPA”). The trial court concluded the reimbursement limitation was a “rule”
subject to the rule-making requirements of the UAPA and invalidated the reimbursement
limitation. We hold that the reimbursement limitation falls within the internal management
exception of the 2009 version of the UAPA and was therefore not subject to the UAPA’s
rule-making requirements. The ruling of the trial court is reversed.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Reversed
and Remanded
ANDY D. BENNETT, J., delivered the opinion of the Court, in which FRANK G. CLEMENT,
JR., P.J., M.S., and W. NEAL MCBRAYER, J., joined.
Herbert H. Slatery, III, Attorney General and Reporter, Andrée Blumstein, Solicitor
General, Matthew Peter Dykstra, Assistant Attorney General, and Kyle C. Mallinak,
Assistant Attorney General, for the appellants, Division of TennCare, Tennessee
Department of Finance and Administration, Butch Eley, and Stephen Smith.
Gregory S. Reynolds and Keane Addison Barger, Nashville, Tennessee, for the appellee,
Emergency Medical Care Facilities, P.C.
OPINION
OVERVIEW
This case requires us to determine whether a $50 reimbursement limitation (“$50
Cap”) imposed by TennCare for “non-emergent” medical services provided by emergency
department physicians is a “rule” under the Uniform Administrative Procedures Act
(“UAPA”). Emergency Medical Care Facilities, P.C. (“EMCF”) asserts TennCare
improperly implemented this $50 Cap without first engaging in rule-making procedures.
The trial court agreed with EMCF and held that (1) the $50 Cap is a rule as defined by the
UAPA and (2) TennCare implemented the $50 Cap without complying with the UAPA
rule-making provisions which renders it void and of no effect. TennCare appeals. A brief
overview of the TennCare system, the contractual relationship between TennCare and
EMCF, and TennCare’s implementation of the $50 Cap is helpful to understanding the
issues on appeal.
TennCare
Medicaid is a federal program created to meet the needs of millions of uninsured
Americans who do not have resources to cover necessary healthcare services. See State ex
rel. Pope v. Xantus Healthplan of Tenn., Inc., No. M2000-00120-COA-R10-CV, 2000 WL
630858, at *1 (Tenn. Ct. App. May 17, 2000) (stating that the federal government
established the Medicaid program in 1965 to provide health coverage to low-income
Americans, through the use of state and federal funds); see also 42 U.S.C. §§ 1396–1396w-
6. The Medicaid program is administered by the states. TennCare is Tennessee’s managed
care system for citizens eligible for Medicaid and is administered by the Tennessee
Department of Finance and Administration. See River Park Hosp., Inc. v. BlueCross
BlueShield of Tenn., Inc., 173 S.W.3d 43, 47 & n.2 (Tenn. Ct. App. 2002) (providing an
overview of TennCare’s managed care Medicaid system). Through this managed care
system, TennCare contracts with privately run intermediaries known as Managed Care
Organizations (“MCOs”) to develop a healthcare provider network for the provision of
healthcare services to their respective TennCare members. Specifically, TennCare
contracts with three private, for-profit MCOs: Volunteer State Health Plan, Inc. (“VSHP”);
Amerigroup Tennessee, Inc. (“Amerigroup”); and UnitedHealthcare Plan of the River
Valley, Inc. (“United”). When a healthcare provider enters into a provider agreement with
an MCO, that provider is considered “in-network” for that MCO. Providers that have not
entered into a provider agreement with an MCO are referred to as “out-of-network.”
Regardless of whether a healthcare provider contracts with an MCO, all healthcare
providers who treat TennCare patients must sign a “Provider Payment and Participation
Agreement” with TennCare.
-2-
Emergency Medical Care Facilities, P.C.
EMCF is a professional corporation located in Jackson, Tennessee that is comprised
of physicians and other healthcare professionals providing services in Tennessee
emergency departments. EMCF has contracted with VSHP since 2008 and is considered
an “in-network” provider for that MCO’s enrollees. EMCF is not contracted with
Amerigroup, so it is an out-of-network provider with respect to Amerigroup’s enrollees.
