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Emergency Medical Care Facilities, PC v. Bluecross Blueshield of Tennessee, Inc.

United States District Court, W.D. Tennessee, Eastern Division

January 19, 2017





         On or about August 13, 2014, the Plaintiff, Emergency Medical Care Facilities, P.C. ("EMCF"), brought a putative class action in the Circuit Court for Madison County, Tennessee, against the Defendant, BlueCross BlueShield of Tennessee, Inc. ("BCBST"), alleging breach of contract and breach of implied covenant of good faith and fair dealing under Tennessee law; violation of Tennessee's prompt pay requirement under Tennessee Code Annotated §§ 56-32-109 and 56-7-105, et seq.; and violation of the Tennessee Consumer Protection Act, Tennessee Code Annotated § 47-18-101, et seq. (“TCPA”). EMCF also sought declaratory judgment pursuant to Tennessee Code Annotated § 29-14-101, et seq.[1] The complaint was amended on or about January 6, 2015, naming BCBST subsidiary Volunteer State Health Plan, Inc. ("VSHP") as an additional defendant, dropping the prompt pay claim, and citing to federal law and regulation in support of Plaintiff's state law and declaratory judgment claims. The matter was removed to this Court on January 29, 2015, on federal question grounds. (Docket Entry (“D.E.”) 1.) In an order entered June 5, 2015, the Court dismissed Plaintiff's TCPA and stand-alone breach of implied covenant of good faith and fair dealing claims. (D.E. 35.) Before the Court is the Defendants' motion for summary judgment on the remaining claims for breach of contract and for declaratory judgment. (D.E. 100.)

         II. FACTS[2]

         VSHP has served as a managed care organization (“MCO”) in Tennessee's TennCare program since prior to 2008. TennCare is the state's managed care system for residents eligible for Medicaid. Chattanooga-Hamilton Cty. Hosp. Auth. v. UnitedHealthcare Plan of the River Valley Inc., 475 S.W.3d 746, 749 (Tenn. 2015). BCBST is financially at-risk for its MCO product, known as BlueCare, and contractually obligated to follow state budget reductions, payment reform initiatives and state law. Another program, TennCareSelect, is distinct from TennCare and serves a population selected by the state. BCBST is an administrative services organization (“ASO”) for TennCareSelect and is not financially at-risk therefor.

         EMCF has been a participating emergency medical provider in the BlueCare and TennCareSelect networks under contracts including Group Specialist (Practice) Agreement, BlueCare Attachment, TennCareSelect Amendment and associated amendments. Section Q of the BlueCare Attachment provides as follows:

Compliance with Laws. The parties agree to recognize and abide by all applicable State and Federal laws, regulation, and guidelines.
In addition, all applicable Federal and State laws or regulations, and revisions of such laws or regulations shall automatically be incorporated by reference herein as they become effective. In the event that changes in the Group Practice Agreement, or this BlueCare Attachment, as a result of revisions in applicable Federal or State law materially affect the position of one or more parties, the parties agree to negotiate such further Attachments as may be necessary to correct any inequities.

         (D.E. 1-3 at PageID 173, D.E. 1-4 at PageID 463.) Section 10 of the 2009 BlueCare Compliance Amendment states that

This Amendment incorporates by reference all applicable federal and state laws, TennCare rules and regulations, consent decrees or court orders and revisions of such laws, regulations, consent decrees or court orders shall automatically be incorporated into this Amendment, as they become effective. In the event that changes in this Amendment are a result of revisions and applicable federal or state law materially affects the position of either party, Contractor and Participating Provider agree to negotiate such further amendments as may be necessary to correct any inequities.

         (D.E. 1-3 at PageID 226-27.) The parties' agreements incorporate the BlueCare Provider Administration Manual (the “Manual”) as part of the contracts and provide that the Manual may be revised from time to time.

         On or about April 8, 2011, the Bureau of TennCare issued to BCBST and other MCOs official notice of program changes resulting from the proposed Tennessee fiscal year 2012 budget. All state departments were required to submit proposed budgets that included spending reductions. This action was due to the expiration of one-time federal funding and the continued impact of a national economic downturn on Tennessee revenues. Three categories of budget reduction items were to be implemented by MCOs, including changes to reimbursement for non-emergency professional services performed in hospital emergency departments. Specifically, the correspondence stated that “Most of you have implemented a reimbursement policy for facilities whereby they are only paid a[n Emergency Medical Treatment and Active Labor Act, 42 U.S.C. § 1395dd (“EMTALA”)][3] screening fee for non-emergency [emergency department] visits. The budget directs MCOs to pay [emergency department] physicians their average reimbursement amount associated with CPT 99281 for non-emergency visits.” (D.E. 104-11 at PageID 2521.) The changes were to go into effect on July 1, 2011.

         BCBST notified its network providers of the anticipated July 1, 2011, reimbursement changes in a letter dated May 6, 2011. Twenty days later, TennCare sent an email to MCOs clarifying that reimbursement for non-emergency emergency department visits was capped at $50. A letter dated June 14, 2011, from BCBST advised providers as follows:

VSHP has been directed to pay [emergency department] physicians VSHP's average reimbursement amount based on CPT 99281 for non-emergency visits. UpDated: [Emergency department] physicians will continue to get their contracted rate for non-emergency visits not to exceed $50.00. Whether or not the visit is deemed emergent will be determined by looking at diagnosis codes 1 and 2 on the claim and cross referencing with the Medical Emergency Code List which can be found on our website at

(D.E. 104-15 at PageID 2639.)

         Additional rate reductions for other providers, to go into effect on January 1, 2012, were communicated to MCOs by TennCare in a letter dated November 17, 2011. This missive reiterated the $50 cap on reimbursement for non-emergency emergency department visits. A third letter from BCBST to providers dated December 6, 2011, advised that the cap would remain in place. These reductions in reimbursement continued to be in effect. It is the position of the Defendants that this change was a “directive” by the state which caused the capped fee policy to be enacted into law. Thus, the policy was, pursuant to the terms of the parties' contracts, automatically incorporated into their agreement.

         The Plaintiff has alleged in this action that the cap on reimbursements constituted a breach of the contractual agreements between it and the Defendants. Specifically, EMCF claims that the Defendants reclassified emergency services performed by emergency room doctors as non-emergency in order to justify paying a reduced reimbursement rate. It is averred that Defendants took the position that payment of the $50 flat rate was authorized where the final diagnosis indicated the services were non-emergent, despite the fact that the determination of whether services are emergent or non-emergent must be made at the time of the patient's arrival in the emergency department. In its amended pleading, the Plaintiff contended as follows:

The provision of emergency medical services is of the utmost importance in ensuring that individuals presenting at an emergency department are given the immediate medical attention that they need to reduce the likelihood that the person's health is put in serious jeopardy or that there is a serious impairment to the person's bodily functions or organs.
Pursuant to [the EMTALA], physicians and other health care professionals working in a Medicare-participating hospital emergency department are required to provide to any individual who comes to the emergency department and makes a request, or on whose behalf a request for medical treatment is made: (1) “an appropriate medical screening examination . . . including ancillary services routinely available to the emergency department, to determine whether or not an emergency medical condition” exists.

         Tenn[essee] Code[] Ann[otated] § 56-7-2355, Emergency Services, defines ...

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