As a condition of treating out-of-network TennCare members and receiving payment for
those services, EMCF has executed a Provider Payment and Participation Agreement
(“PPPA”) directly with TennCare.
The Genesis of the $50 Cap
In early 2011, TennCare faced a significant budget reduction and was required to
submit a budget to the governor that included spending reductions. To cover a portion of
the budget shortfall, TennCare proposed a reduction in reimbursements to emergency-
room physicians for non-emergent services provided in an emergency room. On March
14, 2011, the Governor submitted his proposed budget to the General Assembly, which
included TennCare’s proposed reduction for reimbursing emergency department
physicians; however, the budget did not specify precisely how this reduction in
reimbursement would be implemented.
On May 21, 2011,1 the General Assembly passed the Fiscal Year 2011-2012
Appropriations Act (the “2011 Appropriations Act”) implementing the State’s 2011-2012
budget. The 2011 Appropriations Act included the following language regarding
TennCare’s ability to operate with the reduction in appropriations, stating in Section 12,
Item 2:
It is the intent of the General Assembly that the Commissioner of Finance
and Administration shall have the authority to promulgate, as emergency
rules pursuant to Tennessee Code Annotated, Section 4-5-209 those rules and
regulations which concern the Medicaid/TennCare program, including
Medicare Crossover payments, and which require promulgation in order for
the state to fiscally function (i) within the appropriations provided for the
Medicaid/TennCare program or (ii) within the availability of revenues
received for the Medicaid/TennCare program.
In Section 48, Item 6, the 2011 Appropriations Act authorized the Commissioner of
Finance and Administration to “reduce optional eligibility categories, mandate
1
Governor Haslam approved the 2011 Appropriations Act on June 16, 2011.
-3-
standardized reimbursement levels, and/or reduce, or limit optional benefits in the
TennCare Program as necessary to control program expenditures . . . .”
In April 2011, in anticipation of the 2011 Appropriations Act’s passage, TennCare
notified MCOs by “letter” sent via email of the following “programmatic changes”:
This letter serves as official notice of programmatic changes to be made by
the MCOs as a result of the proposed state fiscal year 2012 budget. As you
are aware, all State Departments were required to submit proposed budgets
that included spending reductions. . . . As a result, there are three categories
of budget reduction items to be implemented by the MCOs: An 8.5%
reimbursement reduction for some services/providers, changes to vaginal
and cesarean deliveries reimbursement, and changes to reimbursement for
non-emergency professional services in an ED. Below are the details:
...
 Emergency Department Professional Fees – Most of you have
implemented a reimbursement policy for facilities whereby they are
only paid an EMTALA screening fee for non-emergency ED visits.
The budget directs MCOs to pay ED physicians their average
reimbursement amount associated with CPT[2] 99281 for non-
emergency visits.
TennCare will promulgate emergency rules before July 1 requiring that these
cuts be made thereby making it State law and regulation. . . . We will be
monitoring the progress of implementation to determine if policy changes
are needed to implement this effectively and timely. . . .
(Emphasis added). On May 6, 2011, VSHP sent a letter to providers, including EMCF,
giving notice of TennCare’s proposed payment reductions. VSHP’s letter mirrored
TennCare’s language regarding the reimbursement policy for emergency room physicians.
The letter also stated, “TennCare will promulgate emergency rules before July 1 requiring
that these cuts be made thereby making it State law and regulation.”
2
Current Procedural Terminology (“CPT®”) “refers to a set of medical codes used by [healthcare
providers] to describe the procedures and services they perform. Specifically, CPT® codes are used to
report procedures and services to federal and private payers for reimbursement of rendered healthcare.”
AM. ACAD. OF PROF’L CODERS, What is CPT®?, https://www.aapc.com/resources/medical-coding/cpt.aspx
(last visited Sept. 17, 2021). CPT codes reflect the complexity of treatment provided—the CPT 99281 code
is “straightforward medical decision making.” Letter from Timothy M. Westmoreland, Director of
Medicaid at the Department of Health and Human Services, to State Medicaid Directors, “SMD Letter –
Managed Care Provisions Regarding Coding of Emergency Services by MCOs” (April 18, 2000).
-4-
On May 25, 2011, the Assistant Director of TennCare Managed Care Operations
sent an email to MCOs setting out the $50 Cap stating, in pertinent part:
Below are the final decisions regarding the reductions addressed in the 2012
Budget that will affect your organization. The following reductions will be
effective July 1, 2011:
...
 Emergency Department Professional Fees – For non-emergent ED
visits, professional claims that would otherwise have been reimbursed
at rates higher than $50 will be paid at a rate of $50.
o Each MCO must provide ED providers with the MCOs policy
describing your process for determining Emergent vs. Non-
Emergent claims. In addition to your MCOs process for a provider
to appeal claims reimbursement, the policy must offer a front end
process whereby the provider may submit documentation for
review upon consideration of an initial claim.
Unlike the April 2011 communication from TennCare, this May 25, 2011 email did not
reference “emergency rules” and it did not reference CPT codes. The next day, on May
26, 2011, a second email was sent to the MCOs offering “one clarification” on the
Emergency Department Professional Fees section, stating: “Reimbursement for
professional claims for non-emergency ED visits will be capped at $50. If the contracted
rate is lower than $50 for the service billed, the MCO is to pay the contracted rate.” Again,
rule-making was not mentioned.
The $50 Cap became effective on July 1, 2011. TennCare did not go through the
UAPA rule-making process to implement this change in reimbursement; rather, TennCare
notified the MCOs of the $50 Cap and implemented the cap via email.
PROCEDURAL HISTORY
EMCF filed a petition in the Chancery Court of Davidson County on September 20,
2018, seeking a declaratory judgment under the UAPA that the $50 Cap is void and of no
effect because it was a rule implemented without following the UAPA’s rule-making
procedures. EMCF also alleged that the $50 Cap violates federal and state law because it
violates the prudent layperson standard for determining whether a patient’s condition was
an emergency medical condition. 3
3
Although not at issue in this appeal, the “prudent layperson standard” derives from 42 U.S.C. §
1396u-2(b)(2)(C) which states, in part:
-5-
After the parties engaged in extensive discovery, EMCF filed a motion for summary
judgment arguing that the $50 Cap met the definition of a “rule” as a “matter of law” and
there was nothing to exempt TennCare from rule-making requirements. TennCare filed a
cross-motion for summary judgment arguing that the $50 Cap was not a rule and, if it was
a rule, Tenn. Code Ann. § 71-5-102(d) exempted TennCare from following the UAPA’s
rule-making procedures in this case because the cap was a cost-cutting measure. The
chancery court issued a thoughtful, eighteen page opinion and granted summary judgment
on the UAPA issues determining that the $50 Cap was a “rule” because (1) it “is a statement
by TennCare of general applicability, not only because it applies to all MCOs, but also that
it potentially affects all providers;” (2) it “implements the 2011 Appropriations Act, as
enacted by the General Assembly;” and (3) it “does not regard only the internal
management of state government, but rather does affect private rights, privileges, and
procedures available to the public.” The court further held that Tenn. Code Ann. § 71-5-
102(d) did not exempt TennCare from rule-making procedures. The trial court did not
reach EMCF’s argument that the $50 Cap violated state and federal law by circumventing
the prudent layperson standard, stating, “EMCF has the option to continue litigating” those
issues. The trial court issued a final judgment pursuant to Tenn. R. Civ. P. 54.02(1) with
respect to its UAPA decision. TennCare appeals.
STANDARD OF REVIEW
This appeal arises from the grant of summary judgment by the trial court. We
review a trial court’s summary judgment determination de novo, with no presumption of
correctness. Rye v. Women’s Care Ctr. of Memphis, MPLLC, 477 S.W.3d 235, 250 (Tenn.
2015). This means that “we make a fresh determination of whether the requirements of
Rule 56 of the Tennessee Rules of Civil Procedure have been satisfied.” Id. We “must
view the evidence in the light most favorable to the nonmoving party and must draw all
reasonable inferences in that party’s favor.” Godfrey v. Ruiz, 90 S.W.3d 692, 695 (Tenn.
2002); see also Acute Care Holdings, LLC v. Houston Cnty., No. M2018-01534-COA-R3-
CV, 2019 WL 2337434, at *4 (Tenn. Ct. App. June 3, 2019).
Summary judgment is appropriate “if the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the affidavits, if any, show that there
[T]he term “emergency medical condition” means a medical condition manifesting itself
by acute symptoms of sufficient severity (including severe pain) such that a prudent
layperson, who possesses an average knowledge of health and medicine, could reasonably
expect the absence of immediate medical attention to result in--
(i) placing the health of the individual (or, with respect to a pregnant woman, the health
of the woman or her unborn child) in serious jeopardy,
(ii) serious impairment to bodily functions, or
(iii) serious dysfunction of any bodily organ or part.
-6-
is no genuine issue as to any material fact and that the moving party is entitled to a judgment
as a matter of law.” TENN. R. CIV. P. 56.04. When a party moves for summary judgment
but does not have the burden of proof at trial, the moving party must either submit evidence
“affirmatively negating an essential element of the nonmoving party’s claim” or
“demonstrating that the nonmoving party’s evidence at the summary judgment stage is
insufficient to establish the nonmoving party’s claim or defense.” Rye, 477 S.W.3d at 264.
Once the moving party has satisfied this requirement, the nonmoving party “‘may not rest
upon the mere allegations or denials of [its] pleading.’” Id. at 265 (quoting TENN. R. CIV.
P. 56.06). Rather, the nonmoving party must respond and produce affidavits, depositions,
responses to interrogatories, or other discovery materials that “set forth specific facts
showing that there is a genuine issue for trial.” TENN. R. CIV. P. 56.06; see also Rye, 477
S.W.3d at 265. If the nonmoving party fails to respond in this way, “summary judgment,
if appropriate, shall be entered against the [nonmoving] party.” TENN. R. CIV. P. 56.06. If
the moving party fails to show he or she is entitled to summary judgment, however, “‘the
non-movant’s burden to produce either supporting affidavits or discovery materials is not
triggered and the motion for summary judgment fails.’” Martin v. Norfolk S. Ry. Co., 271
S.W.3d 76, 83 (Tenn. 2008) (quoting McCarley v. W. Quality Food Serv., 960 S.W.2d 585,
588 (Tenn. 1998)). A disputed fact is material if it is determinative of the claim or defense
at issue in the motion. Id. at 84 (citing Byrd v. Hall, 847 S.W.2d 208, 215 (Tenn. 1993)).
Our review of the construction and application of statutes is de novo, affording no
deference or presumption of correctness to the decision of the lower court. Heirs of Ellis
v. Estate of Ellis, 71 S.W.3d 705, 710 (Tenn. 2002).
ANALYSIS
The UAPA applies in this case because TennCare falls under its definition of
“agency.” Tenn. Code Ann. § 4-5-102(2) (“‘Agency’ means each state board, commission,
committee, department, officer, or any other unit of state government authorized or
required by any statute or constitutional provision to make rules or to determine contested
cases[.]”). The UAPA “requires a state agency in Tennessee to follow uniform procedures
when making rules.” Abdur’Rahman v. Bredesen, 181 S.W.3d 292, 311 (Tenn. 2005). The
UAPA requires rules to be promulgated with public notice, a public hearing, approval by
the attorney general, and filing with the secretary of state, among other things. Tenn. Code
Ann. §§ 4-5-202, -203, -206, -211. When describing the practical application of the
UAPA’s rule-making process, William Aaron, TennCare’s Chief Financial Officer stated
in his declaration:
In my experience, the rule-making process takes approximately six to nine
months. This includes rule drafting, obtaining required approvals, public
posting, rule-making hearing and the hearing before the Joint Government
Operations Committee of [] Tennessee. In addition, while the Joint
Operations Committee can only provide a positive or negative
-7-
recommendation, the Tennessee General Assembly also annually reaffirms
the existence of all executive branch rules through legislation.
The UAPA expressly provides that “[a]ny agency rule not adopted in compliance with this
chapter shall be void and of no effect and shall not be effective against any person or party
nor shall it be invoked by the agency for any purpose.” Tenn. Code Ann. § 4-5-216.
The term “rule” 4 is a statutorily defined term under the UAPA meaning an “agency
statement of general applicability that implements or prescribes law or policy[5] or
describes the procedures or practice requirements of any agency. . . .” Tenn. Code Ann. §
4-5-102(12) (2009) (emphasis added). However, a “rule” does not include “[s]tatements
concerning only the internal management of state government and not affecting private
rights, privileges or procedures available to the public[.]” Tenn. Code Ann. § 4-5-
102(12)(A) (2009) (emphasis added). “Accordingly, a policy is not a rule under the UAPA
if the policy concerns internal management of state government and if the policy does not
affect the private rights, privileges, or procedures available to the public.” Mandela v.
Campbell, 978 S.W.2d 531, 534 (Tenn. 1998) (emphasis in original).
Thus, the threshold question on appeal is whether TennCare’s $50 Cap on
emergency room physician reimbursements constitutes a “rule” under the UAPA. The trial
court correctly determined that “[i]f it is not a rule, then the rest of the issues are moot and
summary judgment must be denied.” First, we must determine whether the $50 Cap is a
statement of “general applicability” and, if so, we must then examine whether it is subject
to the internal management exception under the UAPA.
A. Is the $50 Cap a “statement of general applicability”?
TennCare insists that the $50 Cap is not a statement of general applicability because
it applies only to PPPA-contracted, emergency-room providers who render non-emergent
services.6 In other words, TennCare suggests that because the $50 Cap does not apply to
4
The General Assembly amended the definition of a “rule” in 2018. 2018 TENN. PUB. ACTS, ch. 929.
The $50 Cap was instituted in 2011; therefore, the Court finds, and the parties agree, that the 2009 version
of the UAPA applies here. All references throughout the opinion are to the 2009 version of the UAPA.
5
The 2009 version of the UAPA defines “policy” as “a set of decisions, procedures and practices
pertaining to the internal operation or actions of an agency[.]” Tenn. Code Ann. § 4-5-102(10) (2009).
6
We note, however, that initially, via its April 2011 letter, TennCare indicated that rule-making was
required in order to promulgate this reduction in reimbursement to emergency room physicians. Indeed,
Keith Gaither, TennCare’s Director of Managed Care Operations and TennCare’s designated Tenn. R. Civ.
P. 30.02(6) deponent, testified as follows regarding TennCare’s initial announcement that it would engage
in emergency rule-making:
Q. What were the facts that led TennCare to make that initial decision that it was going to
engage in - - promulgate emergency rules before July 1, requiring that these cuts be made?
-8-
“all” healthcare providers or “all” emergency room physicians, it is not generally
applicable. In contrast, the trial court held that the $50 Cap is a statement of general
applicability “not only because it applies to all MCOs, but also that it potentially affects all
providers.” In support of this holding, the trial court cites the Emergency Medical
Treatment and Labor Act, 42 U.S.C. §1395dd (“EMTALA”).
As an initial matter, we find no support for TennCare’s assertion that the $50 Cap
must apply to “all healthcare providers” to be a statement of general applicability and meet
the definition of a “rule” under the UAPA. A review of other TennCare rules and
regulations promulgated under the UAPA belies this assertion. For example, Tenn. Comp.
R. & Reg. 1200-13-21-.04(1)(a)(3)7 is a TennCare rule that applies only to “primary care
providers” and not to all healthcare providers. We agree with the trial court that TennCare
cannot simply ignore UAPA rule-making requirements by making statements applicable
to a certain subset of healthcare providers on a class-by-class basis.
Next, TennCare asserts that the $50 Cap is not “generally applicable” because it
does not apply to all emergency-room providers. TennCare further asserts that the trial
court erred when it considered EMTALA when analyzing whether the $50 Cap was
“generally applicable.” We disagree. Our Supreme Court has described EMTALA as
follows:
In 1986, Congress enacted the federal Emergency Medical Treatment and
Active Labor Act (EMTALA), 42 U.S.C. § 1395dd, as part of the
Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA)
(codified in various places in Title 42 of the United States Code). The
purpose of EMTALA was to prohibit “patient dumping,” that is, “the
practice of a hospital that, despite its capability to provide needed medical
care, either refuses to see or transfers a patient to another institution because
of the patient’s inability to pay.” Baber v. Hosp. Corp. of Am., 977 F.2d 872,
873 n.1 (4th Cir. 1992); see also Beller v. Health and Hosp. Corp. of Marion
A. Again, we don’t have any direct documents, so I don’t know the specific reasons why.
Q. Well, what was your understanding of the facts that required it?
A. I think it could be inferred that we thought rules were necessary because they were
impacting reimbursement.
Q. In other words, you were cutting somebody’s pay?
A. Yes.
Of course, TennCare’s initial thoughts, prior to the enactment of the Appropriation Act, regarding rule-
making are not binding on this or any court. The proper interpretation of the UAPA is a question of law
for the courts. See Myint v. Allstate Ins. Co., 970 S.W.2d 920, 924 (Tenn. 1998) (“Construction of a statute
is a question of law.”).
7
Tenn. Comp. R. & Reg. 1200-13-21-.04(1)(a)(3) states, in part, “If after notification of enrollment the
enrollee has not chosen a primary care provider (PCP), one will be selected for him by the MCO.”
-9-
Cnty., Ind., 703 F.3d 388, 390 (7th Cir. 2012). To this end, when a person
without the ability to pay for medical services presents to a hospital’s
emergency room, EMTALA requires the hospital to first provide screening
to ascertain whether the person has an “emergency medical
condition.” [footnote omitted] If the hospital determines that the person has
an emergency medical condition, the hospital must provide such treatment
as is necessary to either stabilize the patient or transfer the patient to another
facility. Beller, 703 F.3d at 390.
Chattanooga-Hamilton Cnty. Hosp. Auth. v. UnitedHealthcare Plan of the River Valley,
Inc., 475 S.W.3d 746, 750 (Tenn. 2015) (footnote omitted). Pursuant to EMTALA,
emergency department physicians are required to administer services to any patient who
presents to the emergency department, including TennCare patients, regardless of whether
it is later determined that the patient’s medical needs were “non-emergent.” See River Park
Hosp., Inc., 173 S.W.3d at 48-49 (“[A] hospital must provide services to a person with an
emergency medical condition until the person’s condition has stabilized, without regard to
whether the person has insurance.”). Thus, the practical application of EMTALA
undermines TennCare’s position that the $50 Cap does not apply to all emergency room
providers. Rather, EMTALA requires all emergency room physicians to provide services
to every patient, including TennCare patients, who present to the emergency room, and the
$50 Cap will apply to all emergency room physicians who treat TennCare patients with
non-emergent conditions.
TennCare also attempts to avoid the general applicability label by comparing the
$50 Cap to a TennCare policy and procedure manual this Court examined in Heritage Early
Childhood Development Center, Inc. v. Tennessee Department of Human Services, No.
M2008-02134-COA-R3-CV, 2009 WL 3029595 (Tenn. Ct. App. Sept. 22, 2009).
However, the facts and circumstances in Heritage support a finding that the $50 Cap is
“generally applicable” just as the policy and procedure manual was in Heritage. In
Heritage, this Court considered whether a policy and procedure manual that applied only
to child care centers participating in a federally-funded, state-operated program that
provided child care assistance to low-income working parents met the statutory definition
of a rule under the UAPA. Id., at *1-2 (Tenn. Ct. App. Sept. 22, 2009). The policy and
procedure manual addressed, inter alia:
[S]ubstantive procedures that the petitioners and all participating child care
centers must follow concerning attendances and absences of each child
participating in the Program, rates the providers may charge, procedures for
the transfer of children from one provider to another, and capacity
limitations, among other provisions that do not apply to internal operating
procedures of the Department.
- 10 -
Id., at *8. Regardless of the content of the manual, it only applied to child care providers
that participated in the federal program; there were non-participating child care providers
throughout the state to which the manual did not apply. Id. Thus, even though the policy
and procedure manual did not apply to “all” child care providers in the state, the manual
was held to be a rule under the UAPA because it described the procedures for which a
licensed child care center may be terminated from participating in a federally funded
program. Id.Here, the $50 Cap applies to all emergency room physicians across the state who
provide care to TennCare patients with non-emergent medical conditions. Therefore, we
agree with the trial court and EMCF that the $50 Cap is an “agency statement of general
applicability.” This does not conclude our analysis, however, because we must determine
whether the internal management exception applies to the $50 Cap.
B. Does the $50 Cap fall within the “internal management” exception?
The $50 Cap is not a rule if it “concerns internal management of state government
and . . . does not affect the private rights, privileges, or procedures available to the
public[8].” Mandela, 978 S.W.2d at 534 (emphasis in original). Relying on Tennessee
Community Organizations v. Tennessee Department of Intellectual & Developmental
Disabilities, No. M2017-00991-COA-R3-CV, 2018 WL 2175818 (Tenn. Ct. App. May 11,
2018), TennCare asserts that the $50 Cap concerns only internal management of state
government and does not affect the public. The trial court found Tennessee Community
did not control the outcome in this case.
In Tennessee Community, two long-term care providers contracted with the
Tennessee Department of Intellectual and Developmental Disabilities (“TDIDD”) to
provide home and community-based services to recipients through a federal waiver. Id. at
*1. Under this arrangement, the long-term care providers were limited to providing
services “a maximum of 5 days per week up to a maximum of 243 days per person per
calendar year” and were required to comply with TDIDD’s Provider Manual. Id. TDIDD’s
Provider Manual imposed sanctions, including financial penalties, against contracted
entities for certain violations. Id. at *1-2. The long-term care providers at issue billed
services in excess of the number of days allowed and were sanctioned for their billing
practices. Id. at *2. The long-term care providers filed a petition for declaratory judgment
asking the trial court to declare any sanctions imposed invalid, arguing, in part, that the
sanctions outlined in the Provider Manual constituted an invalidly promulgated rule under
the UAPA. Id. The trial court granted summary judgment to the TDIDD, finding that the
policy on sanctions in the Provider Manual was not invalidly promulgated because it fell
within the internal management exception of Tenn. Code Ann. § 4-5-102(12)(A) (2009).
8
Public means “[o]f, relating to, or involving an entire community, state, or country” or “[o]pen or
available for all to use, share, or enjoy.” BLACK’S LAW DICTIONARY (11th ed. 2019).
- 11 -
Id. at *12-13. This Court affirmed the trial court, holding that the internal management
exception applied because the TDIDD Provider Manual’s policies narrowly applied to
TDIDD employees and to contracted entities, the manual did not “address or bear on
private rights, privileges or procedures available to the public.” Id. at 13.
We find the $50 Cap TennCare imposed in this case to be similar to the TDIDD
Provider Manual’s sanction policies in Tennessee Community, because the $50 Cap
TennCare imposed does not address or bear on procedures available to the public nor does
it affect entities other than those under contract with TennCare. As relevant here, the
Participating Provider Agreement that EMCF and TennCare entered into states, in relevant
part: “The Provider or Provider Entity will accept the Medicaid/TennCare payment plus
any applicable patient liability as payment in full. Provider or Provider Entity
acknowledges that federal law precludes payment for any services for which Federal
Financial Participation is not available.” The record is devoid of any evidence that the $50
Cap affects TennCare enrollees or other members of the public. The only entities impacted
by the $50 Cap are those in privity with TennCare. In its brief, EMCF states that “by
capping payments to ED providers, the $50 Cap has obvious downstream effects that
impact more than just Medicaid participating ED providers.” However, EMCF provides
no citation to any evidence in the record to define and substantiate the existence of these
downstream effects. See Tenn. R. App. P. 27(a)(7)(A) (requiring appropriate references to
the record to support contentions); see also Tenn. R. Ct. App. 6(b) (“No assertion of fact
will be considered on appeal unless the argument contains a reference to the page or pages
of the record where evidence of such fact is recorded.”).
A review of the policy and procedure manual in Heritage, which was held to be a
rule requiring rule-making procedures, is in accord with this conclusion. In Heritage, the
internal management exception did not apply because the policy and procedure manual
contained agency statements that applied to the public. Heritage Early Childhood Dev.
Ctr., Inc., 2009 WL 3029595, at *8. The Heritage Court specifically noted that the policies
“affect the parents of eligible children.” Id. at *5. The policy and procedure manual in
Heritage affected the public. Unlike the manual in Heritage, the $50 Cap only applies to
entities in privity with TennCare, such as EMCF under the Provider Participation
Agreement; there is nothing to indicate it affects the “public.”
In rendering its decision that the $50 Cap was a rule under the UAPA, the trial court
cited Chattanooga-Hamilton County Hospital Authority v. UnitedHealthcare Plan of the
River Valley, Inc., 475 S.W.3d 746, 752 (Tenn. 2015) and focused on TennCare regulations
referred to as the “74% Rule” and the “57% Rule” that were at issue in that case. The
trouble with the trial court’s reliance on that opinion is that it did not require examination
of the UAPA definition of a rule or make any determination regarding whether the “74%
Rule” or the “57% Rule” were improperly promulgated. Id. at 756-67. The central issues
in the Chattanooga-Hamilton case involved exhaustion of administrative remedies. Id. at
760. Therefore, Chattanooga-Hamilton County Hospital Authority is not analogous to the
- 12 -
issues before us in this appeal and not helpful to our resolution on the issues presented in
this case.
It is argued that Tennessee Code Annotated section 71-5-105(a)(3)(A) requires
TennCare to establish rules in this instance. We disagree. Tennessee Code Annotated
section 71-5-105(a)(3)(A) requires TennCare to establish, “in consultation with the
comptroller of the treasury, rules and regulations for the determination of payment for
hospitals, and other health care providers who contract with” TennCare. In our opinion,
this statute requires rules to establish what documentation is necessary to authorize
payment. An examination of TennCare’s rules show that this statute is cited in reference to
audits of providers. See Tenn. Comp. R. & Reg. 1200-13-18-.02(4) (“Audits are conducted
in accordance with AICPA (American Institute of Certified Public Accountants) auditing
or attestation engagement standards. For purpose of this chapter, audits are conducted of
health care provider records, financial information, and statistical data . . . .”) and 1200-13-
18-.04(1) (“The Bureau is required by state and federal law to protect the integrity of the
Medicaid program. This is accomplished in part by causing audits of provider claims to be
conducted. Audit findings are reported to the Bureau for the purpose of recovering
incorrect payments, by recoupment or withhold.”). The requirements of Tennessee Code
Annotated section 71-5-105(a)(3)(A) reflect the audit authority of the comptroller of the
treasury. Tenn. Code Ann. §§ 4-3-304(1), 8-4-109, 111, and 116; see also Provider
Payment and Participation Agreement, ⁋⁋ 5, 9, 10, and 11. There are certainly some agency
statements regarding the “determination of payment for hospitals, and other health care
providers” that must be promulgated under the UAPA rule-making requirements.
However, Tenn. Code Ann. § 71-5-105(a)(3)(A) does not require rule-making in this
instance.
In light of the precedent in Tennessee Community, which has informed our
interpretation of the internal management exception, we find that the internal management
exception applies to the $50 Cap because the $50 Cap only impacts entities in privity with
TennCare and “does not affect the private rights, privileges, or procedures available to the
public.” Therefore, we conclude that the trial court erred in granting summary judgment
on the UAPA issues to EMCF. Our holding that the $50 Cap does not meet the definition
of a “rule” under the 2009 version of the UAPA, renders any other statutory authority cited
by the parties in this appeal irrelevant.
CONCLUSION
The $50 Cap implemented by TennCare is not a rule as defined by the 2009 version
of the UAPA because it is subject to the internal management exception at Tenn. Code
Ann. § 4-5-102(12)(A) (2009). Thus, the judgment of the trial court is reversed and the
case is remanded. EMCF may continue litigating the remaining issues raised in its initial
- 13 -
summary judgment motion. The costs of this appeal are assessed against the Appellee, for
which execution may issue if necessary.
_/s/ Andy D. Bennett________________
ANDY D. BENNETT, JUDGE
- 14 -